Brooklyn prosecutors charge financial advisor in Ponzi scheme

July 9, 2012 Brooklyn Eagle Staff
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Brooklyn federal prosecutors yesterday arrested a Long Island financial advisor for running a Ponzi scheme to cover up hundreds of thousands of dollars in trading losses.

Defendant Paul Sullivan, 47, of New Hyde Park, was charged in a criminal complaint with wire fraud. He was scheduled to appear yesterday afternoon before U.S. Magistrate Judge Lois Bloom at the Brooklyn federal courthouse.

The charges were announced by Loretta E. Lynch, U.S. attorney for the Eastern District of New York; James T. Hayes Jr. of U.S. Immigration and Customs Enforcement (ICE), Ronald J. Verrochio, inspector-in-charge, U.S. Postal Inspection Service, New York Division; and Toni Weirauch, acting special agent in charge, Internal Revenue Service, New York.

Sullivan made investments without his clients’ authorization that resulted in significant losses, the complaint charges. When these losses were discovered, Sullivan admitted his misconduct and attempted to prevent the clients from alerting the authorities by promising to reimburse them for their losses. In order to obtain the money for reimbursement, Sullivan proceeded to misappropriate funds belonging to a second group of clients by encouraging them to send checks to the first group, the complaint continues.

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The complaint details how one client, who was cooperating with law enforcement authorities, and his spouse confronted Sullivan at meetings in the client’s home. The client recorded the meetings using a hidden video camera.

During these meetings, according to the Brooklyn Federal Prosecutor’s Office, Sullivan admitted that he had used the client’s funds to repay another client’s investment losses, stating, “what I did was completely illegal, completely wrong … everything I’ve done was wrong, was illegal, I have nothing to say.”

“When confronted by his victims, he continued his lies and put his own twist on ‘borrowing from Peter to pay Paul’ by manipulating a second set of victims into a Ponzi scheme designed to cover those investment losses,” said Lynch.

The government’s case is being prosecuted by Assistant U.S. Attorney Daniel Spector.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

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