Fla. Money Manager Accused in $44 Million Ponzi Scheme

He’s no Bernard Madoff, Allen Stanford, or Arthur Nadel, but a Florida money manager has been charged with taking $44 million from investors in a Ponzi scheme involving foreign currency markets.

Michael Riolo, of Boca Raton, was charged today by the Securities and Exchange Commission with five counts of mail fraud.

Riolo allegedly used two companies he owned, Sterling Wentworth Currency Group, Inc. and LaSalle International Clearing Corp., to trade futures contracts in the euro, Swiss franc, yen, and other foreign currencies.

The money manager is accused of issuing “materially false statements” to induce at least 80 investors, who contributed about $44 million from 1999 to 2008, the SEC said. Riolo would take funds contributed by investors and instead of investing them in foreign currency markets as promised, used them for his own “personal use and benefit,” according to prosecutors.

Riolo covered up the fraud by issuing monthly account statements that falsified trading profits and account balances. He also distributed more than $29.5 million as purported “profits” to initial investors, but the money was actually paid into the scheme by later investors, the SEC said. That is the hallmark of a Ponzi scheme.

Riolo could face up to 20 years in prison if convicted of his charges.

Madoff, the former NASDAQ chairman, pleaded guilty in March to running a similar investment fraud that ripped off thousands of investors to the tune of about $65 billion. He is to be sentenced in June 2009 to up to 150 years in federal prison.

Nadel was arrested in January 2009 and accused of running a $360 million fraud that ran for a decade. Stanford is accused of using fraudulent certificates of deposit in his Stanford International Bank to swindle $8 billion from investors.

No related posts.