New York Securities Lawyer Blog
On May 12, 2014, Adam Manson (“Manson”) pleaded guilty to conspiracy to commit securities fraud by engaging in a $96 million Ponzi scheme. Manson’s co-defendant is his brother-in-law and former investment fund manager, Brian Callahan (“Callahan”), who pleaded guilty on April 29, 2014 to securities fraud and wire fraud. According to various court filings, between December 2006 and February 2012, Callahan raised more than $118 million from at least forty (40) investors in connection with four (4) different investment funds. Callahan ensured investors that their money would be safely invested in mutual funds and hedge funds. Contrary to his representations, Callahan misappropriated approximately $96 million of investor funds and began to operate a large scale Ponzi scheme. One of the various ways Callahan misappropriated investor funds was by diverting millions of dollars towards the Panoramic View, an unprofitable beachfront resort and residential development in Montauk, New York that Callahan and Manson co-owned. Further, Manson assisted Callahan in concealing the massive Ponzi scheme by deceiving independent auditors, including by presenting fake promissory notes that overstated the assets of the funds they purportedly managed and by lying about debts owed by the Panoramic View.
According to Manson’s plea agreement, Manson forfeited all unsold units in the Panoramic View, valued in excess of $60 million, and an additional $3.9 million. Manson will be sentenced on October 3, 2014 and faces up to five (5) years in prison and payment of up to $96 million in restitution to the victims of his Ponzi scheme. Callahan will be sentenced on August 8, 2014 and faces up to 40 years in prison.
According to a statement to the media by Loretta E. Lynch, United States Attorney for the Eastern District of New York, “Adam Manson assisted his brother-in-law Brian Callahan in orchestrating one of the largest Ponzi schemes in Long Island history by lying to independent auditors and lending institutions. Today’s guilty plea, together with Callahan’s guilty plea approximately two weeks ago, demonstrates this office’s dedication and commitment to aggressively pursue those who seek to defraud the investing public through lies and deceit. We hope that the guilty plea will provide some measure of relief and closure to the defrauded investors.” The cooperative efforts by the United States Attorney, the Federal Bureau of Investigations, the Internal Revenue Service, the Securities and Exchange Commission, and the British Virgin Islands Financial Investigation Agency, which resulted in the 2 plea agreements for Manson and Callahan, can be attributed to President Obama’s Financial Fraud Enforcement Task Force, which was created in November 2009 in order to aggressively investigate and prosecute financial crimes.
Lax & Neville LLP has extensive experience in successfully prosecuting and defending claims on behalf of customers who have suffered losses, including losses incurred as a result of a Ponzi scheme. Indeed, Lax & Neville LLP has successfully represented clients in various aspects in the Madoff Ponzi scheme and defended various victims of the Agape World Ponzi scheme in the Eastern District of New York Bankruptcy Court. Further, Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.