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October 22, 2010

Ponzi Schemer Nadel sentenced to 168 months for stealing $168 million

On October 22, 2010, U.S. District Judge John Koeltl sentenced Arthur Nadel to 14 years in prison, an apt sentence that amounts to 168 months for each of the $168 million he stole. Arthur Nadel is a former hedge fund manager. He disappeared in early January, 2009, along with $168 million. Investors wondered whether the manager had lost the money through awful trading and terrible investments, or if he was running a pyramid or ponzi scheme.

A ponzi scheme is a fraudulent investment scheme that pays separate investors from their own money or money paid by other investors. A small amount of money is shuffled around between investors, and is characterized by short-term returns that are abnormally high. However, the returns stop shortly thereafter, and the scheme pockets the actual investment money.

Nadel's Ponzi operation has been called a "mini-Madoff" following the highly-publicized Bernard Madoff trial in New York, where Madoff was proven to steal upwards of $50 billion.
Investigators said the first sign of a Ponzi scheme occurred here in statements to the investors, who were told they had large balances in hedge funds that actually only contained small amounts of money. More importantly, there is no evidence in any of the funds of legitimate investments. In January of 2009, the U.S. Securities and Exchange Commission charged Nadel with operating a fraudulent Ponzi scheme through six different hedge funds. Following the charges, a federal judge appointed a receiver in order to track down all the missing money. The receiver seized assets and operations of Scoop, Management, Inc., one of the six hedge funds operated by Nadel. Nadel claimed his hedge funds contained $342 million in investments, when in fact they only contained $506,000. Through investigations, the FBI discovered Nadel had moved at least $1.25 million to secret bank accounts under his control.


http://blogs.wsj.com/law/2010/10/21/old-frail-ponzi-schemer-nadel-gets-14-year-prison-term/

http://www.heraldtribune.com/article/20090127/ARTICLE/901270364?p=2&tc=pg

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