Fund manager falsely promised tech investments, bought Maserati: U.S.
By Jonathan Stempel
(Reuters) - U.S. prosecutors charged two executives at Florida-based Elm Tree Investment Advisors LLC with bilking investors out of millions of dollars through a fraudulent technology investment scheme, and accused one of spending some of the money on luxuries for himself.
Elm Tree founder Fred Elm, 46, was arrested on Wednesday at his home in Hollywood, Florida, over the alleged $17 million fraud, while Chief Operating Officer Ahmad Naqvi, 47, is at large, said U.S. Attorney Preet Bharara in Manhattan.
Prosecutors said the defendants never turned a profit during their 1-1/2-year scheme, and that Elm diverted at least $2 million to fund purchases of a Bentley, a Maserati, a Range Rover, jewelry and a $1.75 million Florida home.
Elm's lawyer did not immediately respond to requests for comment. A lawyer for Naqvi could not immediately be identified.
Prosecutors said Elm and Naqvi falsely told investors they would draw on their close ties to elite venture capital firms, and invest at opportune times in such companies as Alibaba Group Holding Ltd, GoDaddy Inc, Twitter Inc and Uber Technologies Inc.
But prosecutors said the defendants invested only $7.1 million, lost $3.9 million in less than a year of trading despite having projected triple-digit returns, and used $5.2 million to pay earlier investors in a "Ponzi-like" fashion.
The scheme ran from June 2013 to December 2014, and took place in New York and elsewhere, prosecutors said.
Both defendants were charged with securities fraud, wire fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud.
Elm appeared on Wednesday in federal court in Fort Lauderdale, Florida, and is to appear in Manhattan federal court on Friday or Monday, court records show. Bond was posted at $2.5 million, co-signed by his wife, the records show.
The case is U.S. v Elm et al, U.S. District Court, Southern District of New York, No. 16-mag-02259.
(Reporting by Jonathan Stempel in New York; Editing by Peter Cooney)
