Former US POLITICIAN gets 6 years in slammer for FACEBOOK SCAM
Stock Ponzi scheme lands financier in jail and costs him $13.2m
A former candidate for governor of Oregon has been sentenced to six years in prison for convincing investors to hand over millions of dollars for Facebook shares he never owned.
Craig Berkman got people to hand over $13m by pretending that he had access to stocks in companies like Facebook, LinkedIn, Groupon and Zynga before their initial public offerings and could use the funds to buy them up. Instead, he used later cash injections to pay off earlier investors and to line his own pockets, including using nearly $6m to settle with a firm that accused him of failing to pay his debts, the US Attorney for the Southern District of New York said.
“For several years Craig Berkman repeatedly lured investors with the false promise of benefiting from his companies’ ownership of pre-IPO stock all the while draining their money into his own pockets in a fraud that was part Ponzi scheme and part plain old theft," said Preet Bharara.
"He is now paying a heavy price for his lies, forfeiting both his liberty and his money, and today’s sentence is a just and fitting conclusion to the multimillion-dollar fraud he perpetrated.”
Berkman, who had unsuccessfully run for governor as a Republican in 1994, went on to manage investment funds in Florida, controlling a number of limited liability companies including Face-Off Acquistions, Assensus Capital and a few different entities with variations of the words "Ventures Trust" in their names from 2010 to 2013.
Berkman and others offered investors the chance to buy up bits of the companies by fraudulently convincing them that the firms already had or would have pre-IPO stocks in the tech firms. He also told people that Assensus Capital Investors would use their money to fund start-ups in the medical, technology and energy sectors.
The fund manager was able to raise at least $13.2m in the scheme from more than 120 different investors. He used $6m of it to pay off creditors in his personal bankruptcy and another $4.8m of new investor money to pay off earlier investors. He also took another $1.6m to pay legal fees, travel and other personal expenses.
The Manhattan federal court sentenced Berkman to six years in jail yesterday and ordered him to pay back the $13.2m he had misappropriated.
Facebook's IPO drummed up a serious amount of investor excitement, inspiring a number of scam artists to claim access to its shares before it went public. Last year, a Wisconsin woman was charged over claims that she convinced people that she had access to $1m worth of Facebook stocks because her daughter knew Mark Zuckerberg.
And in 2011, the Securities and Exchange Commission closed down a similar scheme to Berkman's, where a hedge fund was fraudulently touting pre-IPO shares in Facebook, Twitter, Zynga and Groupon. ®