Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOSEPH MELI and JAMES SINISCALCHI were charged this morning with securities fraud, wire fraud, and conspiracy to commit securities and wire fraud, stemming from their participation in a fraudulent Broadway ticket investment scheme wherein MELI and SINISCALCHI purported to use investor funds to purchase tickets to Broadway shows for resale on the secondary market, but instead appropriated investment funds for their personal use.

SINISCALCHI was arrested this morning and is expected to be presented today in Magistrate Court before the Hon. Kevin N. Fox.  MELI is presently incarcerated following his conviction in a prior federal case and will be presented when he arrives in the District.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Joseph Meli and James Siniscalchi engaged in a scheme to defraud investors by lying about purported access to blocks of Broadway tickets.  As alleged, the acting was all done by the defendants, who posed as legitimate businessmen but appropriated the money they said would be invested in theatre tickets.”  

According to the Complaint[1] unsealed today in Manhattan federal court and the Indictment and statements made in court proceedings related to MELI’s prior conviction:

Beginning in at least March 2017 through in or about April 2018, MELI and SINISCALCHI falsely represented to partners in a business entity (the “Entertainment Company”), that MELI and SINISCALCHI owned a large number of tickets to live events, or intended to purchase a large number of tickets to live events, and would sell those tickets to the Entertainment Company using investor money the Entertainment Company had solicited for the purpose of reselling those tickets on the secondary market for profit.  Representatives of the Entertainment Company, in reliance on statements made by MELI and SINISCALCHI, represented to investors that investor funds would be used to purchase bulk tickets to live shows, and promised investors a share of these profits.  In fact, MELI and SINISCALCHI failed to invest the investor monies as promised, but rather diverted investor monies to their own personal use, including sending $455,000 to a close relative of MELI’s, and $105,000 to a residential management company that managed an apartment MELI was leasing.

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SINISCALCHI, 46, of New York, New York, and MELI, 44, of New York, New York, are each charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and one count of wire fraud.  The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Berman praised the work of the Special Agents from the U.S. Attorney’s Office for the Southern District of New York and thanked the Securities and Exchange Commission for its assistance.  

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Sarah Mortazavi is in charge of the prosecution.

 



[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CRAIG CARTON was sentenced to 42 months in prison for securities fraud, wire fraud, and conspiracy to commit those offenses.  CARTON was convicted after a one-week trial before Chief U.S. District Judge Colleen McMahon, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Radio personality Craig Carton solicited investments for his ticket buying scheme by claiming to have an in with the operator of two New York-area arenas and a major concert promotion company.  He talked of his ability to buy blocks of tickets to live events and sell them for a profit on the secondary market.  But the talk-show host was all talk.  Carton’s purported agreements to buy blocks of tickets were part of an elaborate fiction.  Today he has learned that the price of defrauding investors is a term in prison.”

As set forth in the Complaint, Indictment, and the evidence presented at trial:

CARTON and Joseph Meli worked together to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts, which would then be resold on the secondary market.  CARTON and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that CARTON had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”).  In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with CARTON, co-defendant Michael Wright, Meli, or any entity associated with them.  After receiving the investor funds, CARTON, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.   

In the fall of 2016, CARTON, Wright, and Meli exchanged emails and text messages regarding their existing debts.  On September 5, 2016, for example, Wright emailed CARTON and Meli, “for the sake of our conversation tomorrow,” and outlined “the debt past due and due next week.”  Wright listed several apparent creditors, to whom he, Meli, and/or CARTON were personally indebted for over $1 million.  Wright listed eight possible options for repaying the debt, including “Run to Costa Rica, change name, and start life all over again – may not be an option.”  CARTON responded to Wright and Meli, stating “don’t forget I have $1m coming tomorrow from ticket investor[.]  will need to be discussed how to handle.”  On September 7, 2016, CARTON emailed Wright and Meli, referenced a potential investor (“Investor-1”) in an upcoming holiday concert tour, and suggested “borrow[ing] against projected profits” on that investment. 

Later in the fall of 2016, CARTON began negotiating with a hedge fund (the “Hedge Fund”) regarding a transaction in which the Hedge Fund would extend CARTON capital to finance CARTON’s purchase of event tickets, which CARTON would then resell at a profit.  In early December 2016, Meli texted CARTON and Wright and discussed using the Hedge Fund’s capital “to repay debts,” and not for the purchase of tickets. 

The next day, December 7, 2016, CARTON emailed the Hedge Fund five agreements between (i) Meli and a company controlled by Meli (the “Meli Entity”) and (ii) the Concert Promotion Company.  In each of the purported agreements, the Concert Promotion Company agreed to sell the Meli Entity up $10 million worth of tickets to different concert tours.  However, these agreements were fraudulent and had not, in fact, been entered into by the Concert Promotion Company.

The following day, the Hedge Fund and CARTON executed the revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide CARTON with up to $10 million, for the purpose of funding investments in the purchase of tickets for events.  The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets, including the agreements with the Concert Promotion Company, and for limited business expenses.  The Hedge Fund would receive a share of the profits from the resale of the tickets.

The Hedge Fund then sent $700,000 to the Meli Entity to finance the purchase of tickets pursuant to the agreements between the Meli Entity and the Concert Promotion Company.  Meli, however, then sent this money to a bank account controlled by Wright, who then, on December 12, sent $200,000 to CARTON’s personal bank account (the “CARTON Bank Account”), which CARTON then wired to a casino.  Also on December 12, Wright sent another $500,000 to an individual who had previously lent CARTON $500,000, which was due to be repaid that day.

Later in December 2016, the Hedge Fund sent an additional $1.9 million to the Meli Entity, to finance the purchase of tickets pursuant to agreements between the Meli Entity and the Concert Promotion Company.  Once again, the Concert Promotion Company had not entered into any such agreements.  Meli, Wright, and CARTON engaged in text messages regarding the disposition of these funds.  Some of the money was used by Meli to repay two individuals who had previously invested with Meli in a related scheme involving the purported investment in the resale of tickets, and by CARTON to pay casinos and to pay Investor-1 a purported return on an earlier investment in a ticket-related venture, among other things.

CARTON also induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based on a purported agreement CARTON purportedly had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”).  The Sports and Entertainment Company Agreement purportedly gave an entity controlled by CARTON (the “CARTON Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company.  CARTON, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company.  However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer. 

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company, CARTON contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by CARTON and Wright, for which Wright is the signatory.  After the money was rewired to that account, Wright wired $966,000 to Wright’s personal bank account and $700,000 to the CARTON Bank Account.  CARTON then wired approximately $188,000 from the CARTON Bank Account, including at least $133,000 in wires to several casinos.

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In addition to the prison term, CARTON, 50, of New York, New York, was sentenced to three years of supervised release and ordered to pay $4,835,186.56 in restitution and to forfeit $4,590,000.  CARTON’S co-defendant, Michael Wright, pled guilty on September 27, 2018, to one count of wire fraud and was sentenced to 21 months in prison. 

Joseph Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Judge Kimba M. Wood in April 2018.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT was sentenced to 21 months in federal prison for his participation in a scheme to defraud investors who invested millions of dollars based on false representations that their funds would be used to purchase tickets to various live events for re-sale at a profit on the secondary market.  WRIGHT pled guilty on September 27, 2018 before Magistrate Judge Stewart D. Aaron to one count of wire fraud.   His plea was accepted by Chief U.S. District Judge Colleen McMahon, who also imposed today’s sentence. 

U.S. Attorney Geoffrey S. Berman said:  “Michael Wright previously admitted to his conduct related to an elaborate ticket-buying scheme to defraud investors of millions of dollars.  Wright and his co-defendants induced their clients to invest in their phony business through false representations and lies, when in fact, it was a Ponzi-like enterprise.  While Michael Wright’s ticket-buying business operated as a fiction, now a 21 month term in federal prison will be his stark reality.”

According to allegations in an Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

WRIGHT participated in a scheme along with Craig Carton and Joseph Meli to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts and other live events, which would then be re-sold on the secondary market.  Carton and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that Carton had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”).  In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with Carton, Wright, or Meli, or any entity associated with them.  After receiving the investor funds, Carton, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.  

For example, on December 8, 2016, a New York-based hedge fund (the “Hedge Fund”) and Carton executed a revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide Carton with up to $10 million, for the purpose of funding investments in the purchase of tickets of events.  The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.

Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based on a purported agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”).  Under this supposed agreement, the Sports and Entertainment Company Agreement gave an entity controlled by Carton (the “Carton Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company.  Carton, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company.  However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer. 

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company for the purchase of tickets, Carton contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by Carton and WRIGHT, for which WRIGHT is the signatory. The prior day, December 19, 2016, WRIGHT had e-mailed Carton wire information for this account.   After the Sports and Entertainment Company’s $2 million investment was diverted to that account, WRIGHT wired $966,000 to WRIGHT’s bank account, of which WRIGHT sent approximately $690,000 to repay a gambling loan of Carton’s which WRIGHT had guaranteed and approximately $250,000 to repay WRIGHT’s personal home equity line of credit.  WRIGHT further diverted $40,000 of the Hedge Fund’s investment for his own personal expenses, including to pay off credit card debt, and nearly $1 million to Carton’s personal bank account.

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WRIGHT, 42, of Upper Saddle River, New Jersey, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Carton was convicted on November 7, 2018, of securities fraud, wire fraud, and conspiracy to commit those offenses, and will be sentenced before Chief U.S. District Court Judge Colleen McMahon on April 5, 2019. 

Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Court Judge Kimba M. Wood in April 2018.  

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT pled guilty in Manhattan federal court to his participation in a scheme to defraud investors who invested millions of dollars based on false representations that their funds would be used to purchase tickets to various live events for re-sale at a profit on the secondary market.  WRIGHT pled guilty before U.S. Magistrate Judge Stewart D. Aaron. 

U.S. Attorney Geoffrey S. Berman said:  “Michael Wright admitted today that he and his partners in crime conducted an elaborate ticket-buying scheme to defraud investors of millions of dollars.  From creating phony contracts to outright lies, Wright and his cohorts ensured that the money his backers thought they were investing actually went directly into his and his co-defendant’s pockets.  Now, Wright has pled guilty to his audacious crimes and faces time in prison for his misdeeds.”

According to allegations in an Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

WRIGHT participated in a scheme along with Craig Carton and Joseph Meli to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts and other live events, which would then be re-sold on the secondary market.  Carton and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that Carton had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”).  In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with Carton, Wright, or Meli, or any entity associated with them.  After receiving the investor funds, Carton, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.  

For example, on December 8, 2016, a New York-based hedge fund (the “Hedge Fund”) and Carton executed a revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide Carton with up to $10 million, for the purpose of funding investments in the purchase of tickets of events.  The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.

The Hedge Fund then sent $700,000 to an entity controlled by Meli (the “Meli Entity”) to finance the purchase of tickets.  Meli, however, then sent this money to a bank account controlled by WRIGHT, who then, on December 12, 2016, sent $200,000 to Carton’s personal bank account (the “Carton Bank Account”), which Carton then wired to a casino.  Also on December 12, WRIGHT sent another $500,000 to an individual who had previously lent Carton $500,000, which was due to be repaid that day.

Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based purportedly on an agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”).  The Sports and Entertainment Company Agreement gave an entity controlled by Carton (the “Carton Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company.  Carton, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company.  However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer. 

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company, Carton contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by Carton and WRIGHT, for which WRIGHT is the signatory. After the money was rewired to that account, WRIGHT wired $966,000 to WRIGHT’s personal bank account and $700,000 to the Carton Bank Account.  Carton then wired approximately $188,000 from the Carton Bank Account, including at least $133,000 in wires to several casinos.

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WRIGHT, 42, of Upper Saddle River, New Jersey, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Carton is scheduled for trial on October 29, 2018, before the U.S. District Court Judge Colleen McMahon.  The pending charges against Carton are merely accusations, and he is presumed innocent unless and until proven guilty.

Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Court Judge Kimba M. Wood in April 2018.  

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH MELI was sentenced today in Manhattan federal court to 78 months in prison by the Honorable Kimba M. Wood.  Between 2015 and 2017, MELI solicited approximately $100 million in investments from 130 investors through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  MELI pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 31, 2017.

U.S. Attorney Geoffrey S. Berman said:  “Joseph Meli directed his own version of a Broadway production, where the lead character deceives investors into giving him money that he pockets and spends on himself, or uses to pay off other investors.  Today, however, Meli’s Ponzi scheme is over, and he will serve prison time for his crimes.”

According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

From 2015 through January 2017, MELI conducted a scheme to defraud more than 130 investors who invested a total of more than approximately $100 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  In fact, MELI utilized a substantial portion of the investor funds he obtained for his personal expenses – including payments for a $3 million house in East Hampton, New York, a 2017 Porsche convertible, and expensive watches and jewelry – and to make payments, in a Ponzi-like manner, to previous investors in MELI’s ticket fraud scheme and in an unrelated hedge fund.

In furtherance of the fraudulent scheme, MELI falsely represented to investors that he had entered into written agreements with production companies for popular Broadway shows and with management companies for popular singers and music bands (together, the “Production and Management Companies”) to purchase large blocks of tickets to the shows and performances.  As part of this deception, MELI provided investors with falsified documents purporting to reflect agreements between MELI’s company, Advance Entertainment, LLC, and the Production and Management Companies.  In truth and in fact, MELI had not entered into such agreements and did not have any contractual rights to purchase such tickets from the Production and Management Companies.    

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In addition to his prison sentence, MELI, 43, of New York, New York, was sentenced to three years of supervised release; ordered to forfeit $104,765,565, representing the amount of proceeds obtained as a result of his fraudulent scheme; and ordered to pay restitution.

Mr. Berman praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.  

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that JOSEPH MELI pled guilty today in Manhattan federal court to securities fraud.  Between 2015 and January 2017, MELI conducted a scheme to defraud more than approximately 130 investors who invested a total of more than approximately $95 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  MELI pled guilty earlier today before U.S. Magistrate Judge Barbara Moses.

 

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he admitted in court today, Joseph Meli created his own theatrical production – a fictitious business that purported to have access to blocks of tickets to Broadway shows and other events.  In fact, Meli was deceiving investors into giving him money that he pocketed to fund his own extravagant lifestyle.  Now he awaits sentencing for running a Ponzi scheme.”

 

According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

From at least in or about 2015 through in or about January 2017, MELI conducted a scheme to defraud more than approximately 130 investors who invested a total of more than approximately $95 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  In fact, MELI utilized a substantial portion of the investor funds he obtained for MELI’s personal expenses – including payments for a $3 million house in East Hampton, New York, a 2017 Porsche convertible, and expensive watches and jewelry – and to make payments, in a Ponzi-like manner, to previous investors in MELI’s ticket fraud scheme and in unrelated hedge fund.

 

In furtherance of the fraudulent scheme, MELI falsely represented to investors that he had entered into written agreements with production companies for popular Broadway shows and with management companies for popular singers and music bands (together, the “Production and Management Companies”) to purchase large blocks of tickets to the shows and performances.  In truth and in fact, MELI had not entered into such agreements and did not have any contractual rights to purchase such tickets from the Production and Management Companies. 

 

In furtherance of the scheme, moreover, MELI provided investors with falsified documents purporting to reflect agreements between MELI’s company, Advance Entertainment, LLC (“Advance”), and the Production and Management Companies, in which the Production and Management Companies agreed to sell Advance large blocks of tickets to the shows or performances.  In truth and in fact, the Production and Management Companies had not entered into agreements to sell tickets to MELI or Advance.  These fake agreements listed, as authorized representatives entering into the agreements on behalf of the Production and Management Companies, the names of individuals within those organizations, and furthermore contained fraudulent signatures of these individuals.

 

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MELI, 43, of New York, New York, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000.  In addition, pursuant to a plea agreement with the Government, MELI agreed to forfeit proceeds of the offense and to pay restitution to the victims of the offense.  MELI is scheduled to be sentenced by Judge Kimba M. Wood on January 31, 2018.   

 

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

 

Mr. Kim praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.

 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.  

Joon H. Kim, the Deputy United States Attorney for the Southern District of New York, and William F. Sweeney, Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that STEVEN SIMMONS and JOSEPH MELI were arrested this morning on conspiracy, securities fraud, and wire fraud charges stemming from their participation in a scheme to defraud investors and provide those fraud proceeds to earlier investors in a hedge fund (the “Hedge Fund”). MELI is also charged with wire fraud in connection with a related fraudulent scheme in which MELI solicited investments through false representations that MELI had entered into an agreement to purchase tickets to a particular Broadway show (the “Show”), which MELI could then resell for a profit.

 

SIMMONS and MELI are expected to be presented today in Magistrate Court before the Honorable James C. Francis IV.

 

Deputy U.S. Attorney Joon H. Kim said: “As alleged, while soliciting funds from investors for legitimate-sounding investments, Steven Simmons and Joseph Meli were in fact running Ponzi schemes. Meli allegedly made up out of whole cloth purported deals to buy Broadway tickets that he could later sell at a profit. But as alleged, Meli was just robbing Peter to pay Paul. Thanks to the work of the FBI, the curtain has fallen on Simmons and Meli's alleged fraud scheme.”

 

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “When fraudsters think they’re going to get away with scheming investors out of money, they tend to forget that at some point the money will run out. It’s the way a Ponzi scheme ends. At some point, the original investors will want to see returns on their investments, and they’re going to demand an explanation as to why there isn’t any money. The men arrested in this case even allegedly joked about the scheme, calling it a ‘shell game.’ This should serve as a warning to others playing the same games, at some point, the FBI and our law enforcement partners will discover the fraud and will make sure the criminals behind it are held accountable.”

 

According to the Complaint unsealed today in Manhattan federal court[1]:

 

Beginning in at least November 2015 through in or about January 2017, SIMMONS and MELI solicited investments by falsely representing to the investors that their funds would be used for legitimate, specified, investment purposes. SIMMONS represented that investor funds would be invested in securities by the Hedge Fund and MELI represented that investor funds would be used to purchase a large number of tickets for the Show which would then be resold by MELI for a profit. In fact, SIMMONS and MELI failed to invest the investor monies as promised, but rather used the money, in a Ponzi-like fashion, to fund the repayment of earlier investors in the Hedge Fund whose redemption requests could not be forestalled, and diverted investor monies to their own use.

 

Among other false and misleading statements, SIMMONS told one investor (“Victim Entity-1”) that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers, and provided performance information for these portfolio managers. In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-1 for the purpose of repaying an earlier investor in the Hedge Fund that had demanded the return of its investment. Most of Victim Entity-1’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor. The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS. In a later consensually recorded conversation with a cooperating witness (the “CW”), SIMMONS expressed concern that Victim Entity-1 would contact the portfolio managers with whom it believed its funds were invested and learn that “there’s no . . . money.”

 

MELI also solicited at least three investors in a separate business run by MELI by falsely representing that he had entered into an agreement with the producer of the Show under which MELI would purchase a large number of tickets to the Show and then resell those tickets at a profit. MELI promised these investors a share in these profits. In truth and in fact, MELI had not entered into an agreement to purchase tickets to the Show but rather diverted investor money to his own personal use, including spending more than $200,000 at a luxury car dealership, and used investor monies to repay earlier investors in both his own Ponzi-like ticket resale scheme and the Hedge Fund. In later consensually recorded conversations with the CW, MELI discussed his “fraudulent ticket deal” and described playing a “shell game” with investor monies.

 

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SIMMONS, 48, of Wilton, Connecticut, and MELI, 42, of Manhattan, were arrested this morning. SIMMONS is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and one count of wire fraud. MELI is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and two counts of wire fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

 

Mr. Kim praised the work of the FBI and thanked the Securities and Exchange Commission for its assistance. He added that the investigation is continuing.

 

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.

 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Elisha J. Kobre is in charge of the prosecution.

 

The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 



[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.