Bay Ridge Money Manager indicted in $40 million Ponzi scheme

Who knew there was that much money floating around the neighborhood? Story shamefully linkjacked from here.

NEW YORK -(Dow Jones)- A money manager based in the Bay Ridge section of Brooklyn, N.Y., has been indicted in a Ponzi scheme that prosecutors say operated for three decades and involved more than $40 million.

Philip Barry, who ran a group of companies collectively known as Leverage Group, was charged Thursday in an indictment with securities fraud and 20 counts of mail fraud.

….Barry allegedly ran Leverage Group until February 2009 as a Ponzi scheme, paying returns to earlier investors from money received from other, newer investors, prosecutors said.

Prosecutors previously said that Barry approached them in August 2008, allegedly admitting that in the past he made payments to Leverage Group investors in part by using new investor money. The investigation has been ongoing since then.

The original SEC filing can be found here (sec.gov). It’s really gotta be one of the most stark first paragraphs in an SEC filing.

The Securities and Exchange Commission today charged a Brooklyn money manager for running a $40 million Ponzi scheme in which he promised approximately 800 investors guaranteed high returns from safe, liquid investments, but instead spent their money on real estate, his pornography mail order business, and other interests.

We hear at Bayridgistan are a blue-collar group. Much like the current Fox News-sponsored gold rush, the securities and derivatives hype of yesteryear reads as another Big Finance hustle–another way to get the workingman’s dollar to finance the back end of an investment fad. Just remember.. it’s always the last Ponze that’s the brokest.

Here’s some perspective on the “Madoff of Brooklyn” from dailyfinance.com. Here’s a particularly bizarre, and locally relevant section

Unlike Madoff’s investors, who were quick to clamor for their money, Barry’s customers seem more circumspect. Some, including New York State Conservative Party chairman Michael Long — who lost $15,000 with Barry — are convinced that Barry invested in good faith but was done in by the shaky financial and real-estate markets.
Of course, others haven’t been quite so forgiving. Barry’s various companies, including Philip Barry LLC, the Leverage Group, North American Financial, and Saint Joseph Development Corp., face a host of lawsuits. Apparently, Barry promised a minimum return of 12.55 percent to most of his customers but wouldn’t allow them to withdraw their funds. However, the biggest claim is that Barry, like Madoff, used money from new investors to pay off old ones. If that proves true, this classic “Ponzi” scheme will be the end of Barry.

In light of this, we here are relieved to see at least a little progress in the right direction.

The bill creates a new Consumer Financial Protection Agency (CFPA), imposes new curbs on the multitrillion-dollar derivatives market and sets up a new system for dissolving failing financial firms.