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Rowayton Man Admits To Multimillion-Dollar Fraud Scheme

The former co-founder of a multi-million dollar hedge fund has admitted that he lied to his investors and misappropriated nearly $20 million as part of a Ponzi scheme.
The former co-founder of a multi-million dollar hedge fund has admitted that he lied to his investors and misappropriated nearly $20 million as part of a Ponzi scheme. Photo Credit: Pixabay

The former co-founder of a multi-million dollar hedge fund has admitted that he lied to his investors and misappropriated nearly $20 million as part of a Ponzi scheme.

Jason Rhodes of Fairfield County pleaded guilty to securities fraud, wire fraud, investment adviser fraud, and conspiracy charges in connection with his participation in a scheme to defraud approximately 25 investors in Sentinel Growth Fund Management, a hedge fund he co-founded.

In total, he bilked investors out of approximately $19.6 million by lying to them and using investor funds for his own personal use and to make repayments to earlier investors in a Ponzi-like manner.

Beginning in November 2013, Rhodes, a resident of the village of Rowayton in Norwalk, and his co-conspirators solicited investments in the hedge fund by falsely representing to investors that their funds would be used for legitimate, specified, investment purposes, largely through purchasing securities, the indictment alleges.

Instead, Rhodes failed to invest the money as promised, and diverted funds for him and his co-conspirators to use personally and to pay back previous investors. The scheme lasted through December 2016.

Geoffrey Berman, the U.S. Attorney for the District of New York, noted that among other fraudulent acts, Rhodes falsified an investor account statement using a computer software program to conceal the fact that most of the $4.2 million the investor had sent to the hedge fund had been misappropriated.

When the investor discovered the misappropriations, Rhodes, working with others, took funds from another investor to make payments to the previous investor.

Rhodes is scheduled to be sentenced on Monday, April 6, when he will face decades in prison and fines of more than $5 million.

“As he admitted in court today, Jason Rhodes solicited investors’ money with a promise to invest it in securities. Instead, he used it to line his own pockets and to pay off other investors who were demanding their money," Berman said. "Rhodes now faces significant time in federal prison for his admitted crimes.”

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