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George Sepero, 39, used bogus screen shots to convince investors that they had a secret computer algorithm that would yield outrageous returns of 170 percent or more at a time when financial markets were in flux, the 17-count indictment says.
Sepero and his co-conspirator then spent the investments on credit card bills that averaged $25,000 a month, a bar tab that reached $18,241 – including a $4,000 tip – and $14,034 for separate nights at “Drai’s Hollywood” nightclub in Los Angeles; suites costing more than $4,000 at W Hotels in New York; and flights to Paris, Los Angeles, Chicago, and elsewhere, according to a complaint filed by the FBI in U.S. District Court in Newark.
Sepero — who operated a company he called “Casa Nostra Enterprises” — also spent $80,000 on a customized Ford F-350 “Harley-Davidson Edition” pickup truck, while his associate bought a luxury Range Rover Sport SUV worth more than $71,000 — putting down more than $65,000 on the vehicle, the complaint alleges.
The pair also spent victims’ money on other personal expenditures, including mortgage payments, home improvements, meals at high-end restaurants, jewelry and limousines, the government says.
One of the investors got duped out of $2.1 million, the FBI complaint says.
This July, one of the duped investors met with Sepero while wearing a wire for the feds.
During the conversation, the complaint alleges, Sepero said that all of the investor’s money was “traded and lost.” He also assured him there was a “paper trail” to prove it.
“[T]he only money I ever kept was money that was paid to me for commissions,” Sepero told the investor during the secretly recorded talk. “End of story.”
The government has petitioned a judge to seize Sepero’s Glen Rock home, along with the two luxury vehicles.
U.S. Attorney Paul J. Fishman said Sepero and Carmelo Provenzano, 29, of Garfield, “used fake companies and phony reports to steal millions in real money from trusting investors. “
“With other people’s cash in their pockets,” he said, the defendants “went on a spending spree.”
“It was another of the many Ponzi schemes that have been uncovered in New Jersey” that allowed swindlers “to support lavish lifestyles,” said Michael B. Ward, Special Agent In Charge of the FBI’s Newark Division.
Fishman warned potential investors to “always be skeptical of rates of return that go so far beyond the norm.”
Ward agreed: “I cannot stress enough the importance of investors exercising due diligence before
trusting others with their money. The old adage ‘If it sounds too good to be true, it probably is’ remains constant.”
According to a government release from last December:
Beginning in 2009, Sepero and Provenzano claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading.
The defendants made numerous misrepresentations and omissions to induce their victims to invest in “Pelt Capital,” “Caxton Capital Management,” “SP Investors Inc.,” and “CCP Pro Consulting, Inc.” Sepero and Provenzano claimed they owned and controlled a proprietary computer algorithm for trading foreign currencies; that they had used the algorithm to achieve returns of more than 170 percent in the prior two years; and that any investment funds would be highly liquid and could be withdrawn on days’ notice.
Relying on these and other misrepresentations, investors sent the defendants a total of more than $3.5 million. Sepero and Provenzano invested little or no money in foreign currency or any other investment vehicle, instead diverting the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures.
The defendants furthered the scheme by emailing victims fake statements showing their principal had been invested in the foreign currency markets and was achieving substantial results.
Many of these e-mails were purportedly sent by an individual named “Mel Tannenbaum,” a
fictional character of Provenzano’s invention.
The defendants also e-mailed to several investors “screen shots” of a computer-based trading program, which they claimed represented the investors’ funds being traded in the currency markets. In reality, the shots reflected trading in fictional accounts set up by the co-conspirators to dupe investors.
In the second alleged scheme, Sepero “became acquainted with an elderly woman from New
Jersey with serious medical ailments,” Fishman said. “Sepero took charge of her annuity account, and convinced her to write checks to entities that Sepero controlled. Sepero promised to add the money to the
annuity account, but instead spent hundreds of thousands of dollars for his personal use.
“Sepero perpetuated this fraud by opening accounts in the names of the victim’s family members without their authorization or consent. He also made numerous phone calls to the financial institution administering the annuity account, impersonating either the victim’s son or the victim’s late husband.”
To conceal his wrongoing, the U.S. Attorney said, Sepero gave the family a “wholly fraudulent statement for the annuity account,” which reflected a value of more than $750,000.
At the time Sepero created the fake account statement, the annuity was actually worth $16.57, Fishman said.
Fishman credited Special Agents of the FBI, and thanked the Commodity Futures Trading Commission’s New York Regional Office, for making the case, which is being prosecuted by Assistant U.S. Attorneys Christopher Kelly and Zach Intrater of Fishman’s Economic Crimes Unit and Evan Weitz of the Office’s Asset Forfeiture Unit in Newark.
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