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Jason Rhodes of Fairfield County was arrested on Tuesday morning on conspiracy, securities fraud, wire fraud, and investment adviser fraud charges.
The charges stem from his participation in an elaborate scheme to defraud investors in the hedge fund and using investor funds to repay 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 allegedly 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, during which Rhodes and his co-conspirators defrauded 25 investors out of approximately $19.6 million.
Geoffrey Berman, the U.S. Attorney for the District of New York, noted that among other fraudulent acts, Rhodes allegedly 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, 46, was arrested on Tuesday and charged with one count each of conspiracy to commit securities fraud and wire fraud, securities fraud, wire fraud and investment adviser fraud.
Rhodes faces decades in prison if convicted and could be subjected to millions of dollars in fines. He was scheduled to be arraigned on Tuesday and is due to appear in court at a later date to answer the charges.
"As alleged, Rhodes participated in a scheme to solicit investors’ money by promising to use it for a stated purpose — to invest in securities — instead, he used it to line his own pockets," Berman said. "In typical Ponzi-like fashion, Rhodes allegedly kept his scheme operating by using investor funds to make payments to other investors who were demanding their money. Jason Rhodes now faces serious time in federal prison for his deceitful conduct.”
FBI Assistant Director-in-Charge William F. Sweeney, Jr. added, “time and time again, we see Ponzi-like investment schemes fail and their perpetrators brought to justice.
"As we allege today, Jason Rhodes is just the latest example of someone who allowed greed to guide his actions as he defrauded investors of more than $19 million. The FBI will continue to aggressively investigate these cases as long as misguided individuals continue to foolishly pursue these fraudulent schemes.”
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