Scott Kupersmith Arrested, Charged with Allegedly Defrauding New Jersey Firms and Investors in Securities and Investment Fraud Schemes

October 28, 2011

The Federal Bureau of Investigation (FBI) on October 26, 2011 released the following:

“NEWARK, NJ— A man who allegedly bought securities without being able to pay for them and claimed to run a phony hedge fund was arrested this morning at his Boca Raton, Fla., office by FBI agents after being charged for allegedly orchestrating the securities and investment fraud schemes, New Jersey U.S. Attorney Paul J. Fishman announced.

Scott Kupersmith, 46, formerly of Alpine, N.J., and currently of Boca Raton, is charged by complaint with one count each of securities and wire fraud. He is scheduled to appear Friday, Oct. 28, 2011, before U.S. Magistrate Judge Ann E. Vitunac in federal court in West Palm Beach, Fla.

According to the criminal complaint unsealed today in Newark federal court:

Kupersmith engaged in a securities fraud scheme commonly referred to as “free-riding,” in which a customer buys or sells securities in a brokerage account without the cash or securities to cover the trades. To perpetuate the scheme, Kupersmith and his associates opened more than half a dozen brokerage accounts at multiple brokerage firms located in New Jersey and elsewhere. In order to induce the brokerage firms to open these accounts, Kupersmith falsely represented that he had a personal net worth of approximately $5 million and that he controlled a hedge fund in Manhattan with assets of as much as $20 million.

Kupersmith also misappropriated the personal identification information of a family member and a friend and used that information to open additional brokerage accounts. Once these accounts were opened, Kupersmith used them to make large-dollar-value securities trades.

The defendant then failed to pay for or “settle” the trades he made that were not profitable. As a result, the brokerage firms were forced to settle the trades on Kupersmith’s behalf, leading to approximately $1 million in losses.

To induce investors to invest in a hedge fund he claimed to control, Kupersmith falsely represented to investors that they would receive extraordinary returns—representing to at least one prospective investor that he would receive a return on his investment of approximately 43 percent every three months—and told prospective investors that their principal investment was “guaranteed.”

Based on these, and other, misrepresentations, Kupersmith raised approximately $500,000 from investors in New Jersey and elsewhere. Kupersmith did not use investors’ funds to make legitimate securities trades. He used a small portion of the investments to fund his freeriding scheme, and spent the bulk of the funds either on personal expenditures—such as private limousine services, luxury hotel rooms, and adult entertainment clubs—or to make principal and interest payments to existing investors in Ponzi-scheme fashion.

If convicted, Kupersmith faces a maximum potential penalty per count of 20 years in prison, as well as a $5 million fine on the securities fraud count and a $250,000 fine on the wire fraud count.

The Manhattan District Attorney’s Office worked with the New Jersey U.S. Attorney’s Office in conducting the investigation, and is charging related violations of New York state law.

The SEC is also filing a parallel civil action.

“According to the complaint, Scott Kupersmith managed to defraud both investors and brokerage firms of least a million dollars by making trades he couldn’t pay for and promises he couldn’t keep,” said U.S. Attorney Fishman. “‘Free riders’ and Ponzi schemers who live large on others’ money do so on borrowed time.”

“The alleged conduct undermines the confidence investors place in the markets,” said FBI Acting Assistant Special Agent in charge Douglas Veivia. “Kupersmith’s alleged defrauding of investors is even more troublesome in this time of economic stress.”

“Financial markets are governed by rules that keep investors safe. This defendant, skilled in the technicalities of market function and bank operations, allegedly came up with a clever scheme to create risk-free investments,” said District Attorney Cyrus R. Vance Jr. “The illegal scheme he is accused of was little more than a confidence game using offshore banks, shell companies, and fraud, and ultimately cost legitimate broker-dealers hundreds of thousands of dollars.”

U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for their work in the continuing investigation, and the Manhattan District Attorney’s Office, under the direction of District Attorney Vance, for its contributions and cooperation in coordinating parallel investigations. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the leadership of Director George S. Canellos, for its assistance.

The government is represented by Assistant U.S. Attorney Christopher J. Kelly of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

The charges and allegations in the complaint are merely accusations and the defendant is considered innocent unless and until proven guilty.

If you believe you are a victim of or otherwise have information concerning this alleged scheme, you are encouraged to contact the FBI at 973-792-3000.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Attorney Kimberly S. Daise Charged by a Federal Criminal Information with Alleged Conspiracy to Commit Fraud on a Financial Institution and Wire Fraud

October 19, 2011

The Federal Bureau of Investigation (FBI) on October 19, 2011 released the following:

“Lawyer/Title Agent Charged in Versailles Mortgage Fraud Scheme

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; Jeff Atwater, Chief Financial Officer, Florida Department of Financial Services; and the Palm Beach County Mortgage Fraud Task Force, announced the filing of a criminal information charging defendant Kimberly S. Daise, 48, an attorney, of Miami, Florida, in connection with a mortgage fraud scheme relating to a property in the Versailles development in Wellington, Florida. Daise made her initial appearance in federal court this morning before U.S. Magistrate Judge Ann E. Vitunac in West Palm Beach.

As alleged in the information, Daise submitted false documentation to mortgage lenders substantially inflating the purchase price of the properties. As part of the conspiracy, two sets of HUD-1 Settlement Statements were prepared. One form, listing the real price, was provided to the seller. Another form, with the inflated price, was provided to the lender. The difference between the real price and the inflated price was either made to appear as if it were a debt owed to business entities controlled by the defendant and her co-conspirators, or was made to appear as profits to the sellers. The fraudulent loan proceeds were ultimately used for the benefit of the defendant and her co-conspirators.

More specifically, the information alleges that defendant Daise was involved in a mortgage fraud scheme that generated more than $3.2 million in mortgage loans and approximately $500,000 in fraudulent loan proceeds involving a properties located at 10543 Versailles Blvd., Wellington, Florida and 10727 Versailles Blvd., Wellington, Florida. The defendant is charged with one count of conspiracy to commit fraud on a financial institution and wire fraud, in violation of Title 18, United States Code, Section 1349.

If convicted, the defendant faces a maximum statutory sentence of 30 years in prison for the conspiracy to commit fraud on a financial institution.

Mr. Ferrer commended the investigative efforts of the FBI, Florida Department of Financial Services, U.S. Secret Service, FDLE, State of Florida’s Office of Financial Regulation, and the Palm Beach County Mortgage Fraud Task Force. The case is being prosecuted by Assistant U.S. Attorney Ellen Cohen.

An information is merely an accusation and a defendant is presumed innocent unless and until proven guilty.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

————————————————————–

To find additional federal criminal news, please read Federal Crimes Watch Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.