A California man admitted he masterminded a massive Ponzi scheme that brought in more than $80 million from 300 investors. Anthony Vassallo, 33, entered into a plea agreement with prosecutors in which he agreed to plead guilty to a single count of wire fraud. While wire fraud carries a maximum sentence of twenty years in prison, prosecutors agreed to recommend a 16-year sentence.
Vassallo and others operated Equity Investment, Management and Trading Inc ("EIMT") from April 2006 to March 2009, telling investors he had developed a computer program that could yield 36% annual returns by successfully 'timing' the stock market. Investors were assured that their funds were safe from any risk of loss, and were provided fabricated investment information and forged brokerage and bank documents as proof of the scheme's success. Eventually, over 300 investors, including friends and family, would entrust more than $80 million to Vassallo.
However, of the little trading EIMT did engage in, Vassallo suffered extensive losses, and hid these losses from investors by employing the use of "dummy screens." Instead, in classic Ponzi fashion, he used funds from new investors to make regular dividend payments to existing investors who thought their investment was performing as advertised. By March 2009, the scheme had collapsed.
Vassallo's co-conspirator, Kenneth Kenitzer, has already pled guilty, and is awaiting sentencing. Vassallo is scheduled to be sentenced May 3, 2012, and also faces criminal fines and mandatory restitution.
The case also featured an attempt at 'vigilante' justice when several investors were confronted by several of Vassallo's associates at gupoint who identified themselves as federal agents and demanded over $378,000. The men, who brandished fake identification, bullet-proof vests, and radio earpieces, threatened at least one of the investor's families. Michael David Sanders, along with three accomplices, was later charged with conspiracy, impersonating a federal agent, and attempted extortion. The four were sentenced Friday, with each receiving probation.