A Florida man pled guilty to securities fraud in connection with a Ponzi scheme that raised over $5 million from investors. Ward Onsa, of Marco Island, Florida, faces a maximum prison sentence of 20 years in connection with the guilty plea, although the actual sentence will depend on federal sentencing guidelines.
Onsa founded New Century Investment Management LLC, which maintained offices in Pennsylvania andoperated the New Century Hedge Fund ("New Century"). From 2005 to 2010, New Century solicited investors by representing that it had formulated an investment strategy that purchased securities, futures contracts and options that would profit when the Dow Jones Industrial Average reached 10,748, on the theory that the market would not trade above this level. New Century raised over $5 million from investors, most of this money coming from retirement accounts. However, as the market surged in the period before the financial crisis and traded at levels exceeding 14,000, these bets suffered heavy losses. Instead of disclosing these losses to investors, which totaled $2.8 million when the fund stopped trading in late 2008, New Century generated fictitious account statements showing steady performance, and investors continued to receive returns from new investor funds.
The U.S. Commodity Futures Trading Commission filed civil charges against Onsa and New Century in April 2011, charing the two with violations of the Commodity Exchange Act, and seeking disgorgement of ill-gotten gains and civil monetary penalties.
A copy of the complaint filed by the CFTC is here.