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Entries in Prime Rate (1)

Thursday
Oct132011

New York Man Sentenced to 10 Years in Prison for $6 Million Ponzi Scheme

A New York man who conducted a $6 million Ponzi scheme through the use of a phony financial services firm was sentenced to ten years in federal prison on Wednesday.  Matthew John Ryan, 46, was sentenced by United States District Judge Norman Mondue after previously pleading guilty to a single count of securities fraud.  Ryan was indicted in June 2010 on one count of securities fraud and nine counts of mail fraud.  In exchange for his guilty plea, prosecutors agreed to drop the mail fraud charges.

Ryan operated Prime Rate and Return, LLC, which did business as American Integrity Financial Co. ("American Integrity").  Neither company was ever registered with the Securities and Exchange Commission ("SEC").  Incorporated in April 2001, American Integrity solicited investors through Ryan as its representative.  Potential investors were told that American Integrity was a substantial New York financial services firm with a Manhattan address, and that the firm's investments were protected through its membership in the FDIC and SIPC.  Potential investors were offered purported contracts through American Integrity that promised to pay a fixed rate of return over a fixed period of years, usually three.  After that period, investors were given the option to request the return of their principal, or "roll over" their investment into an additional fixed period with a guaranteed rate of return.  Ryan promised investors an annual rate of return ranging from 3.85% to 9.35%.  Investors were provided with account statements that displayed fictitious balances and accumulated returns.  In total, Ryan collected nearly $6 million from investors.

In reality, American Integrity was not a prominent Manhattan financial firm.  It was not located in the midtown Manhattan address provided by Ryan, nor were there numerous employees.  Instead, Ryan utilized a mail drop box to send and receive mail, and created phony employee names to be used in correspondence with investors.  Additionally, American Integrity was not a member of the SEC, FIDC, or SIPC.  Of the nearly $6 million collected, approximately $2 million was used to pay fictitious interest and principal payments.  Additional funds were used to sustain Ryan's lavish lifestyle, including the purchase of real estate and payments on luxury car loans.

Ryan had faced a sentence of up to twenty years in federal prison.  The United States Securities and Exchange Commission has also instituted administrative proceedings against Ryan.  The case had been set aside pending the resolution of the criminal case.  The SEC is seeking injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties.  

A copy of the Indictment is here.

A copy of the SEC's Complaint is here.

A Receiver has been appointed to marshal and distribute assets to defrauded investors.  A link to his website is here.