“You are a liar. Numerous victims have described their financial crisis as a result of your crime and the heart rendering consequences they are enduring because of your fraudulent conduct....A substantial prison sentence will be important...to protect the public.”
-U.S. District Judge Garland E. Burrell, Jr.
After a series of bizarre events that included an extortion attempt involving the impersonation of federal officers and an unsuccessful attempt to withdraw a guilty plea, a California man was sentenced to serve the next sixteen years in federal prison for masterminding a Ponzi scheme that took in more than $80 million from investors. After originally pleading guilty to one count of wire fraud in February 2013, Anthony Vassallo, 34, recently tried to change his plea when he claimed that he had been coerced into entering the plea agreement by prosecutors and his own defense attorney. However, United States District Judge Garland E. Burrell Jr. did not mince his words in rejecting this attempt, declaring that Vassallo had no credibility and branding him a 'liar' at a later hearing.
Beginning in April 2006, Vassallo, along with several others, operated Equity Investment, Management, and Trading Inc. (EIMT) in Folsom, California. EIMT purported to be a hedge fund investment company that achieved lucrative returns through the use of a computer program designed by Vassallo to time the stock market. These returns, which were as high as 36% annually, were promised with little to no risk of loss of an investor's principal. To convince investors of the scheme's legitimacy, investors were invited to visit Vassallo's office to observe the trading program in action. In total, investors contributed more than $80 million to the scheme.
However, according to authorities, the computer screens shown to investors were nothing more than 'dummy' computer screens designed only to fool investors. Rather than deliver the exorbitant returns through legitimate trading, Vassallo perpetrated the classic Ponzi scheme by using investor funds to make payouts to existing investors. While Vassallo did engage in some trading, he experienced heavy losses of investor funds, and by September 2007 he had virtually ceased trading. Of the remaining funds, Vassallo made Ponzi-like payments to investors, as well as sustaining a lavish lifestyle that included the purchase of a $103,000 Lexus for his wife.
The case also featured an attempt at 'vigilante' justice when Vassallo's former bodyguard was charged with impersonating a federal agent in an attempt to 'shake-down' a pair of businessmen who had recently invested with Vassallo. Along with several others, the bodyguard confronted the men and demanded the return of over $378,000. The men, who brandished fake identification, bullet-proof vests, and radio earpieces, also threatened at least one of the investor's families. The bodyguard and the men were each sentenced to a term of probation.
A hearing has been set for August 23, 2013 to determine the amount of restitution Vassallo will be ordered to pay to his victims.