As some have predicted, federal authorities have unveiled criminal charges against a former TD Bank official implicated in the massive $1.2 billion Ponzi scheme masterminded by Scott Rothstein. Frank Spinosa, 53, was arrested today on five counts of wire fraud and one count of conspiracy to commit wire fraud and was later released on a $250,000 bond. Spinosa's lawyer, who called the arrest "unnecessary" and "one of those typical Rothstein case flourishes," has maintained his client's innocence and indicated he intends to stand trial on the charges.
Rothstein's relationship with Spinosa began after he opened over 20 attorney trust accounts and law firm operating accounts in late 2007 at TD Bank and another bank TD Bank later acquired. Spinosa was Rothstein's point of contact beginning in 2008, and communicated often with Rothstein regarding the accounts and various documents that were provided to investors. As Spinosa's compensation was tied to the size and volume of accounts he managed, the fact that Rothstein's accounts were among TD Bank's largest accounts in South Florida meant increased compensation and bonuses for Spinosa.
Spinosa was implicated in the massive scheme by Rothstein himself, who claimed during a 2011 deposition that he had recruited Spinosa to assist in the preparation of false "lock letters" used to show investors that their investments were safe and that Rothstein could not remove funds from the account holdings the funds. According to the Securities and Exchange Commission, which filed civil fraud charges against Spinosa last year, Spinosa also made oral assurances to at least two investors that certain trust accounts at TD Bank holding investor funds contained hundreds of millions of dollars when in reality the "locked" accounts typically held less than $100. In one instance during August 2009, months before the scheme eventually collapsed, Spinosa participated in a conference call with Rothstein and an investor in which he told the investor that an account had a balance of $22 million when, in reality, the account had a balance of less than $100. The investor subsequently made four more investments with Rothstein in the ensuing months.
Over two dozen other individuals have been charged for their role in Rothstein's scheme and sentenced to prison. Spinosa could face decades in federal prison if convicted of all charges and sentenced to the statutory maximum.
Other Ponzitracker coverage of the Rothstein scandal is here.
A copy of the indictment is here (thanks to Chuck Malkus, authorof The Ultimate Ponzi)