After Failed Suicide Attempt, Lawyer Charged With $5 Million Ponzi Scheme

“I have systematically over the course of five years or so perpetrated a huge Ponzi scheme envelloping [sic] my family and closest friends... I managed to completely squander the hard earned money that my family and dear friends managed to set aside over the course of their working lives. To be clear about this: the whole . . . investment scheme that so many thought was real was in fact a complete and fiction of my crazed imagination.”

After penning a detailed suicide note confessing to operating a multi-million dollar Ponzi scheme, a former prominent New York lawyer jumped into the Hudson River as a final act.  However, after a NYPD SCUBA diver saved his life, his suicide note was discovered and authorities subsequently charged him with masterminding a Ponzi scheme that duped family, friends, and law clients out of at least $5 million.  Charles A. Bennett, 56, was the subject of a civil fraud complaint filed earlier this month by the Securities and Exchange Commission, and was also arraigned on wire fraud and securities fraud charges from his hospital bed.  A federal magistrate judge refused a request by prosecutors to detain Bennett as a flight risk while he recovers at a local hospital.

Bennett started as a lawyer in the 1980s, working for several prominent New York law firms that specialized in corporate law and mergers and acquisitions.  During his tenure at those firms, he made several key connections, including the then-wife of former New York governor Eliot Spitzer and the principal of a Wyoming family-owned investment fund.  In the early 2000s, Bennett opened a solo law practice.  

In the mid-to-late 2000s, Bennett began encountering financial difficulties as a solo legal practitioner and started borrowing funds from friends to stay afloat.  Soon thereafter, Bennett began representing that he had a connection to a Wyoming hedge fund (the 'Fund"), which purportedly generated significant returns through investments in European real estate mortgage-backed securities and/or credit default swaps.  Potential investors were told that former Governor Eliot and his then-wife were investors in the Fund.  After making an investment in the Fund, investors then received falsified documents containing the logo of the Fund, which he used without permission of the Fund.  In total, Bennett raised more than $5 million from at least 30 investors.

However, while the Fund was real and Bennett had a relationship with the Fund principal, no outside investor money was ever taken by the Fund nor did Bennett ever make an investment with the Fund.  Rather, Bennett simply appears to have taken advantage of the fact that the Fund was based far away from New York in Wyoming.  Instead of investing those funds entrusted to him, Bennett instead used investor funds to sustain his lavish lifestyle that included international travel and large cash withdrawals.  Bennett also used new investor funds to make payments of fictitious interest and principal to existing investors - a hallmark of a Ponzi scheme.

By 2014, Bennett was repeatedly receiving investor demands for the return of their principal and accrued returns - demands that Bennett was unable to meet with his available funds.  In an attempt to stave off victim demands, Bennett opened two bank accounts at a new financial institution with $100 in each account - and then proceeded to write checks of $500,000 and $550,000, respectively.  Those checks subsequently bounced.  After the demands intensified, Bennett checked into a New York hotel in early November 2014 and authored a 16-page suicide note titled "A Sad Ending To My Life," in which he took full responsibility for the Ponzi scheme and confessed that “the whole investment scheme that so many thought was real was in fact a complete and [sic] fiction of [his] crazed imagination,” and that “the bulk of the funds were used in classic Ponzi scheme fashion to pay off other supposed ‘investors’ and my absurd lifestyle.”   The next day, Bennett jumped into the Hudson River.

The SEC's complaint is below.


comp-pr2014-279 by jmaglich1