A Massachusetts man currently serving a 10-year sentence in state prison for operating a multi-million dollar Ponzi scheme was recently indicted on twenty-five federal charges of criminal contempt relating to allegations he willfully violated a court-ordered asset freeze during a Securities and Exchange Commission enforcement proceeding. Steve Palladino, 57, was recently sentenced to serve 10 years in a Massachusetts state prison after he agreed to plead guilty to masterminding a $10 million Ponzi scheme along with his wife and son. Palladino could face additional prison time if he is convicted of the new contempt charges.
According to the U.S. Attorney's Office, Palladino and his company, Viking Financial Group, were the subject of an emergency enforcement action brought by the Commission in April 2013. The Massachusetts District Court granted the Commission's request for an asset freeze, and subsequently modified the asset freeze to require that all funds from Viking be deposited into an escrow account. Palladino was repeatedly accused by the Commission of violating the asset freeze, which resulted in four motions to hold Palladino in civil contempt. This included allegations that Palladino transferred vehicles to his wife who subsequently obtained loans on the vehicles, failed to deposit funds from the loans in an escrow account, obtained a loan from an investor, sold his truck for $9,500, and opened credit cards under false pretenses.
While it is a rarity for criminal charges to result from alleged violations of a Commission asset freeze, the allegations here were particularly egregious - as well as verifiable. For example, Palladino was able to obtain more than $200,000 in bank loans after his wife offered their 2012 Mercedes CLS 63 AMG, 2013 Audi A5 Quattro, and Range Rover Sport up as collateral.
While the form of charging document is one typically used where a plea agreement is likely, there has been no indication that one is forthcoming.
A copy of the criminal information is below: