A New York investment advisor is facing criminal charges over allegations that his investment fund was, in reality, a massive Ponzi scheme that raised more than $17 million from dozens of investors. James M. Peister, 62, was indicted on five charges of securities fraud, mail fraud, and wire fraud. Each of the charges carries a maximum 20-year prison term, as well as varying criminal monetary penalties. Peister was scheduled to be arraigned this afternoon on the charges.
Peister owned and operated several commodity pools, including Northstar International Group, Inc. ("Northstar"), North American Globex Fund, L.P. ("Globex"), and North American Globex Group, Inc. ("Globex Group") (collectively, the "Funds"). Beginning in 2000, Peister solicited potential investors by representing, among other things, that the Funds had achieved positive monthly returns in all but four months over a seven-year period, and that their funds would be invested in a variety of safe securities, including stocks, commodity futures contracts, and fixed income instruments. Investors were provided with regular monthly statements showing purported consistent gains in their accounts. In total, at least 74 investors entrusted more than $17 million with Peister and the Funds.
However, according to authorities, a majority of investor funds were transferred to the Globex Group, which was not audited and did not issue regular statements. Authorities allege that Peister and the Funds began experiencing trading losses immediately, which were not disclosed to investors. Additionally, Peister allegedly misappropriated investor funds for a variety of unauthorized purposes, including to sustain a lavish lifestyle that included expensive real estate and a Hummer vehicle. In June 2009, after making redemptions to investors that totaled more than $10 million despite concealing the underlying trading losses, Peister announced that the Funds were dissolving and that financial statements previously provided to investors likely contained material inaccuracies.
Following Peister's announcement, both the Securities and Exchange Commission ("Commission") and the Commodity Futures Trading Commission ("CFTC") filed civil enforcement actions in 2011 accusing Peister of violating federal securities and commodities laws. Peister resolved both of those cases, including a settlement with the CFTC that called for an $11 million payment.
The Commission's 2011 Complaint is below: