“These offenses and their devastation cannot be tolerated. The court must inflict a punishment that emphasizes this kind of financial chicanery cannot and does not exist. It’s necessary for this court to send a loud message, an emphatic message, that this kind of conduct cannot be tolerated.”
- U.S. District Judge Herman Weber
A Cincinnati man will spend the next 15 years in federal prison for orchestrating a devastating Ponzi scheme that took at least $100 million from over 140 investors. Glen Galemmo received the maximum possible sentence from U.S. District Judge Herman Weber pursuant to a plea agreement with prosecutors in which he pleaded guilty to one count of money laundering and one count of wire fraud. Galemmo will also be ordered to forfeit his assets. With credit for time served, Galemmo will serve at least 13 years of his sentence.
Galemmo operated Queen City Investment Fund ("Queen City"), along with a dozen other investment entities. Touting himself as an experienced trader, Galemmo promised lucrative returns to potential investors through investments in stocks, bonds, futures, and commodities. Investors were provided with promotional materials indicating Queen City had enjoyed a streak of consistently above-average returns, including a return of nearly 20% in 2008 when the S&P 500 experienced a -38.49% loss. Potential investors were assured that Galemmo obtained annual audits of Queen City, and were provided with monthly statements showing steady returns. In total, Galemmo raised at least $100 million from individuals, trusts, and even charitable organizations.
However, Galemmo's touted prowess as a savvy trader was pure fiction. Galemmo was able to pay the promised outsized rates of return not through trading stocks and bonds, but from using incoming investor funds to pay existing investors - a classic sign of a Ponzi scheme. Nor was the Queen Fund audited; rather, Galemmo simply listed the name of an audit firm that had not had a relationship with Galemmo or his fund since 2003. Galemmo also created fictitious trading and account statements that were distributed to investors. Investor funds were diverted by Galemmo for a variety of unauthorized uses, including the purchase of real estate, the payment of fictional interest and principal distributions, and even to operate other businesses such as entertainment complexes.
The scheme came to a sudden halt in July 2013 when investors received an email from Galemmo stating that the funds were shutting down and directing all further inquiries to an IRS agent. Galemmo was later arrested, and agreed to plead guilty shortly thereafter. The prospect of recovery for victims appears bleak, with one source reporting that the Department of Justice has estimated that victims could recoup 10% to 20% of their investment. One group of investors has commenced litigation against several national banks, seeking to hold the banks liable for their assisting Galemmo's scheme.
Galemmo was allowed to remain free on bond while the Bureau of Prisons determines where he will serve his sentence, which could take as long as two months.