A day after his original sentencing was postponed over revelations that as much as $1 million in undisclosed assets might be stashed in the Caribbean, an Illinois man was sentenced to serve twenty-five years in prison for a Ponzi scheme that took in more than $100 million from hundreds of investors and ultimately resulted in over $34 million in losses. Daniel Spitzer, 55, received the sentence from U.S. District Judge James Zagel after previously pleading guilty to ten counts of mail fraud in July 2014 on the eve of trial. While Spitzer expressed remorse for his actions, Judge Zagel was not swayed and handed down a sentence that he felt represented the "severe" damage inflicted on Spitzer's victims.
Spitzer owned and operated multiple entities, including Kenzie Financial Management, Kenzie Services, LLC, Draseena Funds Group, Corp., DN Management Company, LLC, and Nerium Management Company. Through these entities, he controlled twelve investment funds (the "Kenzie Funds") that purported to be engaged in various forms of foreign currency trading. Beginning around 2004, Spitzer and Alfred Gerebizza, a sales agent for the Kenzie Funds, solicited investors based on representations that the Kenzie Funds were worth hundreds of millions of dollars, had never lost money, and in fact had achieved annual returns ranging from 4.5% to 13.54% from 2004 to 2009. Spitzer told investors that he specialized in world currencies - which he claimed was the largest asset class in the world. Investors were assured that Spitzer had numerous risk management mechanisms in place, and that their funds would be conservatively invested whilst providing lucrative returns. In total, more than $105 million was raised from over 400 investors.
However, Spitzer was not the forex trading whiz he professed to be. Nor were investor funds used for their stated purpose. Instead, Spitzer ran a classic Ponzi scheme whereby he raised funds under false pretenses and subsequently used those funds as his own personal piggy bank to support a lavish lifestyle that included residences in Illinois and the Caribbean and gambling trips to Las Vegas with expenses totaling nearly $1 million. Spitzer also paid out approximately $71 million in Ponzi-style payments to investors that purportedly represented earned interest and principal redemptions, as well as millions of dollars in commissions to sales agents.
Spitzer was charged both civilly and criminally in 2010, and subsequently pleaded guilty to the criminal charges in July 2011 while his co-conspirator, Gerebizza, was convicted of fraud in July 2014 and is currently awaiting sentencing.
While Spitzer was originally scheduled to be sentenced yesterday, Judge Zagel ordered the sentencing postponed when Spitzer's lawyer informed the court that he had recently learned that as much as $1 million in undisclosed assets existed in the form of securities being held offshore in St. Vincent. At Spitzer's sentencing, Judge Zagel indicated that those assets would be recovered and added to the pot of assets set aside for restitution to Spitzer's defrauded victims.
The Superseding Indictment is below: