A Chicago investment fund manager who touted his law degree to potential victims in an attempt to win their trust will serve the next seventy-two months in federal prison for masterminding a Ponzi scheme that raised more than $11 million from primarily Hindu victims. Neal Goyal, 34, received the sentence from U.S. District Judge Matthew Kennelly after previously pleading guilty to one count of wire fraud. Goyal was also ordered to pay more than $9 million in restitution to his victims - an amount prosecutors estimate will never be completely repaid.
Goyal owned and managed two investment advisors: Blue Horizon Asset Management ("Blue Horizon") and Caldera Advisors, LLC ("Caldera"). Blue Horizon and Caldera, neither of which was registered with federal or state securities regulators, acted as investment advisers to four investment funds created by Goyal (collectively, the "Funds"). Beginning in 2006, while he was attending law school at the Thomas Jefferson School of Law, Goyal began raising funds from friends and family members in the Hindu community. Potential investors were told that the Funds primarily invested in equities, and employed a "long-short" strategy that involved holding both long and short positions. According to account statements provided to investors from 2011 to 2013, the Funds returned at least 17% per year. In total, Goyal raised more than $11 million from at least 35 investors.
However, Goyal was not the savvy trader investors were led to believe. Indeed, his initial trading resulted in substantial losses, and he ceased trading completely by January 2009. Instead, Goyal used investor funds to pay returns to existing investors - a classic hallmark of a Ponzi scheme. Additionally, Goyal misappropriated investor funds to sustain his lavish lifestyle, including more than $1 million for two homes, more than $200,000 in investments in a Chicago tavern owned by his father-in-law, luxury vacations and custom-tailored suits, and $100,000 for a children's clothing boutique operated by his wife. Indeed, despite the fact that his wife's children's clothing boutique was losing money, Goyal used investor funds to help the business expand to a second location. Goyal also splurged on his employees, handing out gold bars as rewards, renting out a bank vault for a work Christmas party, and even treating his staff to a week-long trip to the Dominican Republic just before the scheme collapsed.
A routine audit by the Securities and Exchange Commission uncovered the fraud, and the Commission filed an enforcement action last May accusing Goyal and the Funds of multiple violations of federal securities laws. Goyal was also criminally charged, and subsequently pleaded guilty to one count of wire fraud in February 2015.