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CAMDEN, NJ—The former CEO of the hedgefund management company Osiris Partners LLC admitted today to conspiring withothers to defraud investors of more than $4 million, U.S. Attorney Paul J.Fishman announced.
Michael J. Spak, 44, of Chesterfield,New Jersey, pleaded guilty before U.S. District Judge Joseph H. Rodriguez inCamden federal court to an information charging him with conspiracy to commitwire fraud.
According to documents filed in thiscase and statements made in court:
Spak and his co-conspirators solicitedinvestors to invest in the Osiris Fund, which they pitched to prospectiveinvestors as a hedge fund for the “little guys” and “moms and pops.” Over time,more than 75 people invested $12 million in the Osiris Fund. Beginning inJanuary 2010, however, Spak and his co-conspirators at the Osiris Fund beganimproperly diverting investors’ funds for their own use. In January andFebruary 2010, Spak and his co-conspirators spent $300,000 of investors’ moneyto purchase a luxury sport-fishing boat called the “Fintastic.” In total, in2010 and 2011, Spak and his co-conspirators fraudulently diverted more than $4million. Spak failed to disclose these diverted payments to the Osiris Fundinvestors, and in the financial statements that they sent to investors, Spakand his co-conspirators continued to characterize these diverted funds as“assets” of the fund.
In April and May 2010, the Osiris Fundincurred trading losses of approximately $4.5 million, about half the value ofthe fund. Spak and his co-conspirators never disclosed these losses toinvestors. They instead created false financial statements, which included afictitious $5 million “asset,” and sent them to investors. Even though thisfictitious asset never existed, Spak and his co-conspirators charged investorsa three percent management fee to manage it and fraudulently overchargedinvestors millions of dollars in management fees.
The charge of conspiracy to commit wirefraud is punishable by a maximum potential penalty of 20 years in jail and a$250,00 fine. Sentencing is scheduled for January 9, 2013.
U.S. Attorney Fishman credited specialagents of the FBI, under the direction of Special Agent in Charge Michael B.Ward, for the investigation leading to today’s guilty plea. He also thanked theNew Jersey Bureau of Securities, under the direction of Bureau Chief Abbe R.Tiger, for its assistance.
The government is represented byAssistant U.S. Attorneys Shirley U. Emehelu and Christopher J. Kelly of theU.S. Attorney’s Office Economic Crimes Unit in Newark.
This case was brought in coordinationwith President Barack Obama’s Financial Fraud Enforcement Task Force. PresidentObama established the interagency Financial Fraud Enforcement Task Force towage an aggressive, coordinated, and proactive effort to investigate andprosecute financial crimes. The task force includes representatives from abroad range of federal agencies, regulatory authorities, inspectors general,and state and local law enforcement who, working together, bring to bear apowerful array of criminal and civil enforcement resources. The task force isworking to improve efforts across the federal executive branch and, with stateand local partners, to investigate and prosecute significant financial crimes,ensure just and effective punishment for those who perpetrate financial crimes,combat discrimination in the lending and financial markets, and recoverproceeds for victims of financial crimes.
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