Authorities on Monday arrested the CEO of a private New York financing firm on suspicion of running a purported Ponzi scheme that attracted $400 million in investments, according to a Reuters report.
Nicholas Cosmo, head of Agape World on New York’s Long Island, is believed to have provided commercial bridge loans, but was instead operating a traditional Ponzi scheme where early investors are paid with the money of new clients.
“Nicholas Cosmo took the advice of an attorney and complied with an arrest warrant,” said Al Weissmann, spokesperson for the U.S. Postal Inspection Service, which is investigating Agape World and Cosmo along with the FBI.
While a much smaller amount of money, compared to Bernard Madoff’s $50 billion fraud—U.S. authorities expect to uncover similar operations following the fallout of the economic crisis.
“Some of the early investors made money but as this scheme started to crumble, the later investors did not see a penny,” a law enforcement official said of the firm.
Cosmo was convicted of a federal charge of felony fraud and swindle in 1999 and was sentenced to 21 months in prison. He was released in August 2000.
Investors had raised concerns long before Cosmo’s arrest. Bridge loans that promised 13-14 percent returns did not sit well with all investors. Since Madoff’s arrest on December 11, three other Ponzi schemes have been announced in California, Georgia, and Florida. The amounts in those cases range from $25 million to hundreds of millions of dollars.
According to Reuters, the Securities and Exchange Commission charged money manager Arthur Nadel, head of Florida-based Scoop Management, with fraud last Wednesday in a complaint. The complaint specified that the six hedge funds Nadel oversaw, which he valued at more than $300 million, actually contain less than $1 million. It obtained an emergency court order freezing Nadel’s assets and appointed a receiver.
Nadel was reported missing by his family in early January and left behind a suicide note. He conveyed guilt for losing his client’s money and said someone might try to kill him.