DENVER – LAWFUEL – The Law Site of Record – Troy A. Eid, United States Attorney for the District of Colorado, Richard C. Powers, Special Agent in Charge of the Denver Division of the FBI, and Teresa L. Thome, Acting Postal Inspector in Charge in Denver, announced that JOSEPH A. FERONA, age 45, of Castle Rock, was indicted by a federal grand jury in Denver on November 2, 2006, on mail fraud, wire fraud, and money laundering charges related to an investment fund scheme known as “Global Prosperity Fund.” FERONA solicited and obtained funds in excess of $2.8 million from investors, much of which he ultimately diverted for his own use. He was arrested in Texas on December 18, 2006, where he was ordered transferred to US District Court in Denver. On January 8, 2007, FERONA was ordered held without bond pending a resolution of his case.
From October 2003 through May 2005, FERONA devised a scheme to defraud investors of money by false pretenses by soliciting individuals to invest funds into a “hedge fund” known as Global Prosperity Fund. FERONA purported to operate this fund through Castle Rock Trading Company, based in Castle Rock and Franktown, Colorado.
According to the indictment, FERONA held himself out to be an investment advisor, private investment banker, and a financial analyst. He marketed the Global Prosperity Fund as a private mutual or hedge fund that pooled investors’ money to trade in equity securities and options through a predefined trading system, with investors sharing in the profits on a pro-rata basis according to their contributions to the fund. FERONA was not registered with the State of Colorado nor federal regulatory agencies to conduct such business.
As part of the scheme, FERONA made fraudulent representations to investors, including that the fund realized annual returns or profits in excess of 40 percent, that returns for 2005 were projected as reaching 50 percent, and that the fund earned double digit returns during both good and bad market conditions.
In truth, at no time was FERONA ever profitable, and no more than half of investors funds, and at times, only a fraction of investor money, was even transferred to brokerage accounts for use in trading. FERONA would provide fabricated documentation depicting fictitious arrangements with law firms and nonexistent liability insurance coverage.
FERONA allegedly concealed massive trading loses by generating and distributing false and fictitious quarterly and monthly investor account statements, falsely depicting each investors’ fund balance as appreciating based on the falsely reported returns.
The indictment states that the defendant diverted and misapplied a significant part of investor funds for his own purposes and uses, rather than transferring To conceal his loses, FERONA also engaged in a Ponzi scheme with investors’ monies. He would fund distributions to investors who sought withdrawals of their share of funds’ purported profits either from preexisting investor funds or from additional investment solicited and secured from current or new investors to the Global Prosperity Fund.
“There is no such thing as a ‘guaranteed’ or ‘insured’ investment,” said U.S. Attorney Troy Eid. “Investments that promise unrealistic returns with no risk are virtually always fraudulent.”
“The FBI is fully committed to combating Financial Fraud, especially those individuals using investment schemes to target and victimize elderly members of our community; often persons of the most vulnerability,” said Richard Powers, FBI Special Agent in Charge. “This case represents another successful investigation in partnership with the United States Postal Inspection Service and the assistance of the SEC.”
“It is the mission of the U.S. Postal Inspection Service to protect the integrity of the U.S. Mails and pursue individuals who utilize the mail to deceive the American Public. We are appreciative of the working relationship between our agents and those with the Federal Bureau of Investigation and the Securities Exchange Commission.” said Teresa L. Thome, Postal Inspector in Charge.
FERONA faces 23 counts of mail fraud, each carrying a penalty of up to 20 years imprisonment, and up to a $250,000 fine. He faces five counts of wire fraud, each carrying a penalty of not more than 20 years in federal prison, and up to a $250,000 fine. Lastly, FERONA faces 9 counts of money laundering, with four of the counts carrying a penalty of not more than 20 years imprisonment, and up to a $500,000 fine, and 5 of the counts carrying a penalty of not more than 10 years imprisonment, and up to a $250,000 fine
This investigation was conducted by the Federal Bureau of Investigation (FBI), and the US Postal Inspection Service, with tremendous assistance from Securities and Exchange Commission.
The case is being prosecuted by Assistant United States Attorney Ken Harmon.
The charges are only allegations, and the defendant is presumed innocent unless or until proven guilty.