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Former Hedge Fund Manager Pleads Guilty in Manhattan Federal Court to Massive Ponzi Scheme

LawFuel.com – US Commercial and Business Law News-
PREET BHARARA, the United States Attorney for the
Southern District of New York, announced that ARTHUR G. NADEL
pleaded guilty today before United States District Judge JOHN G.
KOELTL to fifteen counts of securities fraud, mail fraud, and
wire fraud.

According to the Complaint and Indictment previously
filed in this case and statements made during NADEL’s guilty
plea:

From 1999 through January 2009, NADEL perpetrated a
Ponzi scheme to defraud investors in six different investment
funds (collectively the “Funds”). During the scheme, NADEL
persuaded people to invest their retirement money and savings in
the Funds by lying to them about his success in trading and
inflating the value of the Funds. For example, NADEL claimed
that his trading prowess resulted in consistent, double-digit
yearly returns. In reality, NADEL repeatedly lost money and
stole investor money to fund his lifestyle and several
businesses, including a real estate project in North Carolina,
his wife’s flower shop, and his purchase of several private
planes.

To further the scheme, NADEL created and caused others
to create false and fraudulent client account statements and
other documents showing fictitious positive returns consistent
with the double-digit returns NADEL falsely claimed he achieved.
Based in part on NADEL’s false statements to investors and
others, from 1999 through January 2009, nearly 250 people
invested more than $397 million with the Funds. NADEL received
tens of millions of dollars in management fees and performance
incentive fees and, moreover, transferred and caused to be
transferred millions of dollars in investor money in the Funds to
accounts and entities that he owned and/or controlled. The
investors in the Funds did not authorize NADEL to make these
-2-
transfers, and NADEL failed to disclose them. As a result of
NADEL’s Ponzi scheme, investors suffered losses of approximately
$162 million.

NADEL pleaded guilty to six counts of securities fraud,
one count of mail fraud, and eight counts of wire fraud, and
faces a maximum penalty of 20 years in prison on each of the
counts. For the securities fraud charges, NADEL faces a maximum
fine of the greater of $5 million or twice the gross gain or loss
from the offense. For the mail fraud and wire fraud charges,
NADEL faces a maximum fine of the greater of $250,000, or twice
the gross gain or less from the offense. In addition, NADEL
admitted to allegations in the Indictment seeking forfeiture.
NADEL, 77, of Sarasota, Florida is scheduled to be
sentenced by Judge KOELTL on June 11, 2010.

U.S. Attorney PREET BHARARA said, “Arthur Nadel cheated
his victims out of hundreds of millions of dollars of their
retirement money and savings by lying to them over and over again
and claiming false returns and profits. Many of Nadel’s victims
were elderly and relied on the money that they invested in
Nadel’s funds for their retirement. While he deceived and
impoverished others, Nadel funded a luxurious life for himself
and his associates. Today’s guilty plea is a significant step in
our ongoing effort to bring justice to victims of investment
fraud and Ponzi schemes.”

Mr. BHARARA praised the investigative work of the
Federal Bureau of Investigation and thanked the United States
Securities and Exchange Commission for its assistance in the
investigation of this case.
Assistant United States Attorneys REED M. BRODSKY and
MARIA E. DOUVAS are in charge of the prosecution.
10-060 ###

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