Lawfuel – The Law Newswire – MICHAEL J. GARCIA, the United States Atto…

Lawfuel – The Law Newswire – MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that UDO ROTMISTRENKO was sentenced today to 51 months’ imprisonment on charges of wire fraud and mail fraud. United States District Judge DEBORAH A.
BATTS, who imposed the sentence, also ordered ROTMISTRENKO to pay
$1,800,410 in restitution to compensate victims for losses
suffered as a result of ROTMISTRENKO’s misconduct.

ROTMISTRENKO was arrested on June 2, 2004, and indicted
on September 30, 2004. On March 31, 2005, ROTMISTRENKO pleaded
guilty to twelve counts of wire fraud and twelve counts of mail
fraud. During his guilty plea, ROTMISTRENKO admitted that, from
1999 to 2003, as then-CEO and president of Rittmeister Capital
Management in New York City, he fraudulently induced investors to
wire and mail him funds by giving the investors inaccurate
information regarding his company’s profit history.

ROTMISTRENKO did so by giving the investors account statements that falsely inflated the profits the investors were earning and by using
investor funds to pay his personal expenses without disclosing
those expenditures to the investors. According to the Indictment
to which ROTMISTRENKO pleaded guilty:

Rittmeister held itself out to the investing public as
a brokerage firm that managed investments for retail customers in
the foreign currency exchange (“forex”) market. ROTMISTRENKO
solicited retail investors for investments purportedly for the
purpose of trading in the forex market. The forex market is an
international market through which financial institutions trade
various currencies among themselves for the purpose of, among
other things, realizing a profit based upon the fluctuations in
the values of those currencies. Retail investors participate in
the forex market by investing with forex brokerage and/or trading
firms. These firms typically pool retail customer investments in
order to have sufficient capital to invest in the forex market,
and typically exercise discretionary authority over their
clients’ funds.

In order to induce potential customers to invest funds
through Rittmeister, ROTMISTRENKO and Rittmeister sales
representatives made false and fraudulent representations
regarding Rittmeister’s trading history in the forex market.
Specifically, they falsely represented to retail customers that
Rittmeister historically generated large profits, as high as in
excess of 43 percent per year, for its customers through forex
trading. In fact, Rittmeister generated little or no profits for
Rittmeister’s customers through trading in the forex market.

Furthermore, ROTMISTRENKO and Rittmeister sales
representatives told retail customers that Rittmeister’s customer
investment funds were used to invest in the forex market, when,
in fact, the company failed to transfer a large majority of
investor funds to any forex trading firm for the purpose of
executing forex trades. Rather, ROTMISTRENKO diverted a
substantial amount of investor funds to pay his personal
expenses, and to pay Rittmeister’s operating expenses. To hide
the fact that a large portion of the customer funds Rittmeister
received was being diverted to pay Rittmeister’s operating
expenses and for ROTMISTRENKO’s personal benefit, ROTMISTRENKO
created and sent clients false and fraudulent account statements
that represented trading activity and profits and/or losses
incurred on trades in client accounts.

In truth, Rittmeister failed to generate any trading profits for the customer accounts. ROTMISTRENKO diverted customer funds from Rittmeister’s bank accounts in various ways, including the following: (i)
approximately $319,000 was withdrawn in cash; (ii) approximately
$146,900 was paid to an associate of ROTMISTRENKO; (iii)
approximately $24,900 in checks was made payable to ROTMISTRENKO;
(iv) in excess of $30,000 was used for car payments and other car
expenses; (v) approximately $38,000 was used to pay college
tuition for ROTMISTRENKO’s wife; and (vi) funds were used to pay
for numerous hotel, motel and restaurant bills, wedding expenses,
and gym memberships.

Finally, ROTMISTRENKO made false and fraudulent
statements to investors regarding the status of the investors’
funds and account holdings. For example, in response to
investors’ requests for the return of their investment funds or
inquiries regarding their investment accounts, ROTMISTRENKO
falsely represented to investors the following:
(i) the investors’ funds were maintained in banks throughout the world;
(ii) the transfer of investor funds back into the United States
was delayed due to restrictions placed by the United States
government on such international transfers in the wake of the
terrorist attacks on September 11, 2001; and
(iii) ROTMISTRENKO would return all or part of the investors’ principal in the near future.

ROTMISTRENKO, 40, is a resident of Brooklyn, New York.

Mr. GARCIA praised the efforts of the United States
Postal Inspection Service in the investigation and prosecution of
this case.

Assistant United States Attorney ANTHONY S. BARKOW is
in charge of the prosecution.
07-157 ###

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