"Mini-Madoff" gets 25 years for $400 million Ponzi fraud
NEW YORK (Reuters) - A Long Island man was sentenced to 25 years in prison Friday after admitting to stealing more than $195 million from thousands of investors in the course of a five-year, $400-million Ponzi scheme.
Nicholas Cosmo, 40, was ordered by U.S. District Judge Denis Hurley to repay $179 million to more than 4,000 investors who thought they were investing in short-term commercial bridge loans through Cosmo's two Long Island-based companies, Agape World Inc and Agape Merchant Advance.
Instead, prosecutors said, Cosmo used new investments to pay returns to investors, in a classic Ponzi structure. Media accounts dubbed Cosmo a "mini-Madoff" following his arrest in January 2009, because of the similarity of his scheme to that of New York investment manager Bernard Madoff's multi-billion-dollar swindle, which had been discovered only weeks earlier.
Cosmo pleaded guilty in October 2010 to federal mail and wire fraud charges. Under federal sentencing guidelines he faced up to 40 years in prison.
In contrast to many of Madoff's victims, who were well-off Manhattan residents, charities and companies, prosecutors said, Cosmo and Agape preyed on working-class families, U.S. soldiers and others who wound up losing all or part of their life savings.
"The defendant's actions crushed the hopes and dreams of everyday citizens," Loretta Lynch, the U.S. Attorney for the Eastern District of New York, said in a statement.
An attorney for Cosmo declined to comment.
SECOND FRAUD-RELATED CONVICTION
According to prosecutors, Cosmo fraudulently convinced investors to pour more than $400 million into the Agape companies between October 2003 and January 2009, telling them their money would be used to fund short-term secured bridge loans to commercial borrowers and make other short-term loans to small businesses.
Investors were promised returns as high as 80 percent on their investments, prosecutors said. While a small amount of their funds were actually spent on commercial loans, the majority of new money went to paying returns to other investors, prosecutors said.
Cosmo admitted to using about $80 million in investor funds to perform unauthorized trades in commodities and futures markets. Prosecutors said he also spent hundreds of thousands of dollars without permission to fund a lavish lifestyle -- including hotel rooms, limousine rides and jewelry purchases -- and to pay Agape brokers for bringing in new clients.
This will be the second fraud-related prison term for Cosmo. In 1999, he was sentenced to serve 21 months after admitting to having misled investors, commingled funds and forged documents while working at a stock brokerage firm. He was stripped of his broker's license by the National Association of Securities Dealers in 2000 and forbidden from associating with other registered securities dealers.
In January 2009, the U.S. Commodity Futures Trading Commission filed a separate lawsuit against Cosmo and the Agape entities. It was stayed pending resolution of the criminal charges.
The case is United States v. Cosmo, in the U.S. District Court for the Eastern District of New York, no. 09-2255.
(Reporting by Jessica Dye, editing by Bernard Orr)