* Tyrone Gilliams charged with wire fraud
* Trader was profiled by Reuters in May
(Adds details on scheme and information on West Coast
By Matthew Goldstein
NEW YORK, Oct 5 Commodities trader and hip-hop
promoter Tyrone Gilliams was arrested Wednesday on charges of
running a $4 million investment scam, according to a criminal
complaint filed by federal prosecutors in New York.
Gilliams was the subject of a Reuters Special Report in May
[ID:nN12284177] that detailed his activities and allegations
against him by Ohio businessman, David Parlin, in a civil
Known for promising his investors superior returns that
might make Ponzi-king Bernard Madoff blush, Gilliams was
arrested in Philadelphia and is charged with one count of wire
Federal authorities allege that Parlin, working through an
intermediary, placed $4 million with Gilliams to be invested in
U.S. Treasury Strips, a derivative tied to Treasury bonds.
The complaint alleges that Gilliams "did, in fact,
misappropriate at least $2 million of the $4 million" he
received from Parlin.
The Reuters story in May
(link.reuters.com/kag59r)said that Gilliams used some of
Parlin's money to sponsor a
glitzy black-tie charitable event in Philadelphia attended by
rappers and local politicians. One of the guest attendees at
the charitable event was hip-hop mogul Sean "P. Diddy" Combs.
Federal authorities began investigating Gilliams soon after
the Reuters story was published, according to people familiar
with the matter who declined to be identified.
Gilliams, who has been representing himself in the civil
lawsuit, could not be reached for a comment. He was expected to
be arraigned later today in New York federal court.
The U.S. Securities and Exchange Commission's Philadelphia
office was also reported by the sources to be investigating
Gilliams. Daniel Hawke, the administrator of the SEC's
Philadelphia office, declined to comment.
Agents with the New York office of the Federal Bureau of
Investigation are also looking into whether a California-based
group of investors who invested $1 million with Gilliams may
have been similiarly scammed, according to two sources familiar
with the matter.
Louis Craco, the laywer for Parlin, declined to comment on
The FBI arrested Gilliams, who lives in a Philadelphia
suburb, just days after he was scheduled to sit for a
deposition in Parlin's civil lawsuit. The deposition was
A charitable fund set up by Parlin invested $4 million with
Gilliams on the recommendation of New York financier Vassilis
Morfopoulos. In his lawsuit, Parlin also named Morfopoulos as a
Federal authorities did not charge Morfopoulos with any
wrongdoing. His attorney, Christopher Chang, in a statemement,
said: "Morfopoulos will continue to do whatever is necessary to
get David Parlin's money returned from Gilliams."
The investment scheme that Parlin invested in, on the
surface, certainly seems to have been too good to be true.
Parlin claims he was told he could expect to earn a return of 5
percent a week.
In the complaint, an investigator with U.S. Attorney's
Office for the Southern District says Gilliams has claimed in
the civil lawsuit that he always intended to invest the $4
million from Parlin in a gold deal in the west African nation
But the investigator says he has "neither seen nor been
told anything that corroborates Gilliam's assertion."
(Reported by Matthew Goldstein; editing by John Wallace and