NEW YORK (Reuters) - A suburban New York hedge fund manager accused of losing or spending all but about $27,000 of the $21.8 million he told investors he had was criminally charged on Thursday with running a Ponzi scheme.
Prosecutors said Michael Scronic, who once worked at Morgan Stanley (MS.N) and has degrees from Stanford University and the University of Chicago, stole more than $19 million from 45 investors he had lured to his Scronic Macro Fund by lying about his track record.
Scronic, 46, of Pound Ridge, New York, allegedly lost money in 28 of 29 calendar quarters since April 2010, even as he reported largely positive returns on bogus account statements.
Prosecutors said he also spent $2.9 million on himself over 5-1/2 years, including $180,000 annually on credit cards, fees for beach and country club memberships, and mortgage payments for a vacation home near Stratton Mountain in Vermont.
Scronic was criminally charged with one count each of securities fraud and wire fraud.
He was released on $500,000 bond after a brief appearance in the federal court in White Plains, New York, and is forbidden from trading other people’s money or raising new funds.
The U.S. Securities and Exchange Commission filed related civil charges.
Robert Anello, a lawyer for Scronic, declined to comment.
The defendant had worked for Morgan Stanley from 1998 to 2005, including on an equities trading desk, court papers show. Morgan Stanley was not accused of wrongdoing.
Authorities said Scronic used some new money to repay earlier investors, but as cash became tight this summer refused to honor some investors’ redemption requests.
According to court papers, Scronic had emailed one of those investors in November 2015 that “what’s cool about my fund is that i‘m only in publicly traded options and cash so any redemptions are met within 2 business days so if you do need to withdraw for your business needs it will be quick and painless.”
Authorities said it proved otherwise.
They said Scronic blamed a vacation, a relative’s medical condition, email issues, and a new quarterly redemption policy for refusing the investor’s Aug. 8 redemption request.
As of Monday, that investor was still waiting for his money, court papers showed.
Reporting by Jonathan Stempel in New York; Editing by Tom Brown, Lisa Shumaker and David Gregorio