January 27, 2017 / 6:32 PM / a year ago

U.S. brings charges over Ponzi scheme, 'Hamilton' tickets fraud

NEW YORK (Reuters) - U.S. authorities on Friday unveiled criminal charges against two men accused of helping operate a hedge fund as a Ponzi scheme and of swindling investors in a ticket-reselling business for popular events, including the smash Broadway musical “Hamilton.”

Joseph Meli, who ran the ticket business, and Steven Simmons, the head of an alternative investments at Sideris Capital Partners, were arrested on Friday on securities fraud and wire fraud charges brought by Manhattan federal prosecutors.

Meli, 42, and Matthew Harriton, 52, were separately accused by U.S. Securities and Exchange Commission of orchestrating an $81 million Ponzi scheme by raising money from investors to buy and resell tickets for popular shows.

Those included “Hamilton,” which won 11 Tony Awards last year, and concerts featuring Adele, the SEC said.

In court, Assistant U.S. Attorney Josh Naftalis said prosecutors rushed to bring charges after the fund’s co-founder turned cooperating witness and recorded Meli saying he was draining his bank accounts and had gotten his passport.

Naftalis also said that after Simmons, 48, was arrested at his Connecticut home, he told Federal Bureau of Investigation agents that he “hoped that Mr. Meli would put two slugs in the back of the cooperator’s head.”

But defense lawyers swayed U.S. Magistrate Judge James Francis to release each man on $1 million bonds after providing explanations.

Michael Bowen, Meli’s lawyer, said anticipating the probe, Meli recently put down a large retainer with his law firm and gave his lawyers his passport. Florian Miedel, Simmons’ attorney, said Simmons was simply stressed upon arrest.

Bowen in a statement said Meli would “vigorously defend against the criminal charges.” Miedel declined to comment. Harriton did not respond to requests for comment.

According to a criminal complaint, the unnamed Connecticut hedge fund had raised funds from, among others, an investment fund that sank $4.2 million into it, only to misappropriate most of the money.

After that investor demanded repayment, the cooperating witness turned to Simmons, who raised $850,000 from an investor, and Meli, who provided $3.75 million from an account for Advance Entertainment LLC, court papers said.

The SEC said Meli and Harriton through Advance Entertainment and other ticket resale business entities were meanwhile involved in a separate Ponzi scheme.

Of the $81 million they raised from 125 investors, $48 million was used to repay earlier investors, while funds were spent on jewelry, private school tuition, gambling, and other expenses, the SEC said.

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