Long Island Man Charged $370 Million Fraud
President of Investment Firms Charged with Ponzi Scheme in New York
Jan 28, 2009
The President of Long Island, New York investment firms has been charged in a $370 million fraud scheme by the United States Attorney in New York on January 27, 2009, according to a press statement released on the Federal Bureau of Investigation (FBI) website.
Nicholas Cosmos Arrested
Nicholas Cosmos was arrested pursuant to a federal complaint charging him with mail fraud. Cosmo is the owner and president of Agape World, Inc. *Agape) and Agape Merchant Advance, LLC (AMA).
Federal agents have executed search warrants and moved to freeze bank accounts. $1.5 million has been seized so far.
Charges of Fraud
According to the complaint, Cosmos, and others acting at his direction, allegedly carried out a fraudulent scheme that representing to investors that money would provide short term loans to businesses. The loans were to be secured by borrowers’ assets, with returns as high as 48% to 80% per year.
Small amounts of interest generating loans were made to commercial borrowers, but most of the money was used to pay prior investors. Agape and AMA also paid $55 million to brokers who recruited the investors and to fund seven commodities futures trading accounts controlled by Cosmo, through which he lost over $80 between October 2003 and October 2008.
Records revealed that from January 1, 2006 and November 30, 2008, over $370 million was deposited in the Agape and AMA bank accounts, largely from 1,500 investors. Less than $10 million of the $370 million was actually lent to commercial borrowers, the purported purpose.
As of January 22, 2009, approximately $746,000 remained in the Agape and AMA bank accounts.
Cosmo persuaded investors to invest additional funds by paying partial return, said to be profits from interest generating loans. Cosmo falsely inflated profits from some commercial loans to conceal the fact the returns paid to investors were actually funds paid in by new investors.
United States Attorney Campbell
United States Attorney Campbell stated, in the FBI press statement, “This defendant, who operated a classic Ponzi scheme to enrich himself and his colleagues at the expense of investors, is now in custody and the government’s investigation is continuing. In these difficult economic times, it bears repeating that if an investment opportunity seems too good to be true – promising unusually high returns and virtually no risk – it is probably not on the level.”
FBI Assistant Director-in-Charge Demarest
FBI Assistant Director-in-Charge Demarest stated in the FBI press statement, “Investors generally understand that there’s a correlation between risk and reward, and high-yield investments offer higher rates of return to compensate investors for greater risk. But Nicholas Cosmo not only understated the risk, he completely misrepresented the underlying investments. When you lie about what you’re selling people, that’s fraud.”
Postal Inspector-in-Charge Verrochio
Postal Inspector-in-Charge Verrochio was quoted on the FBI press statement, “Operators of Ponzi schemes tell investors they can’t lose, when in fact most never win. The defendant in this case lured his clients with promises of high returns on their investments, but in the end his pyramid of deception came crumbling down but not before losing millions of dollars, their dollars! As long as Americans are victimized by those who use the U.S. Mail to defraud, Postal Inspectors will be on their trail."
If convicted, Cosmo faces up to 20 years in prison on the mail fraud charge. He also faces a fine of up to the greater of $250,000, or twice the pecuniary gain or loss.
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