Ponzi Scheme Charged in Chicago Area
A Suburban Businessman Allegedly Swindled Millions of Dollars
A Chicago area businessman has been charged with swindling millions of dollars from hundreds of investors in a Ponzi scheme that allegedly been going on for 22 years. The U.S Department of Justice released a statement that has been posted on the Federal Bureau of Investigation (FBI) website; regarding the case.
Frank A. Castaldi Charged
Frank A. Castaldi, a suburban businessman, was charged with promising hundreds of investor's rates of return of 10 and 15 percent annually on promissory notes. Castaldi, of Prospect Heights, Illinois, allegedly operated a Ponzi scheme for over 20 years. Losses to investors of tens of millions of dollars were estimated.
The defendant, Frank A. Castaldi, was charged with mail fraud in a federal criminal complaint that was filed in the U.S. District Court on January 23, 2009. The charges were announced by Patrick J. Fitzgerald, the United States Attorney of the Northern District of Illinois, along with Robert D. Grant, Special Agent in Charge of the Chicago Office of the FBI.
Castaldi is listed as being from Prospect Heights, which is a suburb located northwest of the City of Chicago.
Businesses Owned by Castaldi
According to information in the complaint, there were two businesses started by Castaldi, his father and a business partner in the early to mid 1980's. The businesses were CZ Travel and CZ Realty. Later the trio purchased ownership interests other businesses including: First State Travel Service, Ins.; Parkway Towers Insurance Agency and Cumberland Realty, Inc. (later ReMax Cumberland Realty). These businesses shared at address of 4501 North Cumberland in Norridge. Frank A. Castaldi was identified as the president of each business.
Castaldi Sells Notes to Investors
In the mid 1980's, approximately 1986, Castaldi allegedly started to offer to sell promissory notes to investors, including people who were friends, family members and customers of his various businesses. The majority of the notes stated that the annual interest rate was zero percent. Allegedly, Castaldi had orally committed to pay investors annual returns that were between 10 and 15 percent.
Among the allegations against Castaldi is that he made false representations to investors, false statements about the source of funds to investors, and falsely telling investors that he was placing their money in financial institutions that guaranteed principal and high returns.
Allegedly, Castaldi obtained loans and used the principal payments of certain investors to make interest payments to other investors.
Tens of Millions of Dollars and 200 to 300 Investors
According to the complaint affidavit, there are approximately 200 to 300 investors who have not received their principal back in the amount of tens of millions of dollars. In 2008 alone, the total face value of the promissory notes that Castaldi allegedly renewed or issued had a total face value of approximately $68 to $69 million. The money was the total of the investor's initial notes plus the accumulated interest which had been rolled back into the promissory notes.
Castaldi is not only is alleged to have used the new investors' principal to make interest payments and to return principal to earlier investors. Castaldi lost money for investors by funding his own failing businesses, including a failed banquet hall. He is also alleged to have used the money to purchase stocks. According to the complaint, neither Castaldi nor his businesses are believed to have the money to pay investors back.
In addition to using new investors' principal to make interest payments and return principal to earlier investors, Castaldi also lost investors' money by funding his failed banquet hall and other failing businesses, and to purchase some stocks, the charges allege. It is believed that neither Castaldi nor his businesses have the money to pay back the investors, the complaint states.
Law enforcement authorities are still in the process of identifying potential victims in this case. People who believe they may be victims but who have not heard from the U.S. Attorney's Office Victim Assistance Program by the end of February, 2009 should call 1-866-364-2621 for information.
If convicted, mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine.
The public is reminded that the defendant is presumed innocent, that a complaint contains only charges and is not evidence of guilt.
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