An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

UPDATE: The Flying Ponzi Commodities Pool Circus: Securities Fraud, Bank Fraud, and Tax Evasion
Written: June 18, 2012


Few dare -- but did Cilli succeed in pulling off the dramatic triple death spiral of securities fraud, bank fraud, and tax evasion?

This is an update of a “Street Sweeper” column that originally ran on October 5, 2011.

Victor E. Cilli, 45, of Hackensack, NJ, was arrested June 15, 2011, and charged in a criminal Complaint with one count each of securities fraud and of conspiracy to commit bank fraud.

Note: The charges and allegations contained in the Complaint are merely accusations and the defendant is considered innocent unless and until proven guilty beyond a reasonable doubt in a court of law

Background

As early as August 2006, it was alleged that Cilli was the sole owner and president of Progressive Investment Funds, LLC (“PIF”), which was a commodity pool operator (“CPO”) engaged in an investment trust that solicited funds for the purpose of trading commodity futures.  PIF was registered with the Commodity Futures Trading Commission and the National Futures Association .

PIF was the CPO of Progressive Managed Futures Fund LP (“PMFF”), a commodity pool operated for the purpose of trading commodity futures.  Cilli had sole trading authority over PMFF, which remained open until approximately February 2009.

Ponzi

The Complaint alleged that from at least January 2007 and through October 2007, Cilli engaged in a Ponzi scheme to defraud at least four commodity pool participants, who had a total investment of about $506,000. Although Cilli purportedly told the participants that he had realized trading profits, in reality, he traded about $263,000 and sustained some $200,168 in losses. Moreover, Cilli never disclosed to the pool participants that he had traded less than half of their money or that most of his trading had resulted in significant losses.

Also, Cilli misappropriated thousands of dollars in pool funds for personal expenses – including hair salon visits, skin care treatments, payments on his Harley Davidson motorcycle, and other personal entertainment, meals, and travel expenses. Although Cilli returned some funds to the investors, the payments were not from trading profits but allegedly constituted a Ponzi transfer of funds from other pool participants.

Flying High

From about 2002  through September 2006, Cilli and approximately 16 others conspired to defraud KeyBank, a financial institution based in Cleveland, OH.  The Complaint alleged that the conspirators  falsely represented to KeyBank that they would attend Tab Express International, Inc. (“Tab”), a pilot and flight crew training school in DeLand, Fla., and use the proceeds of student loans for educational expenses at Tab. Allegedly, the conspirators never intended to enroll at Tab, nor repayto KeyBank the principal or interest on the loan.

Some $600,000 of the loan proceeds from KeyBank were allegedly deposited into bank accounts solely owned and operated by Cilli, who then kicked back about $130,000 to his co-conspirators for signing up for the loans. The Complaint asserted that Tab retained approximately $900,000 of the total loan proceeds. To conceal his fraudulent conduct, Cilli allegedly maintained bank accounts in the names of Northeast Flight Training, Inc., which was not a flight training school; and United Charities of America, Inc., which was not a charitable organization. Both accounts were maintained by Cilli solely to perpetuate his frauds and fund his personal expenditures.

To date, KeyBank not been repaid any principal or accrued interest on the nearly $1.5 million in loans.

Guilty Plea

On October 4, 2011, Gilli pleaded guilty to a criminal Information charging him with one count of securities fraud, one count of conspiracy to commit bank fraud, and one count of tax evasion.

Beyond the allegations in the Complaint, the Information added that for calendar years 2003 and 2004, Cilli intentionally failed to provide the Internal Revenue Service with any information regarding the nearly $547,705 in proceeds that he received in connection with his conspiracy to commit bank fraud. The Information computed that such non-disclosure resulted resulting in a $158,674 tax loss to the United States.Cilli is scheduled to be sentenced in January 2012 and faces the following maximum penalties:

  • securities fraud: 20 years in prison and a $5 million fine;
  • conspiracy to commit bank fraud: 30 years in prison and a $1 million fine; and
  • tax evasion: 5 years in prison and a $100,000 fine.

UPDATE

On June 18, 2012, Cilli was sentenced to 36 months in prison plus  five years’ supervised release, ordered to pay $710,000 in restitution, and ordered to comply with the IRS in filing amended tax returns and pay more than $410,000 in taxes, penalties, and interest.


 
[^top^]

Previous Entries
October 21, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS... Read On
October 20, 2014
Once upon a time, Wall Street's regulators seemed to view so-called "Failure To Supervise" matters as a last resort -- the final arrow in a quiver. &n... Read On
October 18, 2014
Athena No Goddess Says SEC in HFT SettlementOctober 17, 2014In an effort to cultivate an orderly daily closing, ten minutes before the close at 3:50:0... Read On
October 17, 2014
In an effort to cultivate an orderly daily closing, ten minutes before the close at 3:50:00 p.m., NASDAQ releases a Net Order Imbalance Indicator, whi... Read On
October 17, 2014
Securities and Exchange Commission ("SEC") Commissioner Michael S. Piwowar and his often like-minded colleague, Commissioner Daniel Gallagher, are the... Read On
October 16, 2014
On October 15, 2014, the Securities and Exchange Commission (“SEC”) filed an Order Instituting an Administrative Proceeding (“OIP”) against “Complianc... Read On
October 15, 2014
You should be thrilled to learn that the venerable Lloyds & Associates Management Ltd. is involved in this deal that I’m going to pitch to you. Yo... Read On
October 14, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS... Read On
BrokeAndBroker.com Job Search
Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw Appeal Fowler LPL Johnson US Airways Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Away Account Credit Repair PN Advisor Placement Group Forex Mortgage Private Placement Moon Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Judgment Bank Fraud Deceased TSSB Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman Gallagher White Self Regulation Short Sale Compromise Website TRO Supervision Vacatur SDNY BrokeAndBroker Bill Singer Piwowar Rule 1122 Article V signature Inside Information VA Regulation SP Customer Rule 3270 OWB Stockbrokers
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+