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
April 24, 2014
Few financial products have proven as controversial as Real Estate Investment Trusts, and few REITS have grabbed their share of negative headlines as ... Read On
April 24, 2014
Virtual currency, electronic money, cryptocurrency: Whatever the name, it's in the news but not necessarily in a good way. When I start getting an inc... Read On
April 23, 2014
Wall Street may be the place where trillions of dollars exchange hands, but it's not the place where a registered person should simply ask a customer ... Read On
April 22, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#brokeandbroker #billsinger #wallstreetjobs&n... Read On
April 21, 2014
I fully appreciate that FINRA has a legitimate concern about industry personnel impersonating customers. I also understand why it is appropriate in th... Read On
April 19, 2014
Will This Tax Season Lien On You?April 18, 2014We just made it through another tax season. The good news is that you filed and are fully paid up -- or... Read On
April 18, 2014
We just made it through another tax season. The good news is that you filed and are fully paid up -- or, the bad news is that you didn't file or you h... Read On
April 17, 2014
In this digital age there are still folks who physically cut-and-paste. How quaint. Of course, quaint or not, when you start using the terms "cut-and-... 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 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 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 IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America 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 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 FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Prison NASAA Aguilar FCPA Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Retaliation Variable Annuity Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education Impersonation Annuities BBVA Business Expenses OIP ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement employment jobs Great Recession Chase Investment Services Barclays Willful Apple Time And Price T&P Husband Letter of Authorization LOA Sexism Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Sexist Argentina Judgment Bank Fraud TSSB Trustee Frumento 6th Circuit Proctor Class Action Beneficiary NYAG Schneiderman Gallagher White Compromise Website Supervision Piwowar Tax Liens signature VA
 
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+