Feds Say Fugitive Day Trader Ran Ponzi Scheme On Gay Community

April 9, 2012

Charles Ponzi lives on.

According to federal prosecutors, starting in October 2004, George Elia, 68, formerly of Ft. Lauderdale, FL,  allegedly engaged in fraud when he solicited investors.

Ho hum . . . as if that's a major news story these days? I mean, to be really cynical here, are we supposed to be surprised that someone located in Florida is purportedly engaging in fraud? Lately it seems that the Sunshine State has become a destination of first resort for those looking to engage in medicare or securities fraud.

So, when I read the press releases about Elia, it took on all the excitement of a fender bender on a highway.  You may not be able to avert your eyes, you may feel compelled to slow down and gawk, but you're also going to be met by a blasé officer of the law admonishing you: Nothin' to see here. Move on.

Elia is charged with telling investors that his companies had significant assets. The feds say au contraire. Elia purportedly told investors that he was a day-trading master of the universe. According to the allegations against him, his record doesn't necessarily bear that out. Then there are the accusations that Elia promised astronomical returns on investment. As with so many of such promises, a lot of investor apparently didn't see the anticpated results; and as to any dollars that made their ways back to any investors, the bucks came from newer, fresher meat a la Ponzi.

Federal Cases

On April 5, 2012, Elia was indicted on one count of wire fraud.

NOTE: An indictment is only an allegation, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

On April 6, 2012, the Securities and Exchange Commission  ("SEC") filed a separate civil case against Elia and his companies for engaging in a scheme to defraud investors. In SEC v. George Elia, International Consultants & Investment Group Ltd Corp, Defendants, and 212 Entertainment Club, Inc., and Elia Realty, Inc., Relief Defendants (SDFL, 12-CV 12-cv-60616-xxx, April 6, 2012). At . The SEC'sComplaint charges that Elia and ICIG violated antifraud provisions of U.S. securities laws and that Elia aided and abetted violations by the firms.  The SEC is seeking permanent injunctions against Elia and ICIG, disgorgement of ill-gotten gains plus pre-judgment interest, and civil penalties

NOTE: A Complaint is only an allegation, and the defendant is presumed innocent unless and until proven guilty beyond a preponderance of the evidence in a court of law.

Elia is listed as the President of Defendant ICIG, and of Third Party Defendants 212 Enteratinment Club and  Elia Realty.  He was never registered with the SEC. Elia is believed to have fled the United States and became a resident of Cyprus.

The SEC Complaint alleges

1. From March 2005 to January 2012, Defendants George Elia and his company, International Consultants & Investment Group Ltd. Corp. ("International Consultants"), orchestrated a Ponzi scheme in which Elia raised approximately $11 million from approximately 25 investors. Elia's scheme was, in part, an affinity fraud: a number of the investors were members of the gay community in Wilton Manors, Florida. Elia falsely told investors he had a long track record of day trading stocks and exchange traded funds to yield annual returns as high as 26 percent, and that his trading on behalf of investors was paying quarterly returns of up to 20 percent.

2. However, in fact, Elia's trading resulted in losses or only marginal gains in limited time periods. Further, he misappropriated millions of dollars of investor funds, so any percentage returns he claimed could not have provided enough profits to pay all investors the returns he claimed. Elia transferred the funds to entities he controlled, including Relief Defendants 212 Entertainment Club, Inc., and Elia Realty, Inc. He also used some of the funds to pay personal expenses such as mortgage and car payments, and to pay an associate to introduce him to potential investors to sustain his Ponzi scheme.

The Complaint further alleges that Elia and ICIG operated through an informal "Investor Funding Club" and through funds including Vision Equities Fund II, LLC and Vision Equities Fund IV, LLC. It alleges that Elia sent one investor a statement for the first three quarters of 2009, showing returns of 3.48%, 3.48%, and 3.52% respectively.  These statement are characterized as false and misleading because the returns exceeded Elia's trading gains for the period.  In at least one instance, the SEC alleged that Elia reassured an investor by showing him falsified statements that grossly overstated account balances.

Bill Singer's Comment

Stripped down to its bare bones, what we have here are allegations of yet another affinity fraud - this one targeting Florida's gay community.  Beyond that aspect of the case, it's all pretty much a re-run and re-hash of a long line of predecessors.  A flashy character waving lots of flash cash and speaking of accomplishments that investors failed to investigate and verify.  Oh yes, they asked Elia for some proof and he apparently manufactured whatever would calm their concerns - or, at least, that's what the feds alleged.  Add into that tired mix of half-truths and outright lies the same-old-same-old apparent diversion of investors' funds into private pleasures and, well, like I've said repeatedly, nothing much new to see here.  Keep moving along.

For now, at least, it's not about Goldman Sachs or MF Global - and it's not a finger pointing at the likes of Merrill Lynch, JP Morgan, Morgan Stanley, or UBS. This is a relatively small-time scam that spread by word-of-mouth among Florida's gay community.  Next week, we may likely read of similar facts involving Florida's Jewish or Latino community, California's evangelical community, New York's gay community, or Michigan's Arab community, or - well, you know, just pick a state and an affinity group and wait.