Ponzi Fraudster Gets 12 Years In Prison

January 23, 2013

A picture taken on February 8, 2011 in Rennes,...

If sometime between 2001 and 2009 you had met Randy M. Cho, 39, of Newton, MA, and formerly of Chicago,IL, he may well have told you that he was a self-employed securities trader. At that point, if you were lucky, you would have walked away - if you were smart,you would have run away as fast as your feet could have taken you.

Let's say, however, that you weren't all that lucky or smart and, sadly, you desired to extend the conversation with Cho. At that point, he may have told you that he had this deal, this ability, these special contacts that allowed him to purchase specially discounted shares of such high-flying companies as AOL/Time Warner, Inc., Google, Rosetta Stone, and Facebook - and, more intriguingly, this was at a time when some of those companies had not gone public.

Cho was the man. Cho had the in. Cho said that he had this "friends and family" investment pool and a special relationship with Goldman Sachs, which opened the backdoor into hush-hush opportunities - and he would get you in on the discounted shares if you worked with him.

One pigeon invested some $20,000 into what Cho represented was Google stock priced at $1 a share at a time when the publicly traded shares were at $425! Another victim was convinced that he had made $1 million profit by investing through Cho in Google shares. Of course, no shares were actually purchased by Cho and if you managed to get some cash distribution from him, it probably came from the $1.5 million Ponzi payment he extracted from new investors to pay off older ones.

Alas, $9,642,507 later, more than 50 investors were duped into this too-good-to-be-true deal which, duh, was, in fact, too good to be true. Cho's victims lost about $7,960,707.

Then there's this baffling bit of stupidity. When Cho filed his 2005 tax returns he somehow managed to report only $118,475 of roughly $1,172,862 in annual income. In total, Cho had failed to report approximately $4.8 million of additional income between 2004 and 2007, resulting in an underpayment of just under $1.5 million in federal income taxes. I mean, geez, it's one thing to rip off public investors but to jerk around the IRS? Whoa!

On December 27, 2010, just two days after Christmas, the feds had a lovely holiday gift for Cho. He was charged in a criminal Information in federal court in the Northern District of Illinois with one count of wire fraud and one count of filing a false federal income tax return .

The wire fraud charge carried a maximum penalty of 20 years in prison, a $250,000 fine (or twice the loss to any victim or twice the gain to the defendant, whichever is greater), and  mandatory restitution.  The false tax return charge carried a maximum penalty of three years in prison, a $250,000 fine, costs of prosecution, ongoing liability for any taxes owed, and a civil fraud penalty up to 75 percent of any underpayment plus interest.

In August 2012, Cho pleaded guilty to the wire and tax fraud charges. On January 18, 2013, Cho was sentenced to 12 years in prison and three years of supervised release, ordered to pay $7,995,707 in restitution to investors, and $1,496,339 to the Internal Revenue Service.

As noted in the Department of Justice press releaseon the sentencing:

In imposing sentence, Judge Zagel noted the unlikelihood that victims will receive any restitution. The judge heard from two investors and received letters from numerous others who said that Cho's crimes had irreparably damaged their lives and retirement security. Cho used the misappropriated funds for himself and his business by making payments for his home and furnishings, automobiles, and jewelry, among other things. He never invested in any shares of stock on behalf of any of his investors.