Edward T. Stein’s Life Settlement – A Ponzi Scheme
Hedge fund manager Edward T. Stein was recently sentenced to nine years in prison. Mr. Stein ran a Ponzi scheme which took in at least $30 million ($46 million according this website) that preyed upon friends and acquaintances.
According to Bloomberg, Mr. Stein admitted today to four counts of securities fraud and one charge of wire fraud. Stein told the court:
“I used very poor judgment and I know what I did was wrong, I want to explain to the court how sorry and ashamed I am. Somewhere in the last 10 years I lost my sense of reality and as a result, everyone has suffered. I do want to offer my sincere apologies. I do regret the bad decisions I made.”
Stein will remain free on $2 million bail. He is being represented by attorney Brian Maas.
He was initially accused March 31 of cheating a client out of $6.5 million. Stein faces as much as 19 years and seven months in prison. In April of last year the SEC froze Mr. Stein’s assets.
The SEC also filed a separate civil action that accused Stein, who controls Gemini Fund I hedge fund, DISP LLC and Prima Capital Management Corp., of moving millions of dollars from at least 83 investors through accounts he controlled, according to the complaint filed in federal court in Manhattan.
Stein, who founded DISP, a firm investing in life- settlement policies, deceived clients since 1992 and resorted to stealing their assets, the SEC said in its civil suit.
Here is a sample chart how the life settlement process works. So simple amazing more people couldn’t spot the fraud in this process via operational due diligence….. :
Without telling investors, Stein arranged for Gemini to make its main investment in Detour Media Group Inc., the fashion-magazine publisher that filed for bankruptcy in 2003, the SEC said. Since then, he has used money from new investors to pay returns to “selected” Gemini clients, the agency claimed. He also used investor funds to buy a $1 million condominium in Manhattan, the SEC said.
Stein ran Prima Capital Management Corp. from his offices in Roslyn, New York. He agreed in his plea that he won’t appeal if he’s sentenced to less than 21 years and nine months in prison. Sentencing by U.S. District Judge Jack B. Weinstein is scheduled for September 28.
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