The founder and namesake of Elm Tree Investment Advisors LLC Fred Elm and its Chief Operating Officer Ahmed Naqvi were charged in Manhattan for allegedly bilking investors $17M.
The executives of the Florida based investment firm, Bloomberg reported, are accused of lying to investors by claiming they have close business relationships with leading venture capitalist firms. They promised investors they have access to pre-initial public offerings in companies like Twitter Inc., Alibaba Group Holding Ltd. and Uber Technologies Inc., according to a complaint filed in federal court.
The pair convinced more than 50 investors to put in over $17M under false representation of their alleged business relationships with and access to those well-known privately held companies.
US Attorney Preet Bharara said the funds were co-mingled in one account and only $7.1M were actually invested. Reuters reported that the defendants, according to prosecutors, did not turn a profit in 1 1/2 years but Elm diverted more than $2M to fund purchases of a Bentley, a Maserati, a Range Rover, jewelry and a $1.75M Florida home.
The scheme ran from June 2013 to December 2014 and took place in New York and elsewhere. In that period the defendants lost $3.9M despite having projected triple digit returns and used $5.2M to pay earlier investors in a Ponzi-like design.
Both defendants were charged with securities fraud, wire fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud and face 20 years in prison if convicted of any of the charges.
Elm, 46, was arrested on Wednesday at his Hollywood Florida home, while Naqvi, 47, is at large, according to Bharara. Elm appeared in a federal court in Lauderdale and is set to appear in Manhattan federal court Friday or Monday, according to CNBC. Bond was posted at $2.5M co-signed by his wife, court records show.
His lawyer did not respond to request for comment while lawyer for Naqvi could not be identified.
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