An Illinois grand jury recently handed down eight charges of mail fraud against accused Ponzi schemer and St. Thomas and Illinois resident Daniel Spitzer, court documents show.
Spitzer was arrested last August on a criminal complaint initiated by the Securities and Exchange Commission and U.S. Postal Service. The court granted an extension of time for the grand jury to indict and on Feb. 10, Spitzer’s formal charges were filed with the court.
Each of the eight charges relate to Spitzer allegedly mailing false financial information in order to attract investors to a massive Ponzi scheme in which Spitzer raised about $105 million from roughly 400 investors.
One of the central companies in the case is Kenzie Financial Management, a V.I corporation with offices in St. Thomas. Spitzer is the sole shareholder and principal of Kenzie Financial, according to the SEC.
While the Kenzie Funds claimed to investors to have rates of return ranging from 4.5 percent to 13.5 percent, actual bank records show the gross return over the five year span to be less than 1 percent, according to the indictment.
Kenzie Financial acted as the trading manager for 11 of 12 allegedly bogus investment funds that Spitzer controlled.
Rather than invest the funds as investors were told in periodic mailed statements, Spitzer purportedly used more than $71 million – to make Ponzi payments and ultimately lost roughly $34 million of investors’ money, according to the indictment.
Until recently, Kenzie Financial received tax breaks from the V.I. Economic Development Commission.
The EDC was already in the midst of a compliance review of Kenzie Financial when the SEC case broke, Percival Clouden, CEO of the V.I. Economic Development Authority, said in a statement last August when the complaint was first filed.
If convicted, Spitzer faces a maximum sentence of 30 years and a fine of up to $1 million for each count.