David Saks: Florida Man Arrested in Connection with $8 Million CMO Fraud Scheme

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Florida Man Arrested in Connection with $8 Million CMO Fraud Scheme

Florida Man Arrested in Connection with $8 Million Investment Fraud Scheme

U.S. Attorney’s Office June 20, 2013
  • Southern District of New York (212) 637-2600

NEW YORK—Seth Beoku Betts, a principal of Betts and Gambles Global Equities LLC (Betts and Gambles), was arrested today on the charge of wire fraud for operating a scheme to defraud a public university in the Midwest of more than $8 million, announced Preet Bharara, the U.S. Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the FBI.

Betts is alleged to have solicited the money from the University for the purposes of trading in collateralized mortgage obligations (CMOs). He then misappropriated the funds, including at least $2 million to purchase luxury automobiles and a personal residence in Florida.

Betts was arrested in Durham, North Carolina, this morning and is expected to be presented in federal court in the Eastern District of North Carolina, Western Division, this afternoon.

U.S. Attorney Preet Bharara said, “As alleged, the main investment Seth Betts made was in himself. He induced a public university to make a large investment on which he promised a quick, safe return, but instead he pocketed the university’s money to buy luxury cars and property and to fund other expenses, delivering a full-fledged fraud as the university’s only return, as described in the complaint. With his arrest, this office continues its work to hold financial professionals accountable for cheating investors.”

FBI Assistant Director in Charge George Venizelos said, “Seth Betts allegedly committed the most brazen form of investment fraud. Worse than misrepresenting how he would invest the university’s money, Betts made few investments at all—other than in luxury goods for himself. You can’t take someone’s money to invest in mortgages and spend it on Maseratis.”

According to a complaint unsealed today in Manhattan federal court:

Between July 2008 and December 2008, Betts presented himself to the University as a principal of Betts and Gambles. In that capacity, he solicited the university’s investment in CMOs, which he would then sell to third-party buyers in short order at predicted profits.

CMOs are fixed income mortgage-backed securities which permit investment in different tranches based upon the maturity of the underlying mortgages.

As a result of his solicitation, the university invested approximately $8.165 million of the university’s money with Betts.

Betts misappropriated the money and never delivered any CMOs to the university or returned any funds.

For example, on December 10, 2008, Betts transferred $325,000 of the university’s investment money to a car dealership for the purchase of a Ferrari automobile and a Maserati automobile. Approximately one week later, he transferred $1,545,000 of the university’s investment money to an attorney trust account in connection with his purchase of a personal residence in Florida. Betts also spent at least $455,000 on additional personal expenses, including more than $150,000 in additional payments to car dealerships.

Betts, 37, of Boynton Beach, Florida, is charged with one count of wire fraud.

The charge carries a maximum sentence of 20 years in prison, or twice the gross gain or loss from the offense.

U.S. Attorney Bharara praised the work of the criminal investigators of the United States Attorney’s Office and the FBI, which jointly investigated this case.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets, and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Michael A. Levy and Telemachus P. Kasulis are in charge of the prosecution.

The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

source: FBI

David Saks

Time&Temp Memphis

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