Financial Fraud: WILLIAM J. WELLS Sentenced For Securities – Wire Fraud and Ponzi-Like Scheme
Man Sentenced In Manhattan Federal Court To 46 Months In Prison In Connection With $1.5 Million Ponzi Scheme
Preet Bharara, the United States Attorney for the Southern District of New York announced that WILLIAM J. WELLS was sentenced today in Manhattan federal court to 46 months in prison for securities and wire fraud charges stemming from his scheme to defraud more than 30 investors, including friends, colleagues, and family, of more than $1.5 million through a Ponzi-like scheme, over the course of nearly six years until his arrest in October 2015. WELLS was arrested on October 1, 2015, and pled guilty on March 18, 2016, before United States Magistrate Judge Henry B. Pitman. Today’s sentencing was presided over by United States District Judge Kimba M. Wood.
U.S. Attorney Preet Bharara said: “William Wells repeatedly lied to his investors, falsely claiming positive returns when his trading was, in fact, calamitous. Buttressing his lies with fake account statements, he used investor money to pay personal expenses and to pay back other investors. For depriving his clients of their money – and sometimes their life savings – Wells has been sentenced to a substantial term in prison.”
Among other false and misleading statements, WELLS lied to prospective and existing investors by representing, including in fictitious account statements prepared by WELLS, that he had achieved consistently positive trading returns. In fact, WELLS’s trading was remarkably unsuccessful and he realized trading losses every year from 2009 until his arrest in October 2015. Of the money WELLS did not lose in securities trading, WELLS routinely converted investor funds to his own use to pay personal expenses and used new investor funds to pay back other investors in a Ponzi-like fashion.
Many of WELLS’s victims, several of whom submitted letters to the Court or spoke today at WELLS’s sentencing, lost their life savings to WELLS’s scheme, including money saved for retirement, medical bills, tuition, or wedding costs, or to purchase a family home.
According to the Complaint, the Indictment, and statements made in open court, including at the sentencing proceeding today:
From September 2009 through the present, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital”), engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk. In truth, WELLS’s trading was remarkably unsuccessful. Between 2009 and the present, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000. In fact, as of September 2015, Promitor Capital had less than $1,000 under management.
In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that WELLS’s trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or WELLS held those stocks; and (c) that WELLS had created so-called sub-accounts for clients, for which WELLS purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded. In addition to false and misleading representations made orally and in writing, WELLS also generated wholly fictitious account statements that he provided to his clients.
As a result of these misrepresentations, WELLS obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. Of the money he did not lose in securities trading, WELLS routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for WELLS’s automobile, and for private school tuition. In addition, to hide his trading losses and continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors in a Ponzi-like fashion. In total, WELLS distributed less than approximately $500,000 back to investors.
In addition to the 46-month prison sentence, WELLS, 43, formerly of Manhattan and New Jersey, now living in Valley Cottage, New York, was sentenced to three years of supervised release. The Court further ordered WELLS to forfeit the proceeds of the scheme and to pay restitution in an amount to be determined.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission for their assistance with the investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. 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. Since the fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 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. Attorney Andrea M. Griswold is in charge of the prosecution.