NEW YORK (Reuters) – Authorities on Monday arrested the chief executive of a private New York financing firm on suspicion of running a purported Ponzi scheme that attracted $400 million in investments, U.S. law enforcement officials said.
Nicholas Cosmo, head of Agape World Inc on New York’s Long Island, was said to provide commercial bridge loans, but was instead operating a traditional Ponzi scheme in which early investors are paid with the money of new clients, officials said.
“Nicholas Cosmo took the advice of an attorney and complied with an arrest warrant,” said Al Weissmann, spokesman for the U.S. Postal Inspection Service, which is investigating Agape World and Cosmo along with the FBI.
Another law enforcement official, said agents had visited Cosmo’s office on Monday expecting to arrest him, but he was not there.
He complied with the warrant on Monday night and was expected to appear in magistrate’s court on Tuesday in Central Islip on Long Island, FBI and USPIS officials said.
The amount of money, while large, pales compared with the purported $50 billion fraud masterminded by investment manager Bernard Madoff. Law enforcement officials said they expect to uncover more Ponzi schemes following the sharp decline of the U.S. financial industry.
Agape World Inc, a private firm with its office in Hauppauge, New York was not registered with the U.S. Securities and Exchange Commission.
“Some of the early investors made money but as this scheme started to crumble, the later investors did not see a penny,” a law enforcement official said of the firm.
Cosmo was convicted of a federal charge of felony fraud and swindle in 1999 and sentenced to 21 months in prison. He was released in August 2000, according to the U.S. Bureau of Prisons.
According to the firm’s website www.agapeworldinc.net/ it has made commercial bridge loans, construction loans, acquisition loans and financing for properties nationwide with capital obtained from private sources since 1999.
Projects in New York, California, Texas and South Carolina are among those listed as recipients of its loans in the past two years.
INVESTORS RAISED CONCERNS
Investors had been raising concerns about Agape long before the financial crisis unearthed the recent rash of Ponzi schemes, seeking advice and intelligence on Internet investment chat boards such as www.scamvictimsunited.com and www.fatwallet.com.
“Has anyone invested with Agape World Inc? They provide bridge loans and offer investors 13-14% returns? When my brother was telling me about it, it sounded kinda fishy and risky,” reads a March 2, 2008 website posting.
“The pictures on their website would make you believe that they funded the San Francisco Bay Bridge, the Taipei 101 Tower, and the Tower of Babylon, and the Baghdad Railroad,” reads another post.
Others defended Agape. “I have been an investor with Agape World Inc for 2 years. I have always received my interest payments on time,” reads an October 14, 2008 comment.
“Only twice in a 9 year history of the company has an interest payment been extended ,,, Nicholas Cosmo does have a past and he has paid for it,” writes another ten days later.
Former Nasdaq stock market chairman Madoff was arrested December 11 and charged with securities fraud after authorities said he confessed to running “a giant Ponzi scheme” over many years.
Since then, authorities have announced charges in investigations of at least three other alleged Ponzi schemes — in California, Georgia and Florida — with amounts ranging from $25 million to hundreds of millions of dollars.
Arthur Nadel, head of Florida-based Scoop Management, was reported missing by his family in early January. He left behind a suicide note. It expressed guilt for losing his clients’ money and said someone might try to kill him.
The U.S. Securities and Exchange Commission charged the money manager with fraud last Wednesday in a complaint, saying the six hedge funds Nadel oversaw, which he valued at more than $300 million, actually contain less than $1 million. It obtained an emergency court order freezing Nadel’s assets and appointed a receiver.
(Reporting by Grant McCool; Editing by Bernard Orr)
(Additional reporting by Christopher Kaufman)