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Ponzi scheme

Ex-SEC Employee Indicted While Firm Is Under Investigation for Alleged ‘Ponzi-Like’ Scheme

Ponzi scheme | New York Law Journal | Jane Wester | October 24, 2019

In a document that was unsealed and later resealed by the court this week, Assistant U.S. Attorney Artie McConnell wrote that GPB seemed to be operating “like a ‘Ponzi scheme.'”

A former Securities and Exchange Commission employee has been charged with obstruction of justice, unauthorized computer access and unauthorized disclosure of confidential information, according to a superseding indictment unsealed Wednesday in the U.S. District for the Eastern District of New York.

Prosecutors say Michael Cohn worked at the SEC until Oct. 12, 2018, when he left and joined the private equity firm GPB Capital Holdings four days later. The alleged conduct that led to his charges was discovered during a larger investigation into GPB, according to court documents.

Cohn is accused of using SEC computers to access information about an investigation into GPB, which wasn’t part of his job, according to a news release from the U.S. Attorney’s Office.

He shared that information with GPB employees, according to prosecutors.

Cohn was indicted in February, but documents related to the case had been sealed until Wednesday.

Cohn’s lawyer, Scott Resnik of Katten Muchin Rosenman, said Cohn is innocent and plans to defend himself vigorously in court.

The investigation into GPB Capital Holdings is ongoing, a U.S. Attorney’s Office spokesman confirmed Thursday.

In a document that was unsealed and later resealed by the court this week, Assistant U.S. Attorney Artie McConnell wrote that GPB seemed to be operating “like a ‘Ponzi scheme.’”

“Despite distributing marketing materials representing that GPB pays investors an 8% return funded completely by investment profits, in reality GPB uses the capital contributions of some investors to pay the annual returns to other investors,” McConnell explained in the motion.

GPB Capital was “stunned” to learn about Cohn’s indictment Wednesday, according to a statement from the company. He was immediately replaced as chief compliance officer, according to the statement.

GPB did not immediately respond to questions about an investigation into the firm itself.

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