Miami Businessman Charged With Running $900 Million Ponzi Scheme

It’s not exactly Bernie Madoff’s $65 billion, but the Securities And Exchange Commission has charged a Florida businessman with operating a $900 million Ponzi scheme, telling people they were investing — risk-free and at interest rates upward of 26% — in his grocery business, when in fact he was just using the money to fund his lavish lifestyle.

According to the SEC filing, Nevin K. Shapiro, the founder and president of Capitol Investments USA, Inc., “lured investors by falsely touting Capitol’s securities as a risk-free investment with extraordinarily high returns… He used his prominence and prestige to gain investors’ trust in funding Capitol’s grocery diverting business, but behind their backs he diverted their money to enrich himself.”

The SEC says that, in spite of the influx of investment money, Capitol began operating at a loss in 2004 and “had virtually no operations by 2005 when, in a classic Ponzi scheme manner, Shapiro began using funds from new investors to pay principal and interest to earlier investors.”

Here are some of the SEC’s allegations against Shapiro:

* He falsely told investors their funds would be used as short-term financing to purchase and resell groceries for Capitol’s business.

* He falsely touted Capitol’s financial success as well as his own.

* He falsely assured investors that their principal was secure because Capitol would not broker the sale of the goods without first obtaining a purchase order from a buyer.

* He falsely told investors that Capitol would pay the principal and interest from the profits it received when it resold the goods.

* He misappropriated at least $38 million of investor funds to enrich himself and finance outside business activities unrelated to the grocery business, including a sport representation business and real estate ventures.

According to the filing, Shapiro owned a $5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, high-stakes gambling, and season tickets to premium sporting events.

He has been charged with violating the antifraud provisions of the federal securities laws. The complaint seeks a permanent injunction, sworn accounting, disgorgement of ill-gotten gains, and financial penalties against Shapiro, who surrendered to authorities today.

SEC Charges Prominent Miami Beach Businessman in $900 Million Ponzi Scheme[SEC.gov]