A former politician who ran for governor back in 1994 has pleaded guilty to defrauding investors in a textbook example of a Ponzi scheme. Craig Berkman admitted that he’d told investors he could get the jump on pre-IPO shares of Facebook, as well as LinkedIn, Groupon and Zynga.
Here’s how he ran the scheme, reports Reuters: He’d tell investors he could get his hands on shares of Facebook, for example, before the company’s May 2012 initial public offering. Once he had investors’ money, he’d turn around and make payments to earlier investors and pay off personal expenses.
One of those expenses included a $6 million personal bankruptcy case, Assistant U.S. Attorney John O’Donnell said at a hearing in federal court in New York.
Berkman admitted he’d done a no good, very bad thing, and pleaded guilty to one charge of securities fraud and one charge of wire fraud. Each carries a maximum sentence of 20 years in prison.
“I deeply regret my actions,” he said at yesterday’s hearing. “I’ve devastated my family.” He also apologized to investors, some of whom were his “dear, dear friends.”
His sentencing is set for Oct. 1, and as part of a plea deal, he’s agreed to fork over the $13.2 million he raised from more than 120 investors.