CHICAGO (CN) – A federal grand jury charged a Chicago investment adviser with running a Ponzi scheme that defrauded his clients of $1.5 million.
Dimitry Vishnevetsky, 33, cooked up his scheme in 2006, according to the indictment. It claims that from September 2006 though March this year, Vishnevetsky ran “a scheme to defraud investors and potential investors, and to obtain money and property by means of materially false and fraudulent pretenses, representations, and promises, and by material omissions”.
Vishnevetsky offered and sold his investments primarily through Oxford Capital and Hodges trading, the indictment states. Vishnevetsky is the only defendant.
However, the indictment states: “Oxford Capital, LLC, which the defendant incorporated in the State of Wisconsin, purported to be in the business of providing brokerage/management services to investors and of managing commodities funds, including the Oxford Global Macro Fund, L.P. (‘Macro Fund’), the Oxford Global Arbitrage Fund, LP (‘Arbitrage Fund’) and the Quantum Global Fund, LP (‘Quantum Fund’) (collectively ‘the Commodities Funds’). The Commodities Funds existed in name only and were not incorporated. The defendant represented that he would conduct commodities transactions on behalf of investors through the Commodities Funds. He also offered to provide brokerage and management services through Oxford Capital.
“The defendant offered and sold promissory notes – which he described as London Interbank Offered Rate (‘LIBOR’) adjusted notes – through Hodges Trading, which belonged to the defendant. Hodges Trading existed in name only and was not incorporated. According to a private placement memorandum (‘PPM’), investors could purchase LIBOR notes through Hodges Trading, by subscribing for limited partnership interests in Hodges Trading. According to the PPM, Hodges Trading was engaged in buying and selling assets, including equities, bonds, currencies, commodities, and derivatives.
“The defendant raised approximately $1,700,000 from investors through the offer and sale of investments and brokerage services.”
Investors lost at least $1.5 million, according to the indictment. It claims that Vishnevetsky “falsely represented to those investors that Hodges Trading was offering LIBOR adjusted notes – promissory notes – with an annual return of at least 9.5 percent and that the lead underwriter was a well-known major financial institution, which guaranteed the return of the full amount of the invested principal. In fact, Vishnevetsky knew that Hodges Trading which was his own company, had no way to pay a 9.5 percent return, and that Hodges Trading did not have a well-known financial institution underwriting the investment or guaranteeing the return of principal.”
Vishnevetsky also fabricated documents which falsely showed investment returns as high as 36 percent per year, though his trading consistently resulted in net losses, prosecutors said.
“Vishnevetsky intended to and did misappropriate investors’ funds for his own purposes, including to pay business expenses and personal expenses, such as mortgage payments, car payments, travel and vacation expenses, restaurant bills, athletic club dues, and other living expenses, and to make trades for his own benefit. Vishnevetsky needed to continually raise additional funds from investors to make payments of promised returns to investors and to support himself,” the indictment states.
“Vishnevetsky misappropriated investors’ funds to make Ponzi-type payments of returns to investors. That is, when the defendant made payments to investors, he did so using funds that he had obtained from investors, without disclosing the nature of those payments to investors. As a result of this scheme, defendant Vishnevetsky fraudulently obtained at least approximately $1,700,000 and, after making Ponzi-type payments to some investors, caused a loss to investors of at least approximately $1,500,000.”
In convicted of the 9-count indictment, Vishnevetsky faces up to 20 years in prison for each count of wire fraud and 30 years in prison for bank fraud. Restitution is mandatory.