The federal government says an investment manager from Broomall, Pennsylvania, ran a Ponzi scheme that swindled an estimated $50 million from as many as 80 investors. Joseph S. Forte was given the money to invest between 1995 and 2008, according to the Securities and Exchange Commission. Through his firm, Joseph Forte LP, he either lost it playing the market or didn’t invest it at all, authorities said. Meanwhile, Forte was telling his investors that he was making huge profits. His portfolio in September reported a value of more than $150 million, but its trading account contained less than $147,000, according to the SEC complaint that was filed on January 7th of this year.
The investors thought their money was going into a commodity futures pool that traded in securities futures contracts, including S&P 500 stock index futures. The SEC said Forte admitted falsifying investment returns from the beginning. Many of the alleged victims of the scheme were Forte’s friends and acquaintances, according to Daniel M. Hawke, director of the SEC’s Philadelphia Regional Office. Hawke observed:
Using other people’s money, Forte promised and reported outrageous returns over more than a ten-year period, and because of his relationships with investors was able to lull them into trusting him with their funds.
U.S. District Judge Paul S. Diamond issued an emergency order freezing Forte’s assets and requiring him to turn over pertinent financial documents. According to the SEC, the investigation is continuing. The Commodity Futures Trading Commission, named the Plaintiff in a related civil complaint, said Forte did not deposit any money into the trading account from October 2002 to February 2007. I find that many people really don’t understand Ponzi schemes. Stephen J. Obie, acting enforcement director of the federal oversight agency, wrote:
Ponzi schemers succeed by creating an illusion of profitability through lies and deceit. We are committed to rooting out miscreants who, like Forte, destroy the lives of innocent victims and, ultimately, undermine the confidence of investors everywhere.
The commission wants Forte to pay fines and full restitution and seeks to have him permanently banned from commodities trading. The news of the case is just the latest investor fraud to come to light since Bernard Madoff’s $50 billion Ponzi scheme made the headlines.
Source: Associated Press
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