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Valley Cottage Man Sentenced In Connection With $1.5M Ponzi Scheme

The sentence was handed down U.S. Court for the Southern District of New York, in Manhattan, which serves the counties of Westchester, Putnam, Rockland, Dutchess, Orange, Sullivan and New York City.
The sentence was handed down U.S. Court for the Southern District of New York, in Manhattan, which serves the counties of Westchester, Putnam, Rockland, Dutchess, Orange, Sullivan and New York City. Photo Credit: uscourts.gov

A Valley Cottage man was sentenced in Manhattan federal court Tuesday to 46 months in prison for securities and wire fraud charges stemming from a Ponzi scheme to defraud more than 30 investors, including friends, colleagues and family, of more than $1.5 million over the course of nearly six years, according to the U.S. Attorney's Office for the Southern District of New York.

William J. Wells, 43, was arrested on Oct. 1, 2015, and pleaded guilty on March 18 before U.S. Magistrate Judge Henry B. Pitman.

Tuesday’s sentencing was presided over by U.S. District Judge Kimba M. Wood.

“William Wells repeatedly lied to his investors, falsely claiming positive returns when his trading was in fact calamitous,” U.S. Attorney for the Southern District of New York Preet Bharara said. "Buttressing his lies with fake account statements, he used investor money to pay personal expenses and to pay back other investors. For depriving his clients of their money – and sometimes their life savings – Wells has been sentenced to a substantial term in prison.”

Among other false and misleading statements, Wells lied to prospective and existing investors by representing that he had achieved consistently positive trading returns, Bharara said.

In fact, Wells’ trading was remarkably unsuccessful: he realized trading losses every year from 2009 until his arrest in October 2015, according to Bharara.

Of the money he did not lose in securities trading, Wells routinely converted investor funds to his own use to pay personal expenses and used new investor funds to pay back other investors in a Ponzi-like fashion, said Bharara.

Many of Wells’ victims, several of whom submitted letters to the court or spoke at his sentencing, lost their life savings to Wells’ scheme, including money saved for retirement, medical bills, tuition or wedding costs or to purchase a family home, Bharara said.

According to the complaint, the indictment and statements made in open court, including at the sentencing proceeding, Wells, through his investment firm Promitor Capital, engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk.

In actuality, between 2009 and his arrest, Wells realized trading losses totaling in excess of $500,000.

As a result of the misrepresentations, Wells obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues or family members, Bharara said.

Of the money he did not lose in securities trading, Wells routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for credit card bills, payments for Wells’ automobile, private school tuition and other expenditures, Bharara said.

In addition to the 46-month prison sentence, Wells, formerly of Manhattan and New Jersey, now living in Valley Cottage, was sentenced to three years of supervised release.

The court further ordered Wells to forfeit the proceeds of the scheme, and to pay restitution in an amount to be determined.

Bharara praised the work of the FBI, and thanked the U.S. Securities and Exchange Commission for their assistance with the investigation.

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