Preet Bharara, the United States Attorney for the Southern District of New York announced that WILLIAM J. WELLS pled guilty in Manhattan federal court today to an Indictment charging him with securities fraud and wire fraud in connection with his scheme to defraud more than 30 investors of more than $1.5 million through a fraud scheme over the course of more than six years. WELLS was arrested on Oct. 1, 2015, and pled guilty today before United States Magistrate Judge Henry B. Pitman.
U.S. Attorney Preet Bharara said: “As he admitted today in court, William Wells engaged in a fraudulent scheme where he lured investors through lies about his trading performance and spent their money lavishly on himself. Instead of operating a legitimate investment firm - as he said he would to his investors - Wells focused on covering up his consistent trading losses and his personal spending of investor money, going so far as to create entirely fake account statements to reassure his clients. Thanks to the outstanding work of the FBI, Wells has now been forced out of the fraud-scheme business."
According to the Complaint, the Indictment, and other statements made in open court:
From September 2009 through his arrest, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital"), engaged in a scheme to obtain investments by falsely representing that he had achieved consistently positive returns in the U.S. equity markets, including through the successful use of options to hedge risk. In truth, WELLS’ trading was remarkably unsuccessful. Between 2009 and the time of his arrest, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000. In fact, as of September 2015, Promitor Capital had less than $1,000 under management.
In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that WELLS’ trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or WELLS held those stocks; and (c) that WELLS had created so-called sub-accounts for clients, for which WELLS purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded. In addition to false and misleading representations made orally and in writing, WELLS also generated wholly fictitious account statements that he provided to his clients.
As a result of these misrepresentations, WELLS obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. WELLS routinely converted investor funds he did not lose trading to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for WELLS’ automobile, and for private school tuition. In addition, to hide his trading losses and to continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors in a Ponzi-like fashion. In total, WELLS distributed less than approximately $500,000 back to investors.
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WELLS, 42, formerly of Manhattan and New Jersey, now living in Valley Cottage, New York, pled guilty to one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. The defendant will be sentenced at a future date by United States District Judge Kimba M. Wood.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for their assistance with the investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrea M. Griswold is in charge of the prosecution.
Source: U.S. Department of Justice, Office of the United States Attorneys
