Matthew Melton Fled the United States After Investors Realized That His “Algorithmic Trading” Fund Was a Ponzi Scheme
United States Attorney for the Southern District of New York, Jay Clayton, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Christopher G. Raia, announced that MATTHEW MELTON was extradited from the United Kingdom to face securities fraud and wire fraud charges. The charges in the Indictment arise from an alleged scheme by MELTON to raise millions of dollars in investor money by falsely representing that his investment fund, “Price Physics,” was investing in futures contracts using a proprietary trading algorithm. In fact, MELTON was operating a Ponzi scheme in which he used investor money to fund his luxury lifestyle and make payments to earlier investors. MELTON’s case is assigned to U.S. District Court Judge Arun Subramanian.
“As alleged, Matthew Melton told investors he was using groundbreaking technology and cutting-edge trading techniques to generate record returns,” said U.S. Attorney Jay Clayton. “In reality, Melton was allegedly operating one of the oldest scams around, taking new investors’ money to pay old investors and pocketing funds for himself along the way. With the assistance of our dedicated law enforcement partners, our Office will continue to aggressively prosecute financial fraud and protect our markets.”
“This alleged scheme victimized many and caused millions of dollars in victim losses,” said FBI Assistant Director in Charge Christopher G. Raia. “FBI New York is committed to eradicating all unlawful schemes fueling an unearned life of luxury by those who prey on others. We remain focused on disrupting financial fraud operations and will continue to fiercely pursue those who seek to defraud others.”
According to the allegations contained in the Indictment and bail hearing:[1]
MELTON promoted an investment vehicle he called “Price Physics,” which purported to invest in futures contracts using a proprietary trading algorithm. He promised investors guaranteed returns of up to twelve percent per month, of which he said he would keep only two percent as compensation. In reality, there was no proprietary trading algorithm, and MELTON invested almost none of the millions of dollars he raised. The few times that MELTON did make trades, it was not in futures contracts, and the trading was generally unprofitable. For the most part, instead of trading, MELTON used his investors’ money to pay his own personal expenses—including mortgage payments and sailing excursions—and to pay earlier investors in Ponzi-like fashion.
MELTON, 61, of Boulder, Colorado, was charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum term of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Clayton praised the outstanding work of the FBI and thanked the Department of Justice’s Office of International Affairs for its assistance. Mr. Clayton also thanked the U.S. Securities and Exchange Commission, which previously filed a separate civil action against MELTON.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Adam S. Hobson is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.
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