Chairman Of Purported Hedge Fund Sentenced For Conspiring To Commit Securities And Wire Fraud

  Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that NICHOLAS MITSAKOS was sentenced today to 30 months in prison on charges of conspiring to commit securities fraud and wire fraud in connection with his operation of a purported hedge fund called Matrix Capital.  MITSAKOS pled guilty on May 25, 2017, and was sentenced by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “As he previously admitted in pleading guilty, Nicholas Mitsakos spun a fake tale to investors about his miraculous track record of trading in the securities markets.  Mitsakos lured investors by claiming returns of over 66 percent for one year, never disclosing that his portfolio was an entirely ‘hypothetical’ one and that in fact, he had never entered into any real trades.”

According to the Complaint, Indictment, and statements made during court proceedings:

In or about October 2013, MITSAKOS created a purported hedge fund called Matrix Capital (“Matrix”), which claimed to be a long-short fund with a long track record of success.  In order to raise money for his fund, MITSAKOS sent marketing materials to numerous potential investors claiming that Matrix had achieved outsized returns that exceeded major indices like the S&P 500.  One newsletter sent to potential investors, for example, claimed that Matrix had achieved returns of approximately 25% in 2012, 66% in 2013, 20% in 2014, and 49% between January and October of 2015.  MITSAKOS also led potential investors to believe that these returns were based on actual securities trades by Matrix, and that Matrix had tens of millions in assets under management (“AUM”). 

MITSAKOS’s representations regarding Matrix’s performance and AUM were false.  In fact, Matrix had no track record in actually purchasing and selling securities, and, indeed, had no meaningful assets at all until receiving funds from a victim in September 2015.  Instead, the purported performance results provided to potential investors were premised on how a hypothetical portfolio would have performed had Matrix actually acquired certain securities.  No such trading actually took place and Matrix never actually owned any of the securities in the hypothetical portfolio that MITSAKOS maintained.  Even in regard to Matrix’s hypothetical investment portfolio, MITSAKOS retroactively manipulated the investments in that portfolio from time to time in order to improve dramatically its hypothetical performance. 

Based in part on these and other misrepresentations, Matrix received approximately $2 million from an investor in September 2015.  However, MITSAKOS used only a portion of that amount – about $1.2 million – to actually buy and sell securities.  Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and his own rent.  MITSAKOS’s trading of the $1.2 million that he did invest, moreover, resulted in significant losses.

In addition to the prison sentence, MITSAKOS, 57, was sentenced to two years of supervised release.  The Court further ordered MITSAKOS to forfeit a sum of $861,163.62 and to pay restitution to victims of his offense.           

Mr. Kim praised the exceptional work of the Office’s criminal investigators, and thanked the Securities and Exchange Commission for its assistance.   

Virginia Man Pleads Guilty In Manhattan Federal Court To $100 Million Market Manipulation Scheme Involving Fitbit Stock

  Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY pled guilty today in Manhattan federal court to securities fraud.  In November 2016, MURRAY conducted a scheme to manipulate the market for the stock of Fitbit, Inc. (“Fitbit”) by filing a sham tender offer with the Securities and Exchange Commission (“SEC”).  The sham tender offer falsely reported that another entity had made a bid to purchase all outstanding Fitbit stock at a significant premium to the then-existing market price.  As a result, the price of Fitbit stock temporarily but significantly increased in price, allowing MURRAY to sell for a profit options that he had previously purchased.  MURRAY’s sham tender offer, moreover, resulted in a temporary inflation in Fitbit’s market capitalization of over $100 million. 

Acting U.S. Attorney Joon H. Kim said:  “As Robert Murray admitted today, he manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer.  After manipulating Fitbit's stock price and temporarily inflating its market capitalization by over $100 million, Murray sought to take a quick profit from trading in Fitbit stock.  Murray’s ill-advised and criminal attempt to game the system has ended in a federal securities fraud conviction.”  

According to the allegations in the Complaint and Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:

On November 8, 2016, MURRAY, falsely purporting to be an officer at a China-based entity called ABM Capital, created an account on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (or “EDGAR”) system.  The next day, MURRAY submitted a filing on EDGAR that reported that ABM Capital had offered to purchase Fitbit for approximately $12.50 a share, a significant premium to the price of Fitbit stock at the time.  This filing was made public on November 10, 2016, and, when it was, Fitbit’s stock temporarily increased in response to the news.  While Fitbit’s stock had closed at approximately $8.55 a share on November 9, 2016, it reached a high of approximately $9.27 per share, with significantly increased trading volume, after the false tender offer filing was made public.  MURRAY’s filing, however, was entirely fictitious, and was instead meant only to increase the value of options in Fitbit stock that he had purchased just before filing the sham tender offer. 

MURRAY, moreover, took significant steps to hide his connection to the tender offer filing.  He created a separate email account to register with the SEC and to file the sham tender offer, taking care to disguise his actual IP address when accessing it. 

MURRAY, 24, of Chesapeake, Virginia, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.  In addition, pursuant to a plea agreement with the Government, MURRAY agreed to forfeit proceeds of the offense.  MURRAY is scheduled to be sentenced by Judge Katherine B. Forrest on March 9, 2018.  

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.

Mr. Kim praised the exceptional work of the Office’s criminal investigators, and thanked the United States Postal Inspection Service and the Securities and Exchange Commission for their assistance. 

DOI ARRESTS SITE SAFETY REPRESENTATIVE ON A CHARGE OF POSSESSING FRAUDULENT SAFETY CERTIFICATES

  Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrest of an individual in charge of site safety at the renovation of the New York City Housing Authority’s (“NYCHA”) Fulton Houses Community Center in Manhattan on a charge of possessing fraudulent safety training certificates. This site safety representative is required to hold a 30-hour safety certification issued by training centers approved by the United States Occupational Safety and Health Administration (“OSHA”) and provided to construction workers who successfully complete a comprehensive safety program that provides information on OSHA compliance issues. These Site Safety representatives are responsible for the enforcement of all OSHA and government construction regulations, all NYCHA-approved site safety plans, informing workers of safety deficiencies, and maintaining a log of hazardous materials used at the work site, among other duties. Based on information provided by NYCHA, DOI investigators requested the Site Safety representative produce his OSHA safety credentials and, when he did, DOI investigators determined the certificates were fraudulent. The office of Manhattan District Attorney Cyrus R. Vance, Jr., is prosecuting the case.

  DOI Commissioner Mark G. Peters said, “Individuals overseeing site safety are charged with making sure that construction sites are safe and workers are not injured. This manager, instead, relied upon false documents at a site with multiple other safety problems. Professionals who place construction workers in danger will not be tolerated and will face arrest."

  ANDREAS TSAMOS, 49, of Whitestone, N.Y., was arrested Friday, November 3, 2017, at the construction site and charged with Criminal Possession of a Forged Instrument in the Third Degree, a class A misdemeanor. Upon conviction, a class A misdemeanor is punishable by up to one year’s incarceration. TSAMOS was arraigned on Friday and released on his own recognizance. His next court date is December 5, 2017, in New York County Criminal Court.

  On Thursday, November 2, 2017, DOI investigators found numerous safety problems at NYCHA’s Fulton Houses Community Center in Manhattan, including an emergency fire exit door locked from the outside preventing workers from exiting during an emergency, a fall protection guardrail system missing where work was being done, and a scaffold was installed without any fall protection guardrail system. NYCHA ordered the contractor to correct the safety problems. City Department of Buildings’ inspectors evaluated the site Friday, November 3, 2017, and found no outstanding safety issues.

  According to the criminal complaint, also on Friday, November 3, 2017, DOI investigators asked TSAMOS, who works for Gem Quality Corporation of Brooklyn, to provide his safety credentials. The defendant 2 provided two certificates – one for a 10-hour-approved OSHA course and a second certificate for a 30-hourapproved OSHA course. Both certificates bore the same training completion date and did not indicate the course names. DOI observed that the certificates indicated the defendant took his training courses at “360Training.com”. DOI confirmed with the training company that no individual with the defendant’s name completed training courses on the date of the certificates. Additionally, the training company informed DOI that its certificates bear course names.

TSAMOS was arrested on Friday, November 3, 2017, and removed from the site. NYCHA shut down the site, which remained closed Monday, November 6, 2017, until a new site safety representative is submitted for NYCHA’s approval.

  DOI Commissioner Peters thanked NYCHA Chair and Chief Executive Officer Shola Olatoye and her staff for their cooperation and assistance in this investigation. Commissioner Peters also thanked Manhattan District Attorney Cyrus R. Vance, Jr., and his staff for their assistance on this investigation. 

  The investigation was conducted by DOI’s Office of the Inspector General for NYCHA, specifically Special Investigator/Investigative Auditor David Haynes and Investigative Engineer Kris Kingpayom, under the supervision of Deputy Inspectors General Edward Bradley and Doug Schneider, Inspector General Ralph Iannuzzi, Associate Commissioner James Flaherty, Deputy Commissioner/Chief of Investigations Michael Carroll and First Deputy Commissioner Lesley Brovner. 

A criminal complaint is an accusation. A defendant is presumed innocent until proven guilty.  

DOI FOLLOW-UP INVESTIGATION FINDS INSUFFICIENT INVENTORY CONTROLS OVER LARGE APPLIANCES AT NYCHA FACILITIES

  Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced that an investigation into the New York City Housing Authority’s (“NYCHA”) inventory tracking and controls of large appliances is insufficient and places inventory at risk for theft. DOI undercover investigators entered six NYCHA facilities and removed new and used refrigerators and stoves without being stopped or detected. In each of these instances, subsequent interviews with NYCHA employees revealed that managerial staff was unaware the items had been removed and did not report any appliances as missing. This investigation was a follow-up to DOI’s investigation in 2016 that exposed the problem of large appliance theft from NYCHA facilities, resulting in the arrest of a NYCHA caretaker and the recommendation for NYCHA to perform an inventory review and strengthen controls in tracking and safeguarding large appliances to prevent further theft. A copy of DOI’s Report follows this release and can also be found at the following link: http://www1.nyc.gov/site/doi/newsroom/public-reports.page/

  Commissioner Mark G. Peters said, “At a time when NYCHA faces a severe budget crisis, its failure to safeguard property simply compounds this problem. DOI undercover investigators were able to enter into NYCHA facilities and cart away large appliances, without challenge or notice.”

  DOI first informed NYCHA of breakdowns in its inventory management in July 2016, when it arrested a NYCHA caretaker for stealing three refrigerators from a NYCHA facility, and subsequently discovered that same employee had stolen additional appliances on multiple occasions, including stoves and washing machines, and sold them to an appliance store for cash. That employee pleaded guilty to Petit Larceny and resigned from NYCHA after his arrest. A copy of the press release from the July 2016 arrest can be found at the following link: http://www1.nyc.gov/assets/doi/press-releases/2016/jul/23KenyonAllen07- 22-16.pdf

  In July 2017, DOI began its follow-up investigation and surveyed 19 NYCHA developments, focusing its undercover investigations on six that readily presented security vulnerabilities. Dressed as either NYCHA employees or in plainclothes, DOI undercover investigators went to these six sites to determine whether NYCHA had strengthened its safeguards against large appliance theft, as DOI recommended a year earlier. Investigators easily removed large appliances, including refrigerators and stoves, at these six sites: Pelham Parkway Houses in the Bronx, Wald Houses and Smith Houses in Lower Manhattan, Sheepshead Bay Houses in Brooklyn, Hammel Houses in Queens and Mariner’s Harbor in Staten Island. During follow-up visits to these same sites, storeroom and managerial staff were unaware that any appliances were missing, telling DOI investigators that no appliances were missing from the storerooms, no thefts had occurred, or all appliance stock was accounted for. In one of these developments – the Sheepshead Bay Houses – a week after investigators removed a new stove from the premises, investigators observed that the storeroom remained open and unsecured, and the Assistant Superintendent reported that no appliances were missing or stolen.

  DOI also identified several other vulnerabilities at these NYCHA properties that need to be addressed to further secure appliances at developments, including the inadequate use of CCTV cameras to monitor employee areas like development storerooms, and a lack of routine physical inventory counts by managers to aid in the detection of theft or other losses.

  As a result of this follow up investigation, DOI determined that NYCHA failed to address the vulnerabilities identified in DOI’s 2016 theft investigation. As a result, DOI has made the following recommendations to NYCHA:

 Survey and improve security as needed at development storerooms and supply rooms, including installing self-closing and self-locking doors, alarm systems, electronic-layered access control systems, roll-down gates, and CCTV cameras. 

 Ensure that Housing Managers and Superintendents are practicing appropriate controls over storeroom and supply room keys such that only authorized NYCHA personnel – Housing Managers, Superintendents, Assistant Superintendents, Storeroom Keeper, Supervisor of Housing Caretakers, and Supervising Housing Groundskeeper – have key access. Development staff should be instructed to question unauthorized individuals found in development storerooms and to promptly report any suspicious activity to NYCHA’s Office of the Inspector General.

 Install signage at each storeroom indicating that access is restricted to authorized personnel. 

 Implement policy to track large appliances and other valuable items by manufacturer’s serial numbers via computerized systems, beginning at receipt from the supplier, through storage in storerooms/supply rooms, and following through to installation in individual resident’s apartments.  Enforce NYCHA policies requiring development managers to personally count 100% of all high-value (“Closed Kit”) inventory items each year, and to document and investigate any inventory imbalances.

DOI Commissioner Mark Peters thanks NYCHA Chair and Chief Executive Officer Shola Olatoye and her staff for their cooperation in this investigation.

  The investigation was conducted by DOI’s Office of the Inspector General for NYCHA, specifically Deputy Inspector General Osa Omoigui and Confidential Investigator Alfred Carletta, under the supervision of First Deputy Inspector General Pamela Sah, Inspector General Ralph Iannuzzi, Associate Commissioner James Flaherty, Deputy Commissioner/Chief of Investigations Michael Carroll and First Deputy Commissioner Lesley Brovner. 

A.G. Schneiderman Announces Election Day Hotline To Protect Voter Access During November General Election

Voters Experiencing Problems Can Call 800-771-7755 Or Email civil.rights@ag.ny.gov Between 6AM And 9PM On Election Day

Attorney General’s Hotline Troubleshoots A Range Of Election Day Issues

 Attorney General Eric T. Schneiderman announced his office’s Election Day Hotline, which will help troubleshoot and resolve a range of issues encountered by voters at the polls during the general election on Tuesday, November 7. The Attorney General urges voters experiencing problems or issues at the polls to call the office’s hotline at 800-771-7755 or email civil.rights@ag.ny.gov at any time between 6:00 AM and 9:00 PM on Tuesday. The hotline will be staffed by attorneys and staff in the Attorney General’s Civil Rights Bureau.

“The right to vote is central to our democracy – and all eligible voters deserve equal access at the polls,” Attorney General Schneiderman said. “I urge all New Yorkers to immediately contact my office if they encounter any barriers to voting.”

All registered New Yorkers are eligible to vote in the upcoming General Election, regardless of party affiliation. Voters can check their registration status here. Voters registered in New York City trying to find their poll site, click here. Voters registered outside New York City trying to find their poll site, click here. 

Every poll site in the state will be open from 6 AM until 9 PM. 

Attorney General Schneiderman has operated the voter access hotline since November 2012. During previous elections, the office fielded hundreds of complaints from voters across the state and worked with local election officials and others to address issues. The Election Day hotline is part of Attorney General Schneiderman's ongoing effort to reduce barriers to voting.

Attorney General Schneiderman also reminds all registered voters that they have the right to accessible elections. In addition, all registered voters have the right to vote free from coercion or intimidation, whether by election officials or any other person.

The office will receive and respond to election-related complaints relating to any of the statutes that the office enforces. The Attorney General’s Election Day Hotline is being coordinated by Assistant Attorneys General Ajay Saini and Diane Lucas of the Civil Rights Bureau, led by Bureau Chief Lourdes Rosado. The Social Justice Division is led by Executive Deputy Attorney General Alvin Bragg.

A.G. Schneiderman Announces Multistate Settlement Dissolving Deceptive Veterans Charity

VietNow National Headquarters, Inc Used Deceptive Telemarketing Solicitations Falsely Claiming The Charity Funded Services, Medical Facilities, And Treatment For Veterans – But Less Than 5% of Donations Went To Any Charitable Programs 

Settlement Dissolves Shell Charity, Secures Injunctive Relief, Transfers Remaining Funds to Legitimate Veterans Charities

Settlement Is Part Of AG Schneiderman’s Operation Bottomfeeder, Targeting Shell Charities That Exploit Popular Causes To Line Fundraisers’ Pockets

  Attorney General Eric T. Schneiderman today announced a multistate settlement that dissolves VietNow National Headquarters, Inc., an Illinois nonprofit corporation that used deceptive telemarketing solicitations falsely claiming that the charity was funding veterans services, medical facilities, and treatment in donors’ states, including New York. In fact, less than five percent of funds raised went to any charitable programs.

The settlement, joined by 24 states, requires the appointment of a receiver to dissolve VietNow. The settlement also obtains injunctive relief against VietNow’s directors and officers and requires their cooperation in investigations of VietNow’s professional fundraisers. Upon dissolution, VietNow’s remaining funds will be paid to two national and well-respected veterans charities, Fisher House Foundation and Operation Homefront.

“With so many New York veterans in real need, it’s galling that a so-called charity would pretend to help them in an effort to line their own pockets,” said Attorney General Schneiderman. “Operation Bottomfeeder should serve as a warning to the scammers who seek to exploit veterans, cancer patients, and other causes to make a quick buck: we will stop you. I urge all New Yorkers to give, but give wisely, by following our tips.”

• VietNow and its officers and directors are permanently removed from controlling VietNow and a receiver is appointed to administer and dissolve VietNow.
• VietNow is permanently enjoined from soliciting contributions from the public.
• Defendants are required to cooperate with the receiver, and with all interested states in any present or future investigation of any professional fundraisers for VietNow during the period in question.
• VietNow’s controlling officers or directors are permanently enjoined from serving as charitable fiduciaries or acting as professional fundraisers.
• Upon dissolution of VietNow, the receiver will pay remaining funds to two highly-rated national veterans charities, Fisher House Foundation and Operation Homefront. VietNow’s assets as of May 2017 totaled approximately $545,000.

Today’s settlement was filed by a total of 24 states, led by Michigan, Illinois, California, and Ohio, and joined by New York, Connecticut, Hawaii, Iowa, Kansas, Kentucky, Maine, Maryland, Minnestoa, Missouri, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, South Carolina, Tennessee, Virginia, and Wisconsin.

This settlement is part of Attorney General Schneiderman’s Operation Bottomfeeder, an ongoing effort that targets a pervasive business model of shell charities that exploit popular causes, the professional fundraisers who take the lion’s share of donations and make misrepresentations, and other entities who facilitate the abuses. Prior Operation Bottomfeeder investgations and settlements include the National Vietnam Veterans Foundation (whose president and founder was sentenced to jail last month) and the Breast Cancer Survivors Foundation.

Attorney General Schneiderman’s Charities Bureau releases an annual “Pennies for Charities” report, revealing how charitable donations obtained by many professional fundraisers are largely spent on fundraising and administrative expenses, with only a small fraction left for charitable work. The latest Pennies for Charities report may be accessed here.

Attorney General Schneiderman encourages all New Yorkers to follow his Tips for Charitable Giving, available here.

BRONX MAN WHO SET FIRE TO CAFÉ ON MOTHER’S DAY SENTENCED TO SIX YEARS IN PRISON; PLEADS GUILTY TO ARSON

  Bronx District Attorney Darcel D. Clark today announced that a Bronx man pleaded guilty and will be sentenced to six years in prison for setting fire to a café while multiple customers were inside. 

  District Attorney Clark said, “This senseless crime, spurred by petty anger, had the potential to seriously harm many people. Fortunately, an alert FDNY EMS worker noticed the fire, saving many lives. The defendant will now spend six years in prison for his recklessness.” 

  District Attorney Clark said the defendant, Robert McCurdy, 49, of Tryon Ave., pleaded guilty today before Bronx Supreme Court Justice Steven Barrett to second-degree Arson, a felony. As part of the plea agreement, McCurdy will be sentenced on Dec. 1, 2017 to six years in prison followed by five years post-release supervision. He was remanded.

  According to the investigation, on May 8, 2016, McCurdy was asked to leave a Woodlawn café when an argument ensued. The defendant returned and poured gasoline on the building and the sidewalk and proceeded to light a match while the establishment was occupied by several people. A nearby Fire Department official noticed the blaze and alerted authorities, who were able to douse the flames before anyone was hurt. The fire left scorch marks and caused damage to a window.

District Attorney Clark thanked FDNY Fire Marshal Stephen Bumb for his assistance in the case.

NEW CITY ADS COMING TO SUBWAYS, BUSES TO DISCOURAGE WILDLIFE FEEDING

NYC Parks wants New Yorkers to know that sharing is not caring

  Mayor Bill de Blasio today announced a new phase of WildlifeNYC – a campaign launched last October to teach New Yorkers how to live responsibly alongside the wild animals that inhabit the city. The citywide campaign will now focus on a specific action: “Please don’t feed NYC’s wildlife.” Starting today, new ads will be visible on buses, subways, phone kiosks and street pole banners in all five boroughs. The ads will feature mallards, deer, raccoons, coyotes and red-tailed hawks.

“In order to coexist peacefully and responsibly with our city’s wildlife, it’s important not to feed animals. This new campaign will make sure New Yorkers get the message – and learn more about living alongside our urban wildlife,” said Mayor Bill de Blasio.

“Most people think they’re doing a good deed by feeding ducks and other wild animals,” said NYC Parks Commissioner Mitchell J. Silver, FAICP. “But if you share your food with them, they’ll lose their natural hunting instincts. Some of these animals have mastered the art of begging, but they are resourceful New Yorkers and have access to plenty of nutritious food in our city and parks.”

The WildlifeNYC website provides guidelines for safely coexisting with raccoons, coyotes, piping plovers, red-tailed hawks, waterfowl and deer, as well as fun facts, information about animal behavior and background on how the City is helping to manage and care for these populations. As part of the campaign, New Yorkers can report their interesting wildlife sightings through a web portal on the WildlifeNYC, to help us learn more about the wildlife that call NYC home.

One of WildlifeNYC’s core initiatives is the City’s deer management program on Staten Island. NYC Parks estimates there are about 2,000 deer on Staten Island, causing vehicle collisions and damaging trees and native plants. The City has developed a multi-pronged plan to address these negative impacts, including traffic safety measures and the humane sterilization of male deer. To date, more than 1,000 males have been sterilized.

To learn more about WildlifeNYC, visit nyc.gov/wildlife.