Scott Rothstein Pleads Guilty to Running Ponzi Scheme

by Carrie Coolidge (RSS feed)
Jan 29th 2010 at 4:31PM

On Wednesday, disbarred Florida attorney, Scott Rothstein, appeared in the federal courthouse in Miami and pleaded guilty to running a $1.2 billion Ponzi scheme from 2005 to 2009.

Rothstein was was charged with one count of conspiracy to violate the Racketeering Influenced Corrupt Organization (RICO) statute; one count of conspiracy to commit money laundering; one count of conspiracy to commit mail fraud and wire fraud; and two counts of wire fraud. Rothstein is scheduled for sentencing on May 6, 2010. He faces a total maximum statutory term of imprisonment of 100 years.

As part of the plea agreement, Rothstein agreed to forfeit $1.2 billion, including 24 pieces of real property, numerous luxury cars, boats, and other vessels, jewelry, sports memorabilia, business interests, bank accounts, among other financial interests.

Rothstein admitted to running a Ponzi scheme from 2005 through November 2009. Rothstein engaged in a pattern of racketeering activity through his law firm, Rothstein, Rosenfeldt, and Adler, P.A., located in Ft. Lauderdale, FL. Specifically, RRA was the criminal enterprise through which Rothstein and possibly others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes.

Rothstein used the law firm to fraudulently induce investors to loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements.

As part of the loan scheme, Rothstein solicited investors to loan money to purported RRA clients through promissory notes and short-term bridge loans. Rothstein falsely represented to the investors that the purported clients were willing to pay high rates of return on these loans. In the settlement agreement scheme, Rothstein and other co-conspirators solicited clients to invest in purported civil case settlement funds. Rothstein and his co-conspirators falsely told investors that these settlements ranged in amounts from hundreds of thousands to millions of dollars.

Rothstein falsely represented to investors that these settlements could be purchased at a discount and would be repaid over time to the investors at full face value. In addition, investors were told that these funds would be held in the trust account of RRA. In both instances, the Information alleges that the purported investment vehicles never existed, but were part of an elaborate Ponzi scheme in which new investors' money was used to repay money owed to earlier investors.

Rothstein used the investors' funds to fund bank accounts, purchase luxury vehicles and numerous homes, and an equity investment in Gianni Versace's South Beach mansion, called Casa Casuarina.

"(This) guilty plea is an important step in bringing to justice those who perpetrated a $1.2 billion Ponzi scheme under the guise of operating a legitimate law firm," says United States Attorney Jeffrey H. Sloman. "The United States Attorney's Office will continue to pursue all leads and evidence as they are uncovered. Rest assured, those who are criminally culpable will be held accountable. Victims can also take comfort in knowing that the United States will do everything it can to identify, seize and equitably refund fraud proceeds."

Added FBI Special Agent in Charge John V. Gillies, "Scott Rothstein used a classic approach to mislead investors---an ostentatious lifestyle, a charismatic personality, and guarantees of sky-high returns-all red flags in the world of Ponzi schemes. It is a lesson for all investors to learn that they need to look beyond the hype."

Tags: fraud, Jeffrey H. Sloman, JeffreyH.Sloman, John V. Gillies, JohnV.Gillies, money laundering, MoneyLaundering, ponzi scheme, PonziScheme, RICO, RRA, scott rothstein, ScottRothstein, wire fraud, WireFraud