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Arthur Nadel Indicted on 15 Fraud Counts

Apr 29, 2009 | Parker Waichman LLP

Accused Ponzi schemer Arthur Nadel has been formally charged with 15 counts of securities fraud, wire fraud and mail fraud.  According to Bloomberg.com, in a federal grand jury indictment unsealed yesterday, prosecutors are also seeking to force Nadel to forfeit $360 million and property.

Arthur Nadel was president of Sarasota-based Scoop Management. The hedge funds managed by Scoop included Viking IRA, Valhalla Investment Partners LP, Viking, Victory, Victory IRA and Scoop Real Estate. Viking IRA, Valhalla and Viking funds were managed by Nadel under contract with his partners, Neil and Chris Moody.  Nadel reportedly told his 350 investors that his funds held $360 million, but in truth, they only held around $125,000.

Nadel disappeared on January 14, a day before he was to deliver a $50 million payout to investors. He left his family a purported suicide note, but it was always suspected that Nadel was alive and on the run.  Nadel turned himself in to the FBI in Tampa in late January. Nadel has been unable to post a $5 million bond and is currently being held at the Manhattan Correctional Center in New York City.

According to Bloomberg.com,  the indictment against Nadel includes six counts of securities fraud, eight counts of wire fraud and one count of mail fraud. Nadel faces a maximum 280 years in prison if convicted.  He also faces forfeiture of his Sarasota, Florida home, bank accounts and other property he amassed with money from the alleged scam.

A statement from U.S. prosecutors said  Nadel ran his alleged scheme from 1999 through January, at one point claiming the funds had generated more than $271 million in gains with annual profits ranging from 18 percent to 48 percent.  But in reality, his trading resulted in an overall net loss in the funds, the statement said.

According to HeraldTribune.com, the indictment against Nadel alleges he created, "and caused others to create," phony client account statements that deceived investors into believing they were earning  high returns. The indictment does not state who those "others" are. Copies of account statements to investors were typically signed by Nadel and his partners, Neil and Christopher Moody, HeraldTribune.com.

Nadel is scheduled to be arraigned tomorrow at noon before U.S. District Judge G. Koeltl.  According to Bloomberg.com, Nadel's attorney has said he will plead not guilty to the charges.


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