A Lawsuit Against His Former Lawyers. Some former investors of accused Florida Ponzi schemer Arthur Nadel have filed a lawsuit against his former lawyers. According to a report on The AMLaw Daily, the investors allege that some offering documents the firm Holland & Knight helped Nadel prepare did not mention some important information, including the fact that he was once disbarred for fraud.
Nadel, who was recently indicted on 15 fraud counts, 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. 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.
The Firm Failed to Perform Due Diligence.
According to AMLaw Daily, Holland & Knight is listed as general counsel on private placement memos Nadel used to attract investors to his funds. The investors’ lawsuit alleges the firm failed to perform due diligence, and charges it with malpractice and negligent representation.
In addition to leaving out the information that Nadel was disbarred in the 1980s for using client escrow funds to pay a loan shark, the plaintiffs in the suit claim that some – but not all – of the memos also failed to mention that the accountant for Nadel’s fund was not a certified public accountant.
The investors bringing the lawsuit against Holland & Knight lost about $4.5 million, AMLaw Daily said. Holland & Knight has promised to “vigorously” defend the lawsuit.
As we reported previously, 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.
Nadel has pleaded not guilty to all charges.
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