Florida man accused in New Jersey of scamming investors through an $880 million Ponzi scheme

By Samantha Henry, AP
Wednesday, April 21, 2010

Fla man accused in NJ with Ponzi scheme

NEWARK, N.J. — Federal prosecutors say a Florida man accused of running a $880 million Ponzi scheme used proceeds from duped investors to fund a lifestyle so lavish he had a university athletic lounge named after him and once bought a professional athlete a pair of diamond-studded handcuffs.

Nevin Shapiro, wearing standard issue handcuffs Wednesday, stood before a judge in a New Jersey federal courtroom to face money laundering and securities fraud charges. He’s accused of leaving at least 60 investors in Florida, Indiana and New Jersey with about $80 million in losses after the scheme collapsed.

Shapiro remained in custody Wednesday with bail set at $10 million.

His attorney, Michael Tein, acknowledged an e-mail request for comment but had not responded Wednesday evening.

Prosecutors say 41-year-old Shapiro of Miami Beach, used a Florida-based company called Capitol Investments, USA, Inc., to raise nearly $900 million from investors who thought they were buying into a wholesale grocery distribution business.

Shapiro allegedly siphoned at least $35 million of the proceeds for personal use, including $23 million for salaries and commissions for himself, $5 million for a Miami Beach mansion and $400,000 for courtside Miami Heat basketball tickets. He also spent lavishly on luxury cars, a high-stakes gambling habit and the handcuffs given to an unnamed player, according to court documents.

Shapiro also was generous with what prosecutors contend was his investors’ money, donating to athletic groups and charities and getting a student athlete lounge named after him at the University of Miami by donating $150,000.

Charges filed by the Securities and Exchange Commission claim Shapiro promised investors risk-free annual returns as high as 26 percent by persuading them to invest in a “grocery diversion” enterprise — a practice of buying low-cost groceries in one region of the country and reselling them in higher-priced markets.

Investigators say Shapiro had no legitimate business holdings and kept the alleged scheme going by providing investors with fabricated invoices, fake purchase orders and bogus financial statements whenever one inquired about his returns.

“Nevin Shapiro is charged with tricking investors with false documents and false promises,” U.S. Attorney Paul Fishman said in a statement. “He spent tens of millions of their money on gambling debts, lavish gifts and a luxury lifestyle built on a house of cards.”

Shapiro allegedly hid losses from investors by paying out principal to his current clients with money from new investors raised between January 2005 and November 2009. The funds dried up late last year, and he was unable to cover outstanding promissory notes, prosecutors said.

Shapiro is in bankruptcy proceedings, according to the SEC complaint. U.S. Magistrate Judge Madeline Cox Arleo said Wednesday during Shapiro’s Newark court appearance that he probably could not use his Florida home as bail collateral because it is in foreclosure.

The securities fraud charge carries up to 20 years in prison and a maximum $5 million fine if convicted. Shapiro also faces 10 years of prison time and up to $250,000 in fines on the money laundering charge.


Associated Press Writer Curt Anderson in Miami contributed to this report.

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