A New York man allegedly posing as a money manager defrauded three brokerage firms of more than $2 million and robbed investors of another $450,000, according to charges filed by the Securities and Exchange Commission.
The SEC alleges that Ronald Feldstein opened accounts at three brokerages from September 2008 through February 2009 under the names of two investment funds, Mara Capital Management LLC and Vita Health of America LLC. In a so-called free-rider scam, the SEC alleges that Mr. Feldstein made large stock purchases without the funds to pay for them.
In a complaint filed yesterday in U.S. District Court in the Southern District of New York, the SEC alleges that Mr. Feldstein refused to settle trades that were unprofitable, leaving the brokers with more than $2 million in losses. If the stock price rose after the trade date, he paid for the securities with the sales proceeds and pocketed the difference.
In a separate scheme, the SEC alleges that from 2009 until late 2011, Mr. Feldstein solicited about $450,000 through Trademore Capital Management LLC for investments in a penny stock, a fashion-company initial public offering and a hedge fund.
He induced the owners of dry cleaning and car-leasing businesses he had long patronized, as well as the proprietor of a gelato enterprise, to participate, promising big returns. Instead, he diverted the money to fund his expensive habits, including a Bentley automobile, summers in the Hamptons and trips to casinos.
“Without sufficient assets to pay for his stock purchases, Feldstein illegally arranged trades in which he got the profits if he won and left brokerage firms holding the bag if he lost,” Andrew Calamari, director of the SEC New York office, said in a statement. “Then Feldstein used blatantly false promises to lure longtime acquaintances to pour their life savings into his investment schemes that were footing the bill for his luxurious lifestyle.”
The complaint did not name the brokerages involved.
Mr. Feldstein's lawyer denied the charges.
“Mr. Feldstein's trading activities were at all times legitimate,” said Michael Bachner, a partner at Bachner & Associates PC. “Any losses sustained were sustained during the ordinary course of trading activity at these firms.”