SEC busts Brooklyn money manager in $40M porno Ponzi scheme

Money manager Phillip Barry allegedly ran a $40M Ponzi scheme, some of the proceeds of which were used to expand his mail order pornography business

Sep 8, 2009 @ 12:51 pm

By Sue Asci

The Securities and Exchange Commission today charged a Brooklyn money manager with running a $40 million Ponzi scheme in which he allegedly promised investors that their money would be used for safe investments — but apparently spent the money on real estate and a mail order pornography business.

The SEC alleged that Philip G. Barry and several of his firms, The Leverage Group, Leverage Option Management Co. Inc. and North American Financial Services, defrauded some 800 investors, including senior citizens and retirees, when Mr. Barry claimed to sell securities in Leverage investment funds from January 1978 through February 2009.

He allegedly told potential clients that he would invest their funds in options or other securities that would protect their principal and generate returns of as much as 21% per year, the SEC said in its statement.

Mr. Barry reportedly ceased investing any of the investors’ funds in options or securities in 1999 and began running a Ponzi scheme — one in which the SEC claimed he used new investor money to repay other investors and divert funds for his personal use. This involved acquiring interests in at least 60 real estate deals but also helped support his mail order pornography business, Barry Publications, the SEC said in the statement.

According to the SEC, Mr. Barry’s statements indicated that he showed growing account balances, but in reality, he had not traded securities at all for several years.

Neither he nor any of his firms is registered with the SEC.

Without admitting or denying the allegations, Mr. Barry and the firms agreed to settle the SEC’s claims and consented to the entry of the judgment.

Subject to the approval of the court, the judgment orders them to pay disgorgement, prejudgment interest and a civil penalty in amounts to be determined at a later date, the SEC reported.

Mr. Barry also consented to an SEC order barring him from associating with an investment adviser.

In a separate action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Mr. Barry.

He was not immediately available for comment.

The complaint was filed this morning in the U.S. District Court for the Eastern District of New York.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

How to improve productivity

Expanding your business can be a challenge for advisers. Tim Welsh of Nexus Strategy offers some helpful strategies to take your practice to the next level.

Latest news & opinion

Worst day of an awful year leaves no part of market unscathed

Stocks, oil and corporate bonds all plunged, while safe havens like Treasuries and gold stood still.

As it works to pull off a merger, FS Investments admits shortcomings

Management makes public statements about weaknesses at company's funds.

Q&A with Abigail Johnson and Kathleen Murphy of Fidelity Investments

The Fidelity CEO, along with the president of personal investing, discuss record earnings, allegations of sexual misconduct and the challenges facing a changing industry.

Fight for New Jersey fiduciary rule yields doomsday rhetoric from both sides

Stakeholders warned of a 'crisis' and 'decimation of our financial system' at a public meeting held by the New Jersey Bureau of Securities.

The Women’s Issue

News, video and expert opinion about women in financial advice

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print