A New York investment adviser was jailed for engaging in post-arrest activity similar to the conduct that led to civil and criminal allegations against him after he couldn't raise additional bail a U.S. judge required.
A New York investment adviser was jailed for engaging in post-arrest activity similar to the conduct that led to civil and criminal allegations against him after he couldn’t raise additional bail a U.S. judge required.
Kenneth Marsh, owner of Gryphon Holdings Inc., was taken into custody today by U.S. marshals in federal court in Brooklyn, New York. He’s scheduled to be tried next year for securities and investment-adviser fraud.
On Nov. 10, U.S. District Judge Jack B. Weinstein said he wouldn’t revoke Marsh’s bail for the post-arrest behavior, only allowing a magistrate judge to impose new conditions, which included an additional $1 million on the bond. Marsh couldn’t raise that.
“I decline to alter those conditions,” James Orenstein, the magistrate judge, said at a hearing today. “I did put a lot of thought into what would be an appropriate bond to protect the community.”
Marsh, 44, is charged with conducting a $17.5 million fraud by misleading investors into paying fees for phony stock tips and investment advice. He was originally released on a $600,000 bond co-signed by his mother. Marsh and Gryphon are also being sued by the U.S. Securities and Exchange Commission.
Of 18 defendants in the criminal case, including members of Gryphon’s sales force, 16 have pleaded guilty. Marsh and sales representative Baldwin Anderson have pleaded not guilty and are scheduled to be tried in February.
‘House Arrest’
“We disagree with the magistrate judge’s requirement that, in addition to house arrest, telephone monitoring, computer monitoring and an ankle bracelet, there needs to be an additional $1 million in collateral posted,” Fred A. Schwartz, one of Marsh’s lawyers from Adorno & Ross LLP in Boca Raton, Florida, said after the hearing.
After his April arrest, Marsh tried to replicate at least parts of his scheme to defraud investors, prosecutors said, arguing that he should be jailed. Weinstein said in November that Marsh should stay out to help his attorney prepare for trial. At that hearing, Schwartz denied that his client engaged in activities such as running an illegal investment-advising business in New Jersey, as prosecutors contended.
Gryphon charged clients as much as $250,000 for access to its investment recommendations, according to the SEC civil complaint. Clients often lost money on trades suggested by Gryphon, the SEC said.
Strip Mall
Gryphon’s employees lied about their credentials, falsely claiming to oversee billion-dollar hedge funds from offices on Wall Street and in London and Sydney, prosecutors said. The shop was run from a strip mall in the New York borough of Staten Island, they said.
Schwartz said in an August interview that Marsh wasn’t an investment adviser. His client published a newsletter recommending stocks, which is protected speech under the U.S. Constitution’s First Amendment, he said.
Bloomberg
