DOJ: Rochester man sentenced for role in $115 million Ponzi scheme
The Rochester, NY man was sentenced to more than 10 years in prison after pleading guilty to helping run a $115 million Ponzi scheme, according to the Justice Department.
John Law had previously pleaded guilty to conspiracy to commit mail, wire and bank fraud in connection with the scheme, resulting in $70 million in damages to victims.
Law conspired with Perry Santillo and Christopher Parris (who was cited in the original complaint against Law) to drive the plan. According to the complaint, they started buying trading books from registered representatives and investment advisors across the country.
What Law claimed was a legitimate investment advisory firm in Scottran, Penn., but he later admitted the business was fraudulent, serving as a front for the group’s Ponzi scheme. The Scotrun business was one of several different names in Centillo’s operations, including Advice & Life Group, Poconos Investments, First American Securities and Financial Planners Group of America.
Once they purchase the books of business, Law and Santillo will urge clients to withdraw funds from existing investments and invest their money in a number of promissory notes, including First Nationale, Boyles America, Persipence and United RL. However, Santillo and Law often failed to disclose to clients that they also control these issuers.
According to the DOJ, investors agreed to the swap after receiving guarantees that they would see a return on their investment, that the issuer was legitimate and that there would be a bonus in certain situations.
“Indeed, as the conspirators were well aware, those issuers were part of a Ponzi scheme, with no guarantee of investment if there was no legitimate business, and investments by the conspirators for personal use or to make Ponzi payments.” The funds will be misused for the sake of other investors, perpetuating the scheme,” the complaint read.
Law could not immediately be reached for comment by press time.
The charges against Santillo and Paris began with a scheme with their roots in New York in 2007, when the two formed Lucian Development to attract investors into a separate business. Santillo and Paris later took over the business, but soon found that the company’s debt far exceeded available assets. The two chose not to tell investors, and opted to find new investors for their issuers by purchasing the business books of the investment advisor and representative. According to the DOJ.
Santillo was previously convicted for conspiracy to commit mail fraud and money laundering in New York, and was sentenced to 17 years in prison. Paris was also convicted but has yet to receive a sentence.
As a matter of law, according to the complaint, client funds were used for various personal expenses, with at least $1 million going toward “custom suits and lavish parties.” Of the more than $115 million raised throughout the plan, about $45 million was paid to earlier investors to keep it running.
During this time, conspirators not only purchased business books from investment advisors, but acted as advisors themselves, reviewing clients’ securities transactions, investment portfolios and investment strategies, according to the DOJ.
In 2015, Santillo and Law purchased the business books from Pennsylvania investment advisor Anthony Diaz, who was sentenced earlier this year for running a separate fraud scheme prior to the purchase. According to the DOJ, Diaz operated the Financial Planners Group of America (one of the names of Santillo’s fraud advisory businesses in Scotrun) between 2008 and 2015, before he was banned by FINRA.
According to the DOJ, Diaz deceived clients by continually assuring that a range of alternative investment products were low-risk options (but involved high commissions for Diaz). In fact, the opposite was true, and some clients lost their entire investment. Diaz was found Guilty in 11 cases of fraud There was more in 2020 17 years in prison last January.
According to the DOJ, Santillo and several of the law’s victims were previously betrayed by Diaz.