Daniel Spitzer promised his investors a good deal: low risk and sizeable returns if they agreed to put their money into a fund he told them he invested primarily in foreign currency trading, authorities announced today.
But instead of investing, Spitzer took most the money he obtained from about 400 people and used it to pay off other investors in what amounted to a $105 million Ponzi scheme, according to an indictment filed Thursday against Spitzer.
Spitzer, 51, who currently lives in Barrington, allegedly controlled 12 investment funds, known as “the Kenzie Funds,” which he told potential investors had never lost money and had achieved historical returns.
In reality, federal authorities said that Spitzer only invested about one third of the money raised from investors, which yielded a total net return of less than 1 percent. As of June 30, 2009, the Kenzie Funds only had about $4 million in bank accounts, though Spitzer had told investors it was worth about $250 million, according to the indictment.
“Daniel Spitzer made Ponzi-type payments to investors, made and caused to be made misrepresentations about the status of investments, and took other steps to lull investors into false sense of security that their investments were safe and profitable,” the indictment stated.
Spitzer now faces eight counts of mail fraud, which each carry a maximum penalty of 20 years in prison and a $250,000 fine.
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that plays a critical role in overseeing U.S. broker-dealers and protecting investors. Established in 2007 through the consolidation of the National Association of Securities Dealers (NASD) and the regulation, enforcement, and arbitration operations of the New York Stock Exchange (NYSE), FINRA operates as an independent, non-governmental entity. Its primary mission is to safeguard the integrity of the securities industry by enforcing rules that ensure fair and ethical conduct among broker-dealers and their registered representatives.
FINRA’s responsibilities include writing and enforcing rules that govern the activities of its member firms, conducting examinations and audits to ensure compliance with these rules, and administering a dispute resolution forum for investors and broker-dealers. Through these activities, FINRA promotes market transparency and fosters investor confidence.
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By maintaining a robust regulatory framework and emphasizing investor protection, FINRA plays an essential role in the stability and integrity of the U.S. securities markets, ensuring they operate fairly and efficiently for all participants.