Steven Simmons Defrauded Investors and Diverted Fraudulent Proceeds to His Own Use
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that STEVEN SIMMONS pled guilty in Manhattan federal court today to conspiring to commit securities fraud and wire fraud. Between 2013 and January 2017, SIMMONS solicited more than $6 million in investments for a hedge fund (the “Hedge Fund”). SIMMONS, however, misappropriated some of these funds for his own use and knew that the Hedge Fund used the remainder of the funds to pay back prior investors, as part of a Ponzi-like scheme. SIMMONS pled guilty earlier today before U.S. Magistrate Judge Barbara Moses.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Steven Simmons engaged in one of the oldest frauds in the book: using investor funds to pay back earlier investors, all while skimming funds off the top for his own personal use. When investors demanded the returns promised to them, they learned that the entire investment was just a scam. Now Simmons, who admitted his guilt in court today, will answer for his crimes.”
According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds. In fact, SIMMONS failed to invest the investor monies as promised, but, instead, diverted investor funds for his own use and also, together with others, used the money in a Ponzi-like fashion to fund the repayment of earlier investors in the Hedge Fund whose redemption requests could not be forestalled.
Among other false and misleading statements, SIMMONS told one investor (“Victim Entity-1”) that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers. In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-1 for the purpose of repaying an earlier investor in the Hedge Fund which had demanded the return of its investment. Most of Victim Entity-1’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor. The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS. In a later consensually recorded conversation with a cooperating witness (the “CW”), SIMMONS expressed concern that Victim Entity-1 would contact the portfolio managers with whom it believed its funds were invested and learn that “there’s no . . . money.” As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.
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SIMMONS, 48, of Wilton, Connecticut, pled guilty to one count of conspiracy to commit securities fraud and wire fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. In addition, pursuant to a plea agreement with the Government, SIMMONS agreed to forfeit $6,900,000.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. SIMMONS will be sentenced at a date set by the Court.
Mr. Kim praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.