Fund manager charged in Groupon, Facebook scam
A fund manager accused of running an $11 million scam promoting phony access to coveted shares of Facebook and Groupon Inc before their public debut was arrested on criminal charges.business Updated: Nov 18, 2011 15:25 IST
A fund manager accused of running an $11 million scam promoting phony access to coveted shares of Facebook and Groupon Inc before their public debut was arrested on criminal charges on Thursday.
John Mattera, who ran the Praetorian Global Fund registered in the British Virgin Islands, spent nearly $4 million of the misappropriated money on personal expenses, including leasing luxury cars, buying jewelry, paying personal taxes and settling a private civil fraud lawsuit, according to a criminal complaint unsealed in Manhattan federal court.
Mattera, 50, was arrested at his home in Fort Lauderdale, Florida, by Internal Revenue Service agents. The U.S. Securities and Exchange Commission said in a statement that it also filed civil charges against Mattera and several of his associates.
Mattera's lawyer, Carl Schoeppl, could not immediately be reached for comment. Mattera made an initial appearance in federal court in Florida, said the Manhattan U.S. Attorney's office, which brought the charges.
The criminal complaint charged Mattera with securities fraud, wire fraud and money laundering. He faces up to 20 years in prison if he is convicted on charges involving false representations including those about Groupon, the daily deals website, social-networking company Facebook, and others. The companies are not accused of any wrongdoing.
Facebook is private but the popular website is being closely watched by investors as a potential candidate for an initial public offering next year. Groupon made its stock market debut on Nov. 4, closing up 31 percent on its first day of trading. On Thursday, the stock rose 0.9 percent to $24.25.
According to court documents, investors sent more than $11 million into what Mattera and others described as escrow accounts at a Florida bank. He is accused of telling investors that their money would be held until the IPO was completed.
But instead, Mattera transferred most of the money into entities that he controlled with an associate.
"As the complaint describes, Mattera told elaborate lies about stock he did not own and about how he would keep investors' money safe," Manhattan U.S. Attorney Preet Bharara said in a statement. "Instead, Mattera took the investors' money to fund his own extravagant lifestyle."
The case is USA v John A. Mattera, U.S. District Court for the Southern District of New York, No. 11-mag-2947.