Ponzi Swindler of 57 Gets 12 Years – $8 Million Restitution Unlikely, $1.5 Million to IRS
A press release from the U.S. Attorney’s Office:
FORMER CHICAGO MAN SENTENCED TO 12 YEARS IN PRISON FOR $8 MILLION INVESTMENT FRAUD AND $1.5 MILLION TAX FRAUD
CHICAGO — A former Chicago man was taken into custody after he was sentenced today to 12 years in federal prison for an investment and tax fraud scheme in which he swindled 57 investors, some of whom he had purported to befriend, of just under $8 million and failed to pay nearly $1.5 million in federal income taxes.
The defendant, RANDY M. CHO, falsely caused investors to believe they were buying discounted shares of stock in well-known companies.
He then misused a significant portion of the $9.6 million he raised from investors for his own personal benefit, while using approximately $1.68 million he fraudulently obtained from new investors to make Ponzi-type payments to previous investors.
Cho pleaded guilty to wire fraud and tax fraud last August, resolving an indictment that was returned in December 2010 in U.S. District Court.
Cho, 41, of Seattle, and formerly of Chicago and Newton, Mass., was ordered to pay $7,995,707 in restitution to investors, and $1,496,339 to the Internal Revenue Service by U.S. District Judge James Zagel, who ordered Cho to begin serving his sentence immediately. Cho was also placed on three years of supervised release following his sentence.
In imposing sentence, Judge Zagel noted the unlikelihood that victims will receive any restitution.
The judge heard from two investors, and received letters from numerous others, who said that Cho’s crimes had irreparably damaged their lives and retirement security.
Cho used the misappropriated funds for himself and his business by making payments for
- his home and furnishings,
- automobiles, and
- jewelry, among other things.
He never invested in any shares of stock on behalf of any of his investors.
The sentence was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas Jankowski, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
“There was no good reason for this fraud, and the defendant, who was skilled in the world of finances, could have gotten a legitimate job,” the government argued at sentencing.
“The defendant caused enormous pain and suffering to many of the victims. Cho took life savings, retirement funds, business funds, and other money that victims could not afford to lose.”
Cho held himself out as a self-employed securities trader, who, from approximately 2001 to 2009, falsely represented that he would purchase at least $9.6 million in shares of stock in well-known companies for U.S. and foreign investors, including some in the Chicago area.
Cho claimed to have access to sell stock in these companies, which he offered as part of a “friends and family” investment pool, often in anticipation of purported initial public offerings.
Cho misrepresented that he had a special relationship with Goldman Sachs and was able to purchase discounted shares, and further misrepresented the timing or existence of public offerings, the potential profitability and safety of investments, and the use of the funds obtained from investors.
At various times, Cho falsely told investors that he could purchase specially-discounted shares of companies, including
- AOL/Time Warner, Inc.,
- Google, Inc.,
- Rosetta Stone, Inc., and
- Facebook, Inc.,
prior to their initial public offerings. For example, Cho falsely lulled an investor into believing that the victim had made a $1 million profit by investing in shares of Google stock when no such investment or profit existed.
During the investment fraud scheme, Cho failed to report approximately $4.8 million of additional income between 2004 and 2007, resulting in an underpayment of just under $1.5 million in federal income taxes.
The government was represented by Assistant U.S. Attorney Jacqueline Stern. The U.S. Securities and Exchange Commission, which brought a civil enforcement lawsuit against Cho, assisted in the investigation.
The Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.
