An affidavit from U.S. Postal Inspector Natalie Reda has resulted in a criminal complaint against Barrington’s Daniel Spitzer, who also is a resident of St. Thomas.

He is accused of running a Ponzi scheme in which people who had previously invested money were paid with money obtained from new investors.

Of the $249 million his Kenzie Funds family of investment vehicles claimed to have in assets, an analysis by Security and Exchange Commission staff accountant Wilburn Saylor, Jr., showed only $4,101,807 available as of June, 2009.  Saylor estimated from 2004 through March, 2010, Spitzer raised just under $105 million from about 400 investors.

Funds in the Kenzie Funds family controlled by Spitzer follow:

• Arrow Fund, LLC
• Arrow Fund II, LLC
• Nerium Currency Fund, LP
• Conservium Fund, LLC
• Senior Strength Q Fund, LLC
• Three Oaks Senior Strength Fund, LLC
• Three Oaks Fund, LP
• Three Oaks Currency Fund, LP
• Three Oaks Advance fund, LLC
• Three Oaks Fund 25, LLC
• US First Fund, LLC
• Ssecurity Fund, LLC

Claims made that lacked verification include

• funds would be used to invest primarily in foreign currency trading
• funds had never lost money
• funds had achieved profitable historic returns

“However, rather than invest these funds as represented to investors, Spitzer used the vast majority—approximately $71 million—to make Ponzi payments to investors to keep his scheme afloat.”

“…when prior investors sought to redeem their interests in the funds…Spitzer either used funds raised from other, newer investors to pay off these redemptions (“Ponzi payments’) or was unable to pay off the redemptions,” the affidavit said.

Management entities, all Illinois organizations which have Stateline, Nevada, post office boxes, are identified as

• Draseena Funds Group, Corp.
• Aneesard Management Co., LLC
• Nerium Management Company

The paper trail of several investors are outlined. One $100,000 investment was disbursed like this:

• $9,492 to make Ponzi payments to four investors
• $27,102 transferred to the First Bank of Puerto Rico
• $26,257 for third party expenses

Some conversations between investors and Spitzer were recorded.

Here’s what’s written about one:

“In a subsequent conversation on February 28, 2010, Spitzer again reassured Investor D ‘we’ve had a period where things have been slow here, but we’re seeing, you know, return of redemption. You know, things are improving.’

“Investor D asked, ‘all the principal that everyone has is—is protected, it’s secured from the standpoint of the mix of investments we have right?’

“Spitzer replied, ‘Right.’

“Investor D complained that the previously provided validation was inadequate, characterizing it as ‘that simple emial with—it just says, “From Isaac”–I mean that is so—so ridiculous. I mean that—that to me is just unacceptable. I mean what’s your thoughts on that, Dan? You’re running a business here, and you’ve got all these clients. What’s your thought when someone sends you something like that for verification of the assets that you have?’

“Spitzer stated, ‘It doesn’t—it’s not a verification but in the industry, since day one, that’s all you get.’”

Although “the vast majority” of the funds’ investments were in two offshore entities, TLM and CAPM, the office manager in Clearwater, Florida, “stated that she never aw any source material detailing the nature and location of the investments, or any actual transactions, underlying the figures on the CAP< or the TLM statements, and did not know how these entities invested the money.”

Complaints from investors seeking redemptions led her to become “fearful for her safety” and that of other Draseena employees.

Neither of two accountants mentioned in the affidavit made any independent investigation concerning the information provided.

One performed something called an “audit” after investors became concerned after “hearing of the Madoff fraud scheme.”