A complaint filed on November 17, 2011 in Manhattan federal court, by the Securities and Exchange Commission (SEC) alleges that Florida residents John A. Mattera (Mattera) and John R. Arnold (Arnold) and several others engaged in a scheme to defraud investors across the country out of at least $12 million during the past 15 months.
The complaint charges the defendants with numerous federal securities violations and fraud and seeks an emergency court order to freeze the assets of Mattera, Arnold, Joseph Almazon of Hicksville, NY, David E. Howard II of New York City, Bradford Van Siclen of Montclair, N.J. and eight different entities, as well as injunctive relief, financial penalties and disgorgement of the defendants’ ill-gotten gains.
According to the SEC’s press release, the U.S. Attorney’s Office for the Southern District of New York conducted a parallel criminal investigation which resulted in the arrest of Mattera at his Ft. Lauderdale home on Thursday.
The SEC complaint alleges that Mattera and several others used a hedge fund registered in the British Virgin Islands, The Praetorian Global Fund, Ltd. (Praetorian), to solicit funds from investors. According to the SEC, prospective investors were led to believe that Praetorian and its affiliated entities owned tens of millions of dollars worth of shares in privately-held companies such as Facebook, Twitter, and Groupon that were expected to soon hold initial public offerings (IPOs).
The SEC complaint asserts that Praetorian never owned the pre-IPO shares. The complaint further alleges that Mattera and others gave investors a false sense of security by telling them their money would be held by a Florida escrow agent (Arnold) at his firm First American Service Transmittals, Inc. (FAST) when in reality; Arnold simply transferred the investors’ money to personal accounts owned by Mattera and Arnold. According to the SEC, investor funds were misappropriated by Arnold and Mattera to pay their co-conspirators for their roles in the scheme and to finance private jets, luxury cars, art, jewelry and other lavish expenses.