A 29-year-old investment advisor who described himself as the “youngest African-American hedge fund founder in history” was sentenced to more than five years in prison for stealing over $1 million from investors.
The Securities and Exchange Commission said Frederick Douglas Scott, former CEO of ACI Capital Group in Manhattan, was sentenced yesterday to a 63-month prison term and ordered to pay $1.39 million in restitution by U.S. District Court Judge Roslynn R. Mauskopf for the Eastern District of New York. He pleaded guilty on September 13 to engaging in a wire fraud conspiracy and lying to SEC officials who were conducting a regulatory examination of his firm.
During the sentencing, Mauskopf criticized the N.Y. Bureau of Prisons for allowing Scott to teach a course on finance to other inmates, the New York Daily News reported. "Scott argued that he was a 'nerd,' a 'genius,' played the race card and even blamed a victim for lying about her net worth," the paper said. "Mauskopf responded by calling Scott a 'narcisstistic, self-promoting predator' who had to be stopped and deterred from victimizing others."
Scott used client funds to purchase personal items at Louis Vuitton, the Apple Store, Starbucks, Fair Bail Bonds, True Religion Jeans, Tao Restaurant, the Hampton Inn SoHo, and Dizzy’s Coca-Cola Club, among others, the FBI said yesterday, and he also wired stolen client funds to his personal checking account.
Scott worked with intermediaries or finders to locate potential victims, whom he promised a high rate of return for providing short-term financing to businesses purportedly associated with ACI, the U.S. Attorney said at the time of his plea. But once victims wired money to ACI, Scott stole the funds for his personal use.
According to documents filed in the case, ACI was founded by Scott in 2009 and purported to be an investment banking and advisory firm with an office at 477 Madison Avenue in New York. ACI registered as an investment advisor with the SEC in July 2011 and, according to its most recent regulatory filing, claimed to manage $3.7 billion in assets.
Scott touted his qualifications as an investor to potential clients, including distributing the May 2010 issue of Ebony magazine, which described him as “the youngest African American hedge fund founder in history,” but in reality, Scott used ACI to execute his fraudulent scheme, causing over a million dollars in losses, the U.S. Attorney’s office said.