A Suffolk County, N.Y., advisor was arrested on Wednesday for allegedly running an $8 million Ponzi scheme.
Steven Pagartanis, a former registered representative most recently affiliated with Lombard Securities, faces criminal charges filed by the Suffolk County District Attorney's Office in Suffolk County District Court. He was arrested by local law enforcement in Suffolk.
He also faces fraud charges in a civil complaint filed by the U.S. Securities and Exchange Commission in the U.S. District Court for the Eastern District of New York in Brooklyn.
Pagartanis told investors for many years that he was investing their funds in Genesis Land Development Co., a Canadian publicly traded land development company, or a private land development company, promising that the funds would be safe and guaranteeing monthly interest payments to his clients, according to the SEC.
Pagartanis allegedly told his clients to write checks to “Genesis” and deposit them in an account in the name of Genesis I Holdings, an LLC he controlled and whose name was similar to that of the land development companies. He raised about $8 million from nine investors, most of whom were retirees, the SEC said.
The SEC claims that Pagartanis used investor money to fund personal expenses and to make $1.8 million in payments to previous investors that were purported to be the interest payments he promised to them. As of the end of February, Genesis I’s bank account balance was about $8,000, according to the SEC.
To conceal his activity, Pagartanis allegedly created fictitious account statements reflecting his clients’ ownership interests in the land development companies.
The scheme unraveled earlier this year as Pagartanis stopped making interest payments to his clients and ceased replying to client inquiries about the Genesis investment, according to the SEC.
Lombard fired Pagartanis in March after investor complaints sparked an internal probe of his activities, the SEC said.
In April, Finra barred Pagartanis from the brokerage industry after he refused to appear in a hearing concerning the scheme.