The New York City head of a financial services firm has been charged civilly and criminally with raising $4.38 million from investors by lying to them about how close he was to making an initial public offering for his firm, the Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York announced Thursday.
Craig A. Zabala has been charged with fraud for luring at least 17 investors to put money into his financial services firm, Concorde Group Holdings, the two agencies said. He allegedly told investors he already had raised more than $24 million to complete a public offering of $25 million. Instead of using the money for the company, he used much of it for personal expenses, including paying for travel for himself and his girlfriend, and to pay early investors, the SEC said. He was arrested at his home Thursday.
The scheme unfolded between 2015 and 2019. He is charged with telling investors he was converting Concorde Group Holdings into a merchant bank for midsize companies and to invest in affiliated companies, the SEC said. Zabala was president, CEO and chairman of Concorde. The SEC complaint was filed in the U.S. District Court for the Southern District of New York.
The acting U.S. attorney for the Southern District of New York and the inspector-in-charge of the United States Postal Inspection Service’s New York Division have brought criminal charges against Zabala for securities fraud and wire fraud.
Concorde Group Holdings was supposed to be a financial services company providing merchant banking, investment banking, asset management and securities brokerage services to entrepreneurs, investors and businesses in the middle market, meaning small to midsize companies with revenue and market capitalizations of less than $1 billion, the U.S. Attorney’s Office said. Zabala falsely claimed that the proceeds from the offerings would be used to grow Concorde Group Holdings’ purported business by investing in and buying other financial services companies. In actuality, the firm did not make any investments in or buy other companies, the U.S. Attorney’s Office said.
“It can always be said, greed has a way of overcoming honest business practices, and in this case Mr. Zabala allegedly exhibited an indifference to investing regulations and the truth when he lied to his investors to enhance his lifestyle and enrich himself. As alleged, this case has all the elements of a classic Ponzi scheme. Investors should remember where there is high reward, there is high risk. Always verify ‘once in a lifetime’ investment claims to ensure you won't be taken for a ride,” said United States Postal Inspection Service Inspector-in-Charge Philip R. Bartlett in a statement.