PONZI: Elm Tree Investment Advisors with Fake Access to Pre-IPO Shares of Tech Companies Sentenced to 85 Months in Prison
Posted on 09/28/2020
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, disclosed that FRED ELM, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC (ETIA), was sentenced to 85 months in prison for participating in a scheme to defraud investors in multiple investment funds created and controlled by ELM and Ahmad Naqvi, ETIA’s chief operating officer. Among other illicit activity, Frederic Elmaleh and Naqvi fraudulently induced more than 50 investors (from Canada, U.S.., and Saudi Arabia) to invest over US$ 18 million based on false representations that investor money would be invested, through the funds, in the shares of well-known privately held technology companies before their initial public offerings. Instead, the majority of investor funds was misappropriated for personal use, lost through poor trading, or used to repay investors in a Ponzi-like fashion. ELM pled guilty to conspiracy to commit securities fraud and securities fraud on May 15, 2020, before U.S. District Judge Edgardo Ramos, who also imposed the sentence. Naqvi pled guilty before Judge Ramos on May 4, 2020, and was sentenced on June 29, 2020.
For years the fraudsters were living in Canada before extradition. Ahmed Naqvi fled to Toronto in 2015, while Frederic Elmaleh fled to Canada from Florida in 2017.
From at least June 2013 through December 2014, Frederic Elmaleh and Naqvi raised more than US$ 18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager: Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP.
Fake Access, Bad Trading, and Buying Expensive Cars (Bentley Continental GT and Maserati Gran Turismo)
Frederic Elmaleh and Naqvi falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs. These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc. The U.S. government discovered that Frederic Elmaleh and Naqvi comingled the approximately US$ 18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately US$ 7.1 million. At no point did any of the Elm Tree Funds return a profit. Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately US$ 3.9 million in poor trading.
Frederic Elmaleh ran a twitter account at @elm20101. He often tweeted about living in Florida and about the Orlando Magic.
