A Manhasset man was arrested Friday and charged in federal court with stealing more than $19 million in a Ponzi scheme that prosecutors say defrauded investors and funded luxurious amenities including a vacation rental in the Hamptons.
Paul A. Rinfret, 70, created a company called Plandome Partners L.P. and gained more than $19 million in investments through it, investments he claimed would be traded on the stock market but most of which he instead pocketed, according to the U.S. Attorney’s Office in Manhattan, which is prosecuting the case.
The former brokerage firm and investment bank employee faces Department of Justice wire fraud and securities fraud charges, which each have 20-year maximum prison sentences. The Securities and Exchange Commission filed a separate civil lawsuit on the same day.
“As alleged, Paul Rinfret willfully and continually defrauded his investors, the very people he was tasked with serving, in a multimillion-dollar Ponzi scheme that served to enrich only him,” said Angel M. Melendez, special agent-in-charge of the New York Field Office of Homeland Security Investigations.
The scheme took place from at least May 2016 to this June, according to the Homeland Security Investigations complaint. The SEC complaint says it began in late 2013.
Plandome Partners investors were led to believe that all of their funds would be for trading futures contracts on the Standard & Poor’s 500 index, the Homeland Security Investigations complaint said. Only a small amount of that money was traded, according to the complaint.
Among Rinfret’s suspected shopping sprees with the investors’ funds were a $50,000 rental home in the Hamptons, a venue for his son’s engagement party, and more than $40,000 worth of jewelry, according to officials.
One of the brokerage accounts Rinfret said Plandome Partners traded with did not exist, while two others were closed when Rinfret said he was using them, authorities said.
The trading Rinfret actually did with the funds led to losses, but Rinfret instead told the investors the investments were performing well using false monthly account statements and brokerage account statements, officials said.
At least six investors were victims of the scheme, the Homeland Security Investigations complaint said, most of whom lived in Manhattan.
“As is my custom of reporting to you after large market moves, I am pleased to announce a 2.15 percent gross gain today,” Rinfret wrote in a May 17, 2017 e-mail to one of the victims, according to the complaint.
At the time of that e-mail, the victim’s money had not been traded at all, the complaint said.
Several of the victims tried to get their money back in February and April of this year, the document said.
The complaint documents an April 5 phone call between Rinfret and one of the victims, who was seeking $5 million back, as follows:
Rinfret told the victim that he had lost all of the victim’s money. He also said that his son had been creating the monthly statements using information Rinfret had fabricated but that he did not tell his son the information was false.
Rinfret said he had a new algorithm that would raise funds to make up for what he said had been losses because of his previous trading strategy, according to the complaint.
He asked another victim for $250,000 that he said would make enough money under the new algorithm to pay back all of the investors, according to the complaint.
Plandome Partners was created around September 2011, it said. Rinfret’s daughter was named a general partner and one of his sons was named a limited partner in company documents, the complaint said.
Throughout the the scheme, Rinfret presented himself as semi-retired.
“As alleged, Paul Rinfret deceived investors at every step,” U.S Attorney Geoffrey S. Berman said in a statement. “He lied about his past returns to get them to invest. He lied about having invested all of their money, when he was actually spending much of it on things like jewelry, cars, and a Hamptons vacation home. He lied about how their money was growing. His alleged lies stop today.”