Feb 8, 2023
Fund Manager Gets 13 Months for $100 Million Ponzi-Scheme Theft in New York
(Bloomberg) -- The co-founder of an investment advisory firm based in New York was sentenced Wednesday to 13 months behind bars for stealing more than $100 million from clients in a Ponzi-like scheme.
Martin Silver, 65, of New Jersey pleaded guilty in April, admitting that he conspired to defraud investors in funds managed by his firm, International Investment Group LLC, by overvaluing distressed loans and creating bogus documents and fake loans that were used to hide losses.
US District Judge Alvin Hellerstein gave Silver a much shorter sentence than the 12-year term given to his co-conspirator, David Hu. The judge cited Silver’s health problems, his cooperation with prosecutors and lower level of responsibility for the fraud. But Hellerstein rejected Silver’s plea for no jail time, pointing to the need to deter other potential white-collar offenders.
“I don’t think you’re a danger,” Hellerstein told Silver in the hearing in Manhattan federal court. “Others are and others need to be shown they can’t get out of crimes they commit.” If Silver “had greater fear of the consequences of what he was doing, at an earlier point in time, he might have behaved very differently,” the judge said.
Silver and Hu, the firm’s chief investment officer, founded IIG in 1994. The company specialized in global trade financing, providing loans to small and medium-sized businesses in Central or South America using coffee, fish and other food products as collateral. Hu was sentenced to 12 years in July after pleading guilty to conspiracy, securities fraud and wire fraud. He is confined to a federal prison in Lompoc, California.
Prosecutors asked for leniency for Silver, saying he was much less responsible for the fraud than Hu. They also said he provide “critical” help in unraveling the scheme.
While the victims weren’t identified, prosecutors said the IIG’s investments were often marketed to hedge funds, insurers and pension funds. The firm provided investment management and advisory services to businesses, and operated three private funds, including one that held the remaining assets of a failed Venezuelan bank.
IIG told the US Securities and Exchange Commission in March 2018 it had more than $373 million in assets under management.
Prosecutors said Hu and Silver also raised $220 million to create a collateralized loan obligation trust in 2014 that was used to hide losses at one of its funds and generate liquidity as demand for redemptions and loan repayments accumulated.
Silver expressed remorse for his crime, frequently breaking down with emotion in a courtroom that included a group of close family and friends.
“I am a convicted felon and I will have to live with that for the rest of my life, regardless of what you do here today,” Silver told the judge before learning his sentence. “I am truly sorry for all I have done.”
The case is US v. Silver, 20-cr-00360, US District Court, Southern District of New York (Manhattan).
--With assistance from Chris Dolmetsch.
(Adds judge’s comments in fourth paragraph.)
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