A Stamford hedge manager guilty of mounting a Ponzi scheme faces new civil allegations that his fraud ran into the hundreds of millions of dollars, Bloomberg News reports.
Francisco Illarramendi pleaded guilty Monday to fraud and two other men were charged with conspiracy in a U.S. probe of an alleged Ponzi scheme with potential investor and creditor losses of hundreds of millions of dollars, much wider than the earlier estimate of $53 million, prosecutors said.
Also Monday, the Securities and Exchange Commission added additional claims to the lawsuit, alleging he engaged in a multiyear Ponzi scheme. Illarramendi, of New Canaan,is the majority owner of Michael Kenwood Group LLC, a holding company for an investment adviser through which he managed several hedge funds, according to the SEC complaint.
Illarramendi, 42, pleaded guilty in federal court in Bridgeport to two counts of wire fraud and one count each of securities fraud, investment-adviser fraud and conspiracy to obstruct justice, said U.S. Attorney David Fein in Connecticut in an e-mailed statement.
The plea couldn’t be confirmed immediately in electronic court records. John Gleason, an attorney for Illarramendi, declined to comment.
From 2006 to February, Illarramendi used money from new investors to pay returns he promised to earlier ones using fraudulent documents that purported to show the hedge funds had hundreds of millions of dollars in credits, Fein said. Illarramendi, Juan Carlos Guillen Zerpa, 43, and Juan Carlos Horna Napolitano, 40, allegedly conspired to obstruct a Securities and Exchange Commission investigation of the hedge funds, according to the statement.
Robert Targ, an attorney for Zerpa, couldn’t immediately be reached for comment. Dan Forman, an attorney for Napolitano, didn’t immediately return a message seeking comment.
The SEC sued Illarramendi in January, alleging he diverted at least $53 million from clients for himself and other businesses he controlled.
