Money Manager Accused of Funneling Ponzi Funds Into Pornography

Money Manager Accused of Funneling Ponzi Funds Into Pornography - 9/9/2009

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HEADLINE NEWS:

Money Manager Accused of Funneling Ponzi Funds Into Pornography
Linda Sandler

Bloomberg. September 9, 2009
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EXCERPT: A money manager from Brooklyn, New York, was arrested and charged with operating a 30-year Ponzi scheme that claimed more than $45 million in assets and diverted some investor funds into a mail-order pornography business. Philip Barry, 52, a resident of the Bay Ridge section of Brooklyn, began accepting money in the late 1970s from investors, guaranteeing fictional annual profits, according to a statement yesterday by the U.S. Attorney in Brooklyn. Instead, he used new investors’ money to pay earlier ones in a “classic Ponzi scheme,” U.S. Attorney Benton Campbell said. “The positive rates of return were simply pre-determined interest rates made up by Barry,” ranging from 21 percent in 1979 to 12.55 percent in 2006, Campbell said in the statement. Barry is accused of luring about 800 investors who put more than $40 million into his so-called Leverage Group, which claimed to be investing in stock options. His reported ending balance of more than $45 million far exceeded assets held by the Leverage Group, producing “substantial losses” for many investors, according to the statement. Besides the pornography business, investor funds were steered into real estate and other “interests,” the U.S. Securities and Exchange Commission said in a civil complaint against the money manager.

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