BROOLKYN, N.Y.—A Brooklyn man has been charged by the Securities and Exchange Commission (SEC) with running a $40 million Ponzi scheme in which he allegedly used money intended for safe investments for personal real estate deals and to run a mail order porn business.
In an announcement issued Tuesday, the SEC alleges that Philip G. Barry and his firms, The Leverage Group, Leverage Option Management Co. Inc. and North American Financial Services, defrauded as many as 800 investors, including senior citizens and retirees, by selling securities in Leverage investment funds from January 1978 through February 2009.
Barry promised investors returns of as much as 21 percent a year, the SEC claims, but stopped investing in options or securities in 1999 in order to funnel funds into at least 60 real estate deals and also his mail order pornography business, Barry Publications.
"Barry was an unscrupulous and unregulated investment manager who lured victims with false promises of investment safety, lofty performance, and liquidity," said George S. Canellos, Director of the SEC's New York Regional Office. "While Barry guaranteed investors high returns and provided them with false account balances, he was secretly diverting the funds into unauthorized ventures and for his personal use."
According to the Commission complaint, Barry provided fake account statements to investors that recorded growing account balances and concealed the fact that Barry had not been trading securities for several years. Neither Barry nor any of his related firms is registered with the SEC in any capacity. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and financial penalties against all defendants.
Barry does not intend to fight the charges, according to the SEC.
“Without admitting or denying the allegations in the complaint, Barry, Leverage Group, Leverage Option Management Co., Inc, and North American Financial Services agreed to settle the SEC's claims against them and consented to the entry of a judgment, subject to approval by the court, that enjoins them from future violations of the above provisions of the securities laws and orders them to pay disgorgement, prejudgment interest and a civil penalty, the amounts of which will be determined at a later date. Barry also has consented to the issuance of a Commission order barring him from association with an investment adviser,” the SEC said.