Date: 09-29-2020

Case Style:

Case Number: Judge Edgardo Ramos

Judge: 1:16-cr-00356-ER

Court: United States District Court for the Southern District of New York (New York County)

Plaintiff's Attorney: United States District Attorney’s Office, New York City, New York

Defendant's Attorney:

New York City, New York Criminal Defense Lawyer Directory

OR

Just Call 855-853-4800 for Free Help Finding a Lawyer Help You.

Description: New York City, New York criminal defense lawyer represented defendant charged with securities fraud.

Fred Elm, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC (“ETIA”), was charged with participating in a scheme to defraud investors in multiple investment funds created and controlled by ELM and Ahmad Naqvi, ETIA’s chief operating officer. Among other illicit activity, ELM and Naqvi fraudulently induced more than 50 investors to invest over $18 million based on false representations that investor money would be invested, through the funds, in the shares of well-known privately held technology companies before their initial public offerings (“IPOs”). Instead, the majority of investor funds was misappropriated for personal use, lost through poor trading, or used to repay investors in a Ponzi-like fashion. ELM pled guilty to conspiracy to commit securities fraud and securities fraud on May 15, 2020, before U.S. District Judge Edgardo Ramos, who also imposed today’s sentence.

According to the Superseding Indictment charging ELM and Naqvi, and other filings in the case:

From at least June 2013 through December 2014, ELM and Naqvi engaged in a scheme to defraud investors in funds that ELM and Naqvi created and controlled at ETIA, where ELM was the founder and manager, and Naqvi was the chief operating officer. ELM and Naqvi raised more than $18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager: Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”).

ELM and Naqvi falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs. These companies included Twitter, Alibaba, Uber, Square, Pinterest, and GoDaddy. Moreover, ELM and Naqvi falsely represented that they had access to these pre-IPO shares because of their relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake. In truth and in fact, ELM and Naqvi did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.

ELM and Naqvi comingled the approximately $18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately $7.1 million. At no point did any of the Elm Tree Funds return a profit. Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in poor trading.

Moreover, of the investor funds that ELM and Naqvi did not lose in securities trading, ELM routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a multimillion-dollar home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.

The conversion of investors’ funds was contrary to the representations that ELM and Naqvi made to investors concerning their and ETIA’s fees. ELM and Naqvi falsely represented that they and ETIA would take a two percent annual management fee plus a performance fee of 20 percent of any profits that the Elm Tree Funds earned. In truth and in fact, ELM converted investor money that far exceeded the two percent management fee. Moreover, because the Elm Tree Funds never returned a profit, ELM, Naqvi, and ETIA were not entitled to any profit-based performance fees.

ELM and Naqvi also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion. To prevent or forestall redemptions, and continue to raise money to fund their scheme, ELM and Naqvi also generated fictitious account statements and made oral and written misrepresentations that their trading strategies were generating consistently positive returns.

ELM was initially arrested in April 2016 and released on bail. In June 2017, approximately one week before his then-scheduled guilty plea, ELM fled to Canada. ELM was subsequently arrested in Canada and extradited to the United States in January 2020. Naqvi, who had been a fugitive since his indictment in 2016, was arrested in Canada and extradited to the United States in November 2019.

* * *

ELM, 51, was also sentenced to three years of supervised release, ordered to forfeit $8,318,840.07, and to pay restitution in the amount of $12,426,293.11.

Ms. Strauss praised the work of Homeland Security Investigations and the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, and thanked the U.S. Securities and Exchange Commission for its assistance. Ms. Strauss also thanked Canadian law enforcement for its support and assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.

18:371.F CONSPIRACY TO DEFRAUD THE UNITED STATES (SECURITIES FRAUD CONSPIRACY)
(1)
18:371.F SECURITIES FRAUD CONSPIRACY
(1s)
15:78J.F MANIPULATIVE AND DECEPTIVE DEVICES (SECURITIES FRAUD)
(2)
15:78J.F SECURITIES FRAUD
(2s)
18:1349.F ATTEMPT AND CONSPIRACY TO COMMIT WIRE FRAUD
(3)
18:1349.F WIRE FRAUD CONSPIRACY
(3s)
18:1343.F FRAUD BY WIRE, RADIO, OR TELEVISION
(4)
18:1343.F WIRE FRAUD
(4s)
18:3146A.F FAILURE TO APPEAR
(5s)

Outcome: Defendant was sentenced to 85 months in prison.

Plaintiff's Experts:

Defendant's Experts:

Comments: