A former New York hedge fund manager was sentenced to nine years in prison for defrauding investors of $46 million in a Ponzi scheme.
Edward Stein, who pleaded guilty in June to five counts of securities and wire fraud, had faced almost 20 years in prison. But U.S. District Judge Jack Weinstein in Brooklyn, N.Y., handed down a lighter sentence, saying Stein’s crimes fell outside the “heartland” of fraud cases and that he didn’t believe the 60-year-old would do it again.
Stein’s lawyer argued that his clients motives were as pure as they could be for a Ponzi schemer.
“Ed acted out of a desperate need to make a bad situation right and not out of personal greed or predatory impulse,” Brian Maas said. “Having dug himself an enormous hole, Stein tried to keep the ball in the air until a new business that he was building could generate revenues or create assets sufficient to pay off all of the investors.”
Prosecutors and the victims of Stein’s 11-year scam balked at that assertion.
“The government takes issue with the defendant’s assertion that the sole motivation for his misconduct was his desire to repay investors,” Assistant U.S. Attorney Scott Klugman wrote to the judge.
Speaking at the sentencing hearing, Stein’s victims were somewhat less restrained. One said he “has no conscience” and that the fraud “was an outrageous betrayal.” Another called him “a money-hungry, evil, sly fox who preyed on seniors.”
“He deserves to be away for a very, very long time,” victim Shelly Anderson said.
Stein managed two hedge funds and a life-settlement policy investment firm from his offices in Roslyn, N.Y., on Long Island. According to the SEC, he moved investor money through accounts he controlled without notifying investors, as well as lying to them about how he was investing the assets of hedge funds Gemini Fund I and Prima Capital Management Corp., as well as DISP, his life-settlement fund. (Denver-based Prima Capital Management said at the time of Stein’s arrest that it has “no affiliation in any way” with him.)
For his part, Stein offered an apology for his misdeeds.
“Somewhere in the last 10 years, I lost my sense of reality and as a result, everyone has suffered,” he told the court.