‘Youngest African-American Hedge Fund Founder’ Gets Five Years

Apr 2 2014 | 10:04am ET

The boy-wonder hedge fund manager who wasn’t will have more than five years to reinvent himself—although the sentencing judge would prefer it not be as a finance teacher.

Frederick Scott pleaded guilty charges that he defrauded clients of $1.3 million. Prosecutors said he went to great lengths to convince victims that he was the “youngest African-American hedge fund founder in history,” despite a period of homelessness, and all before he turned 30. Few if any of Scott’s claims, however—including the claim to manage $3.7 billion—proved true, and rather than investing his clients’ money, Scott spent it on himself.

At yesterday’s hearing, Scott pleaded for leniency, citing his race and his “genius.” He told U.S. District Judge Roslynn Mauskopf that he was just a “nerd” who had been lied to by one of his victims about her net worth.

It was all a little too much for Mauskopf, who threw the book at Scott, sentencing him to the maximum of 63 months in prison and calling him a “narcissistic, self-promoting predator,” and recommending that he receive mental health treatment in prison.

“You continue your con in front of me,” Mauskopf said.

The judge didn’t reserve all of her fury for Scott. She also blasted the Bureau of Prisons for allowing Scott to teach fellow inmates about finance as he awaited sentencing.

“The fact that the Bureau of Prisons allowed a financial fraudster to teach a financial course is a bit mind-boggling,” she said.

Scott told Mauskopf that he planned to become a car mechanic and hoped for a lighter sentence, to allow him to work to repay his victims. 

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