Alleged Photo Shop Hedge Fund Scammers Arrested

Oct 18 2007 | 8:08am ET

An indictment is worth a thousand words. Two Long Island, N.Y., men have been charged with running a hedge fund scam out of a photography studio.

The Federal Bureau of Investigation says that David Lagone and his cousin, Kenneth Lampasona, defrauded investors in their hedge-fund-cum-Ponzi-scheme of $500,000.

According to yesterday’s indictment, the duo’s L2Q3 Advantage Fund began to lose money almost from its July 2003 inception. Langone and Lampson allegedly sent their client-victims phony account statements claiming “extraordinary profitability.” L2Q3 shut down in November 2005.

Authorities said that wasn’t the only fib the two men told. They allegedly told clients that they could double their money within a year using the quantitative system Langone created to trade Nasdaq-listed stocks. Both men also claimed to be Wall Street veterans; in fact, Langone, who also claims to have an M.B.A. from the University of Chicago, owns the Plainview, N.Y., photo studio that allegedly served as scam headquarters, while Lampasona works as a liquor-store cashier.

Both men are free on $100,000 bail, and face up to 20 years in prison if they are convicted.

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