Alleged Ponzi Scheme Of The Day: Gemini And Prima Capital

Apr 2 2009 | 8:43am ET

Federal prosecutors have charged yet another hedge fund manager with running a Ponzi scheme.

Edward Stein was arrested at his Manhattan home yesterday and charged with wire fraud. He was released on $2 million bail.

According to the criminal complaint, filed in federal court in Brooklyn, N.Y., Stein defrauded a client last year of $6.5 million. But authorities say that is just the tip of the iceberg, putting the total value of Stein’s “classic Ponzi scheme” at more than $55 million.

Stein managed Roslyn, N.Y.-based hedge fund Prima Capital Management and the Gemini Fund I. According to an emergency enforcement action filed by the Securities and Exchange Commission, Stein collected money from at least 83 people, including friends and acquaintances, moving their money through accounts he controlled while lying to them about how he was investing their assets. The SEC has also won a freeze of Stein’s assets.

Denver-based Prima Capital Management issued a statement saying it has “no affiliation in any way” with Stein, his Prima Capital or any other Stein entity.

Stein’s scam also includes his DISP LLC, which invests in life settlement policies, prosecutors said. He is accused of lying to investors since 1992, and running the Ponzi scheme since 2003. It was in that year that Detour Media Group filed for bankruptcy. Stein had, allegedly without telling investors, made Detour Gemini’s “primary” investment.

Nor did he merely use client assets in the Ponzi scheme: The complaint alleges that he bought a $1 million Manhattan apartment with investor funds.

Stein faces as much as 30 years in prison if convicted.

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