A New York investment fund manager has admitted stealing nearly $100 million of investors’ money in a Ponzi scheme that helped fund his interest in a Hamptons resort.
Brian Callahan, of Old Westbury, pleaded guilty Tuesday in U.S. District Court in Central Islip to securities fraud and wire fraud.
He could face up to 20 years in prison on each count when he is sentenced Aug. 8.
Federal prosecutors indicted the 44-year-old Callahan and his brother-in-law, Adam J. Manson, in August 2013.
Callahan was accused of raising more than $118 million from at least 40 investors between 2006 and 2012.
Despite assuring the investors the money would be invested in mutual funds, hedge funds and other securities, Callahan “siphoned off” about $96 million, prosecutors said.
Among the victims of the scheme were the Montauk, N.Y., volunteer fire department and a Maryland investor, who reported losing $11 million.
Prosecutors said Callahan fraudulently diverted $600,000 in the fire department’s funds to the Panoramic View.
Besides the Montauk resort, Callahan also purchased expensive cars and homes in Old Westbury and Westhampton, N.Y.
He also sent fake account statements to investors claiming their investments were performing well.
Some of the money was used to purchase the Panoramic View, described in court papers as “an unprofitable 117-unit beachfront resort and residence development in Montauk, N.Y.”
The resort, on the far eastern tip of Long Island, is co-owned by Manson, who was charged with lying to an auditor looking into Callahan’s investment funds, allegedly providing fake documents, bogus promissory notes and doctored balance sheets.
“To conceal their status as business failures, the defendants employed all the tricks in the typical con man’s bag,” U.S. Attorney Loretta Lynch said in announcing the charges. “They created fake documents, stole a person’s identity and engaged in forgery. The defendants allegedly lied to the lender, they lied to the auditor, and Callahan repeatedly lied to his investors.”
The case against Manson, who has pleaded not guilty, is pending, according to a spokesman for the U.S. Attorney’s office.
Callahan also faces millions in fines, and authorities have taken action to seize the resort and other homes he owns.