SEC Charges Joseph S. Forte In Ponzi Scheme
The Securities and Exchange Commission has charged Philadelphia investment manager Joseph S. Forte and his firm, Joseph Forte LP, of swindling investors out of $50 million in a giant Ponzi scheme. According to the complaint filed Jan. 5, Forte is accused of running the scam from 1995 to 2008.
It is the second multimillion-dollar Ponzi scheme to be uncovered by authorities in the past month. On Dec. 11, New York hedge fund manager Bernie Madoff was arrested on charges of duping investors out of $50 billion. Thousands of retirees, Hollywood celebrities, charities, foundations, global banks and big hedge funds lost everything in Madoff’s subterfuge. Even Madoff’s own sister, Sondra Wiener, was a target of her brother’s scheme. Wiener, 74, lost an estimated $3 million in the Madoff scam, and is now trying to sell her Florida home.
In the case of Forte, the Broomall, Pennsylvania, money manager told FBI agents he had solicited approximately $50 million from dozens of individuals and entities to participate in a commodity futures pool to trade, among other things, S&P 500 stock index futures, foreign currency futures, and metal futures. To conceal his fraud, Forte did not register with the U.S. Commodity Futures Trading Commission and provided quarterly account statements to pool participants that showed profitable returns.
In reality, however, Forte was neither successfully trading nor making an effort to do so.
According to the SEC complaint, Forte consistently lost money in the limited trading that he did, withdrew millions of dollars in so-called fees for his personal use based on the falsely inflated value of Forte LP, and used investor funds to repay other investors.
In addition to misrepresenting the profitability of his trading business, Forte and Forte LP are accused of lying to investors about the use of their funds. Although Forte claimed he raised approximately $50 million from investors for the purpose of participating in the trading program, Forte deposited only $25.8 million in the trading account between January 1998 and October 2008. During that same time period, he withdrew $23.1 million. Forte claims he took at least $10 million to $12 million in fees for his personal use based on the falsely inflated value of Forte LP. However, Forte LP statements to investors reflect fees charged of $28.7 million between March 1995 and September 2008.
Forte also told authorities he used up to $20 million of investor funds to repay other investors, which is the hallmark of a Ponzi scheme.
The SEC’s complaint alleges that Forte and Forte LP also lied to investors about the value of the partnership portfolio. For example, in September 2008, investors were told that the Forte LP portfolio had a value of more than $150 million. In fact, Forte LP’s trading account at the time had a balance of only $146,814.
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