Man Sentenced in Connection with $1.5 Million Ponzi Scheme

Man Sentenced in Connection with $1.5 Million Ponzi Scheme

William J. Wells was sentenced on Tuesday in Manhattan federal court to 46 months in prison for securities and wire fraud charges stemming from his scheme to defraud more than 30 investors, including friends, colleagues and family, of more than $1.5 million through a Ponzi-like scheme, over the course of nealy six years until his arrest in October 2015. Wells was arrested on October 1, 2015, and pled guilty on March 18, 2016.

Among other false and misleading statements, Wells lied to prospective and existing investors by representing, including in fictitious account statements prepared by Wells, that he had achieved consistently positive trading returns. In fact, Wells’s trading was remarkably unsuccessful and he realized trading losses every year from 2009 until his arrest in October 2015. Of the money Wells did not lose in securities trading, he routinely converted investor funds to his own use to pay personal expenses and used new investor funds to pay back other investors in a Ponzi-like fashion.

Many of Wells’s victims, several of whom submitted letters to the Court or spoke at his sentencing, lost their life savings to Wells’s scheme, including money saved for retirement, medical bills, tuition, or wedding costs, or to purchase a family home.

According to the Complaint, the Indictment, and statements made in open court, including at the sentencing proceeding day:

From September 2009 through the present, WELLS, through his investment firm Promitor Capital LLC (“Promitor Capital”), engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk. In truth, Wells’s trading was remarkably unsuccessful. Between 2009 and the present, WELLS realized trading losses every year and, in total, trading losses in excess of $500,000. In fact, as of September 2015, Promitor Capital had less than $1,000 under management.

In connection with the scheme, WELLS made a series of false and misleading representations to investors, including: (a) that Wells’s trading was generating consistently positive returns when, in fact, his trading was consistently unsuccessful; (b) that investors were invested in certain stocks at certain times when, in fact, none of the accounts held by Promitor or Wells held those stocks; and (c) that Wells had created so-called sub-accounts for clients, for which Wells purported to execute individualized trading strategies, when, in fact, no such sub-accounts were ever funded. In addition to false and misleading representations made orally and in writing, Wells also generated wholly fictitious account statements that he provided to his clients.

As a result of these misrepresentations, Wells obtained more than $1.5 million in investments from more than 30 investors, many of whom were friends, colleagues, or family members. Of the money he did not lose in securities trading, Wells routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including more than $500,000 for, among other things, credit card bills, payments for Wells’s automobile, and for private school tuition. In addition, to hide his trading losses and continue to fund his personal lifestyle, WELLS used new investor funds to pay back other investors in a Ponzi-like fashion. In total, Wells distributed less than approximately $500,000 back to investors.

In addition to the 46-month prison sentence, Wells, 43, formerly of Manhattan and New Jersey, now living in Valley Cottage, New York, was sentenced to three years of supervised release. The Court further ordered WELLS to forfeit the proceeds of the scheme and to pay restitution in an amount to be determined.