$900 Million Ponzi Scheme Involves Grocery Network
A Miami Beach-based businessman and philanthropist was charged with fraud for conducting a $900 million Ponzi scheme where investors were sold securities that would fund his investment firm's grocery diverting business, the SEC said yesterday.
The SEC alleged that Nevin K. Shapiro, founder and president of Capitol Investments USA, Inc., sold investors securities that he claimed would fund Capitol's grocery diverting business. Shapiro told investors that the securities were risk-free with rates of return as high as 26% annually. Instead, Shapiro allegedly used investor money to pay for other unrelated business ventures and to pay for a $5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, gambling, and season tickets to sporting events, the SEC said.
Grocery diverters like Capitol purchased lower-priced groceries in one region and resold them for a profit to another region where prices are higher, the agency said. According to the SEC's complaint, Shapiro used his business relationships and word-of-mouth to solicit investors and sell them short-term promissory notes. When investors questioned Capitol's business, Shapiro showed them fabricated invoices and purchase orders for nonexistent sales, the SEC said.
Capitol was operating at a loss by late 2004 and had virtually no operations by 2005. Shapiro began using funds from new investors to pay principal and interest to earlier investors, according to the commission.