(Updates with cooperating witness in fourth paragraph.)
Nov. 17 (Bloomberg) -- The U.S. charged a South Florida man with running an $11 million scam that lured investors into paying for non-existent shares in closely held companies including Facebook Inc. and Groupon Inc.
John Mattera, 50, is accused of operating a two-year scheme to sell shares in special-purpose vehicles set up to hold stock in non-public companies that were expected to make initial public offerings, according to a complaint unsealed today in Manhattan federal court.
Mattera, who ran Praetorian Global Fund Ltd., instead diverted most of money to himself, using it to pay for jewelry, luxury cars and interior decorating, according to the complaint, which was filed by the office of U.S. Attorney Preet Bharara.
Another participant in the scheme, identified only as Praetorian’s managing director, pleaded guilty to criminal charges and is cooperating with the government, according to the complaint. Praetorian’s website and a civil complaint filed today by the U.S. Securities and Exchange Commission identified Bradford van Siclen as the firm’s managing director.
The criminal complaint charges Mattera with wire fraud, securities fraud, money laundering and conspiracy. He faces as long as five years in prison on the conspiracy charge and up to 20 years on each of the other charges, Bharara’s office said in a statement today.
A voice mail message left with Praetorian, a British Virgin Islands mutual fund, wasn’t immediately returned. Scott Lieberman, who represented Mattera in an unrelated civil suit, and Robert Pearce, who represented van Siclen in the same case, didn’t immediately return messages seeking comment on the charges.
Prosecutors said Mattera controlled a group of 10 Delaware limited liability companies, the special-purpose vehicles that were to hold the investments. They were named Praetorian G Power I LLC through Praetorian G Power X LLC, according to the complaint.
Investors sent more than $11 million into “escrow accounts” maintained by a Florida company, First American Service Transmittals Inc., according to the complaint. Instead of holding the money, First American transferred it to bank accounts controlled by Mattera within three days of deposit, prosecutors claimed.
The SEC, in its suit, is seeking an order freezing the assets of Mattera, van Siclen, the Praetorian Global Fund, the special-purpose vehicles and others who allegedly had a role in the scheme. The SEC also seeks disgorgment of all ill-gotten gains from the alleged fraud.
According to the SEC, Mattera pleaded guilty in 2003 to seven counts of grand theft in three separate criminal cases in Florida. In addition to Facebook and Groupon, which raised $700 million Nov. 3 in the biggest Internet IPO since Google Inc. first offered its shares in 2004, the SEC said Praetorian claimed to hold shares in alternative energy company Bloom Energy Corp. and Fisker Automotive Inc. Fisker is the maker of the Fisker Karma, an hybrid-electric luxury sports car that sells for about $100,000.
Mattera was arrested this morning in Fort Lauderdale, Florida, according to court records.
In a civil suit filed in federal court in Fort Lauderdale in September, a group of investors who thought they were investing in shares of Fisker claimed they were defrauded by Mattera, van Siclen and others .
The case is U.S. v. Mattera, 11-CR-2947, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Fred Strasser, Andrew Dunn
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