A former broker who was barred by the Financial Industry Regulatory Authority last year was arrested Thursday in New York on securities fraud and wire fraud charges related to a scheme to defraud investors, according to the U.S. Attorney’s Office for the Southern District of New York.
In a complaint filed in U.S. District Court for the Southern District of New York in Manhattan, Craig A. Zabala, a 68-year-old resident of New York who is CEO, chairman and president of financial services firm Concorde Group Holdings in Jersey City, New Jersey, was accused of fraudulently inducing at least 18 investors to invest about $4.4 million based on false and misleading statements from around 2015 through 2020.
According to the complaint, Zabala failed to use investors’ funds as promised, including to build his firm’s purported business by investing in and buying other financial services companies.
“Zabala allegedly lied to investors about how much money had been raised, how investors’ money would be used, who had invested, and how close the firm was to an initial public offering,” Acting U.S. Attorney Audrey Strauss said in a statement.
“As further alleged, Zabala appropriated most of the fraudulently obtained funds for his own use, or to pay off investors in Ponzi-like fashion,” she added.
Although Zabala and others said the firm had raised nearly $25 million in the public offering, “in truth and in fact, and as Zabala well knew,” only “a few million dollars” had actually been raised, according to the complaint.
Zabala allegedly converted about 70% of the $4.4 million in investor funds in the form of cash withdrawals and other transfers to himself, payments to his girlfriend, payments of his personal credit card bills and repayment of investors, according to the complaint.
He was charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. In addition, he was charged with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison, according to the U.S. Attorney’s Office. The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offenses, it added.
SEC Also Takes Action
The SEC’s charges were similar to those of the U.S. Attorney’s Office, alleging that, between February 2015 and August 2019, Zabala raised about $4.38 million from 17 investors throughout the United States, purportedly to develop Concorde into a merchant bank for midsize companies and to invest in affiliate entities.
The SEC’s complaint alleged Zabala misappropriated over $3 million of investor funds by making almost $2 million in unauthorized payments to himself and McCarthy, and $1.2 million in “Ponzi-like payments” to earlier investors in an affiliate company.
Concorde did not immediately respond to a request for comment on Friday.
FINRA barred Zabala for failing to provide documents and information requested by it as part of an investigation. Without admitting or denying the findings, he signed a FINRA letter of acceptance, waiver and consent on Aug. 19, 2019, agreeing to FINRA’s sanction.
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