Ex-Rep Pleads Guilty to Role in $50M Fraud Scheme

A former registered representative pleaded guilty on Wednesday for his role in a $50 million fraud scheme involving phony certificates of deposit, according to court documents and the Justice Department.

On the same day, the Securities and Exchange Commission said the ex-rep was the latest person it charged for allegedly participating in a long-running fraudulent scheme to lure investors into buying fictitious CDs. The scheme resulted in victims, mainly older adults investing their retirement savings, losing at least $40 million, the SEC alleged, filing a complaint in U.S. District Court for the District of New Jersey.

Allen Giltman, 56, of Irvine, California, pleaded guilty by videoconference before Judge John Michael Vazquez in U.S. District Court for the District of New Jersey to an information charging him with one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud.

According to documents filed in the Justice Department’s case and statements made in court, from 2012 to October 2020, Giltman and others engaged in a scheme involving the creation of fraudulent websites to solicit funds from investors.

The fraudulent websites were, at times, designed to closely resemble websites of well-known financial institutions, according to the FBI, which filed a complaint against Giltman on Oct. 26, 2020.

“In multiple instances involving Fraud Websites that spoofed websites maintained by actual financial institutions, the Fraud Contact impersonated an actual employee of the financial institution whose name and imagery were depicted on the Fraud Website and used the real employee’s name and FINRA Central Registration Depository number,” according to the Justice Department’s complaint.

At other times, the fraudulent websites were designed to resemble legitimate-seeming financial institutions that didn’t even exist, according to Philip R. Sellinger, U.S. Attorney for New Jersey.

Victims of the fraud scheme usually discovered the fraudulent websites through internet searches, according to Sellinger. The fraudulent websites advertised various types of investment opportunities, most prominently the purchase of CDs with higher than average rates of return.

Victims would contact Giltman by telephone or email as directed on the sites, according to Sellinger. Giltman allegedly impersonated real FINRA brokers by using their names and FINRA CRD numbers and would then provide the victims with applications and wiring instructions for the purchase of a CD.

The funds wired by the victims would then be moved to domestic and international bank accounts, including accounts in Russia, the Republic of Georgia, Hong Kong and Turkey, according to Sellinger. However, none of the victims received CDs after wiring the funds.

So far, law enforcement has identified at least 150 fraudulent websites created as part of the scheme, Sellinger said. At least 70 victims of the scheme nationwide, including in New Jersey, collectively transmitted about $50 million they believed to be investments, he added.

The wire fraud conspiracy charge carries a maximum penalty of 20 years in prison and a $250,000 fine, or twice the gross amount of gain or loss from the offense, whichever is greatest. The securities fraud charge carries a maximum penalty of five years in prison and a $250,000 fine, or twice the gross amount of gain or loss from the offense, whichever is greatest, according to Sellinger.

Sentencing is scheduled for May 10.

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