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Ex-Broker Gets 17.5 Years in Prison for ‘Masterminding’ Ponzi Scheme

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What You Need to Know

  • The ex-broker pleaded guilty in 2019 to conspiracy to commit mail fraud, mail fraud and conspiracy to launder money.
  • In 2018, the SEC filed charges and obtained an asset freeze against Santillo.
  • He used money obtained from investors to buy the businesses of at least 15 advisors and brokers.

A former registered broker who was barred by the Nevada Securities Division in 2019 has been sentenced to 210 months in prison for his role in running a nationwide Ponzi scheme in which at least 1,000 investors were bilked out of more than $100 million combined over the span of more than a decade, according to the Justice Department and court documents.

In 2019, Perry Santillo Jr. of Rochester, New York, pleaded guilty to conspiracy to commit mail fraud, mail fraud and conspiracy to launder money for his role in “masterminding” the scheme, according to the Justice Department.

On Thursday, Frank P. Geraci Jr., Chief U.S. district judge for the Western District of New York, sentenced Santillo to 17.5 years in prison and three years of supervised release and ordered him to pay $102.95 million in restitution to the victims of his fraud, according to the sentencing document filed in court that day.

The last firm for which Santillo served as a registered rep was Questar Capital, from 2006-2007, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

The Nevada Securities Division permanently barred him from offering, soliciting or selling any securities or investment advisory services after allegations he was “operating a scheme or artifice to defraud investors via a bait and switch investment opportunity,” according to a disclosure on his report.

The SEC’s Charges

In 2018, the Securities and Exchange Commission filed charges and obtained an asset freeze against Santillo and the other individuals and companies behind the scheme.

According to the SEC’s complaint, the defendants defrauded more than 600 investors through sales of securities in issuers they controlled, including First Nationle Solution LLC, United RL Capital Services, and Percipience Global Corp.

They misappropriated the proceeds for numerous purposes, the SEC alleged. According to the complaint, Santillo used some of the money to commission the writing of a song calling him “King Perry” and boasting about his $10,000 suits. The song was played at a party he threw for himself in Las Vegas.

Advisory and Brokerage Firms Gobbled Up

As part of his 2019 plea in the Western District of New York, Santillo agreed to also plead guilty to a mail fraud charge relating to his Ponzi scheme activities that was pending against him at the time in the Middle District of Pennsylvania.

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Assistant U.S. Attorney John J. Field, who handled the case in New York, and Assistant U.S. Attorney Sean A. Camoni, who handled the case in Pennsylvania, alleged that, between January 2008 and June 2018, Santillo conspired with an individual identified as C.P. and others to obtain money through their scheme.

C.P. was identified as Christopher Parris, also of Rochester, in the SEC’s complaint.

In 2007, Santillo and Parris, as equal partners, formed a business known as Lucian Development in Rochester, according to the Justice Department. Before about July 2007, Lucian raised millions of dollars from investors in Rochester and elsewhere by soliciting investments for City Capital Corp., a business operated by Ephren Taylor.

In July 2007, Santillo and Parris were advised by Taylor that their investors’ money had been lost. In response, in August 2007, Santillo and Parris agreed to acquire the assets and debts of City Capital. The acquisition proved to be “financially ruinous, with the amount of the acquired debt far exceeding the value of the acquired assets,” according to the Justice Department. Taylor was later prosecuted and convicted of operating a Ponzi scheme.

Santillo and Parris opted not to disclose the truth to investors that their money was gone, according to the Justice Department. Instead, the defendants continued to solicit ever-increasing amounts of money from new investors in an unsuccessful attempt to recoup the losses.

To find potential investors to solicit and defraud, the defendants acquired businesses from established investment advisors or brokers who were looking to exit their businesses, according to the Justice Department.

Between about 2008 and September 2017, the defendants, using money obtained from prior investors, bought the businesses of at least 15 advisors and brokers, located in Tennessee, Ohio, Minnesota, Nevada, California (5 businesses), Florida, South Carolina (2 businesses), Texas, Pennsylvania, Maryland and Indiana.

Only a small amount of investor money was actually deployed in productive investments and, when deployed, the investments yielded only meager income and either weren’t profitable or failed altogether, according to the Justice Department.

Between January 2012 and June 19, 2018, Santillo and Parris obtained at least $115.5 million from about 1,000 investors, the Justice Department said. The scheme collapsed in late 2017/early 2018. By then, the defendants had returned about $44.8 million to investors but continued to owe investors about $70.7 million in principal, according to the Justice Department.