Jason Rhodes, co-founder of Stamford hedge fund Sentinel Growth Fund Management, was arrested on Oct. 16 on conspiracy, securities fraud, wire fraud and investment adviser fraud charges.
According to Geoffrey S. Berman, the U.S. attorney for the Southern District of New York, and William F. Sweeney Jr., the assistant director-in-charge of the New York field office of the FBI, the charges stem from Rhodes’ participation in a Ponzi-like scheme to defraud investors by using their funds for his own personal use and to make repayments to earlier investors.
All told, Rhodes and his co-conspirators allegedly defrauded approximately 25 investors out of a total of $19.6 million.
According to the complaint, beginning in at least November 2013 and roughly through December 2016, Rhodes and his co-conspirators solicited investments in the hedge fund by falsely representing to investors that their funds would be used for legitimate, specified, investment purposes – namely, buying securities.
Among other fraudulent acts, Rhodes and a co-conspirator are accused of falsifying an investor account statement using a computer software program to conceal the fact that most of the $4.2 million the investor had sent to the hedge fund had been misappropriated, including through transfers of the funds to, among other places, the personal bank accounts of Rhodes and a co-conspirator, and to previous investors.
After that investor discovered the fraudulent nature of the account statement, Rhodes, working with others, obtained funds from yet another investor in order to make payments to this previous investor, according to the complaint.
The FBI’s Sweeney said that Rhodes, a Rowayton resident, “is just the latest example of someone who allowed greed to guide his actions as he defrauded investors of more than $19 million. The FBI will continue to aggressively investigate these cases as long as misguided individuals continue to foolishly pursue these fraudulent schemes.”
The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.
The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The investment adviser fraud count carries a maximum sentence of five years in prison and a maximum fine of $10,000.