Kenneth Kenitzer, Ponzi Scheme, California 2008

SACRAMENTO, Calif. — United States District Judge Garland E. Burrell Jr. sentenced Kenneth Kenitzer, 70, of Pleasanton, today to six years in prison, to be followed by three years supervised release, for wire fraud in connection with a Ponzi scheme that took in more than $80 million between April 2006 and December 2008, United States Attorney Benjamin B. Wagner announced.

According to court records, beginning in 2006, Anthony Vassallo and Kenneth Kenitzer ran Equity Investments Management & Trading (EIMT). Vassallo claimed that he had developed computer software that enabled him to make profits of approximately 3 percent per month, or 36 percent per year. Investors were told that this strategy had worked successfully for years with one loss situation that had been corrected so that it would not happen again. In fact, Vassallo’s strategy had been historically unsuccessful, losing money overall. Investors generally funneled money into EIMT through a number of sub-funds. Kenitzer was an officer of EIMT and the primary administrator of several of the sub-funds that invested with EIMT. He also was the primary point of contact for investors and sub-fund managers to actually transfer money to and from EIMT. Although Kenitzer was aware that EIMT never functioned as promised, and ultimately became aware that Vassallo was lying about the returns on investments, Kenitzer maintained to investors and sub-fund managers that EIMT was a profitable investment platform.

The scheme began to unravel in late 2008, and investors began demanding their money back. Vassallo and his intermediaries engaged in stalling tactics, claiming that Vassallo was “restructuring” the funds, TradeStation was conducting an audit, or the SEC had frozen the TradeStation account due to a baseless complaint. Vassallo continued to recruit new investments. One investor transferred $250,000 to Vassallo’s account less than two weeks before Vassallo admitted to a group of investors that he had ceased trading and their money had been lost.

More than 300 individuals invested in the EIMT scheme, contributing at least $83 million. Of that amount, more than $55 million was returned to investors, although nearly $17 million of that constituted amounts paid to some investors above the amount of their original investments. Thus, actual loss to the investors totaled more than $40 million.

U.S. Attorney Wagner said: “While Kenitzer wasn’t the primary salesman of EIMT, his administration of the money and of some sub-funds was a crucial part of keeping the scheme running as long as it did, and contributed to the breathtaking quantity of victims and funds lost. His sentence today is an important measure of justice for the victims of the EIMT scam, many of whom lost their homes, health, and retirements to this fraud.”

“Greed and Ponzi schemes go hand in hand. Although Kenitzer and others have been sentenced, time in federal prison cannot restore the millions lost by victims. FBI special agents are highly skilled at investigating elaborate, complicated cases such as these but I am hopeful that investors will cast a wary eye when presented with investment opportunities that seem too good to be true,” said Special Agent in Charge Monica M. Miller of the Sacramento field office of the Federal Bureau of Investigation.

Source: https://www.justice.gov/usao-edca/pr/pleasanton-man-sentenced-6-years-prison-folsom-based-ponzi-scheme