Stephen Maiden, Securities Fraud, North Carolina 2013

CHARLOTTE, N.C. - Two men have been sentenced to lengthy prison sentences for operating separate multi-million dollar investment fraud schemes. Stephen E. Maiden, 41, of Vienna, Va., was sentenced to 84 months in prison, followed by one year of supervised release for carrying out an $8.9 million Ponzi scheme, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Maiden, who pleaded guilty to securities fraud in May 2013, was also ordered to pay $7,755,752 as restitution. The scheme was carried out through his Charlotte-based hedge fund, Maiden Capital Opportunity Fund (“Maiden Capital”), which he formed in 2006. According to court records, Maiden represented to his victims that the fund was doing well and was profitable. By at least February 2009, however, he had lost the majority of the fund’s assets in failed investments.

Maiden began transmitting bogus account statements to his investor victims and to Maiden Capital’s fund administrator, falsely reporting favorable returns. To keep the scheme going, Maiden used money from new investors to satisfy withdrawal requests made by other fund investors, falsely characterizing the transactions as payments from Maiden Capital’s successful operations. As a result of his unlawful conduct, Maiden caused a total loss of at least $8.9 million to approximately 39 victims.

In a separate case, James Alexander Shepherd, 59, of Vass, N.C was sentenced to 84 months in prison and three years of supervised release for defrauding more than 100 investors of in excess of $6 million. Judge Conrad delayed issuing a final order of restitution to permit the parties to file additional court briefs. The United States is seeking a restitution order of approximately $8 million for victims of the scheme. Shepherd pleaded guilty to one count of securities fraud in June 2013.

Shepherd carried out the fraud by promising his victims returns on their investments in funds Shepherd owned and controlled, including “The Shepherd Major Play Option Fund, L.P.” (the “Major Play Fund”) and the “Shepherd’s Model Hedge Fund” (the “Hedge Fund”). In addition, Shepherd had some individual investors that invested their money independent of any particular investment vehicle. Shepherd used forged bank documents and names of fictitious bank employees, among other things, to trick an investor into sending him $100,000.

According to court records, Shepherd also used the money to fund his personal lifestyle, including to build a $2 million home and to make mortgage payments on that residence. Shepherd sent to investors certified financial statements for the Major Play fund, accompanied by an Independent Auditor’s Report. This assured investors that an independent audit on the fund had been conducted in compliance with the rules of the U.S. Commodities Futures Trading Commission (“CFTC”). The false financial statements also misrepresented to investor victims the financial condition of the fund.

The case against Shepherd was investigated by the Federal Bureau of Investigation and the U.S. Commodity Futures Trading Commission. The case against Maiden was investigated by the Federal Bureau of Investigation and the Securities and Exchange Commission.

Maiden and Shepherd were both sentenced by U.S. District Judge Robert J. Conrad, Jr. on May 20, 2013, and June 14, 2013, respectively. The case against Maiden was prosecuted by the U.S. Attorney’s Office for the Western District of North Carolina. The case against Shepherd was prosecuted by the U.S. Attorney’s Office for the Western District of North Carolina.

Defendant Name: Stephen E. Maiden

Criminal Charges: Securities Fraud

City and State: Charlotte, North Carolina

Exact Date: May 2013

Sentence or Outcome: 84 months in prison, followed by one year of supervised release and ordered to pay $7,755,752 as restitution

Dollar Amounts: $8.9 million Ponzi scheme, $7,755,752 restitution

Source: https://www.justice.gov/usao-wdnc/pr/two-men-sentenced-seven-years-prison-defrauding-investors-separate-multi-million-dollar