A Rochester, N.Y., man was sentenced to more than 10 years in prison after previously pleading guilty for helping run a $115 million Ponzi scheme, according to the Department of Justice.
John Law previously pleaded guilty to conspiring to commit mail, wire and bank fraud in connection with the scheme that resulted in $70 million in losses for victims.
To run the scheme, Law conspired with Perry Santillo and Christopher Parris (who were cited in the original complaint against Law), among others. According to the complaint, they began purchasing books of business from registered representatives and investment advisors around the country.
Law operated what he claimed was a legitimate investment advisory firm in Scotrun, Pa., but he later admitted that the business was fraudulent, operating as a front for the group’s Ponzi scheme. The Scotrun business was one of many in Santillo’s operation, with several different names, including Advice and Life Group, Poconos Investments, First American Securities and Financial Planners Group of America.
Once they purchased the books of business, Law and Santillo would urge customers to withdraw funds from existing investments and invest their money in a number of promissory notes, including from First Nationle, Boyles America, Percipience and United RL. However, Santillo and Law often failed to tell clients that they controlled these issuers as well.
According to the DOJ, investors agreed to the swap after getting guarantees they’d see returns on their investments, that the issuers were legitimate and that there’d be bonuses in some situations.
“In fact, as the conspirators well knew, those issuers were part of a Ponzi scheme, conducting little if any legitimate business, the investments were not guaranteed, and the investment funds would be misappropriated by the conspirators for personal use or to make Ponzi payments to other investors, perpetuating the scheme,” the complaint read.
Law could not immediately be reached for comment by press time.
The charges against Santillo and Parris sprang from a scheme with its roots in New York in 2007, when the duo formed Lucian Development to solicit investors in a separate business. Santillo and Parris later acquired the business but soon found the company’s debts drastically exceeded available assets. The duo decided not to tell investors and opted to find new investors for their issuers by buying investment advisors’ and reps’ books of business, according to the DOJ.
Santillo was previously convicted in New York for conspiracy to commit mail fraud and launder money, and was sentenced to 17 years in prison. Parris was also convicted but has yet to be sentenced.
In Law’s case, client funds were used for a variety of personal expenses, including at least $1 million going toward “custom suits and lavish parties,” according to the complaint. Of the more than $115 million raised during the whole scheme, nearly $45 million was paid out to earlier investors to keep it running.
During this time, the conspirators not only bought the books of business from investment advisors but also acted as advisors themselves, reviewing clients’ securities transactions, investment portfolios and investment strategies, according to the DOJ.
In 2015, Santillo and Law purchased the books of business from Pennsylvania investment advisor Anthony Diaz, who was sentenced earlier this year for running a separate fraud scheme prior to the purchase. According to the DOJ, Diaz operated Financial Planners Group of America (one of the names for Santillo’s fraudulent advisory businesses in Scotrun) between 2008 and 2015, before he was barred by FINRA.
According to the DOJ, Diaz consistently defrauded clients by convincing them that a series of alternative investment products were low-risk options (but included higher commissions for Diaz). In reality, the opposite was true, and some clients lost their entire investments. Diaz was found guilty of 11 counts of fraud in 2020 and was sentenced to 17 years in prison last January.
According to the DOJ, many of Santillo’s and Law’s victims had previously been defrauded by Diaz.