Prosecutors have said that Brian Callahan, a New York-based money manager, has admitted to running a $96 million Ponzi scheme to fund luxury home and car purchases and to operate an unprofitable 117-unit resort located in eastern Long Island. The 44 year-old has pleaded guilty to wire and securities fraud and could face up to 40 years in prison, read a statement released today by the US attorney's office in Brooklyn.
In the statement, US Attorney Loretta Lynch in Brooklyn, New York said, "Callahan used six offshore entities to perpetrate one of the largest investment frauds in Long Island history. Through lies and deceit, he misled investors and stole investor funds, including investments from a local fire department, to support a lavish lifestyle."
Bloomberg reported that Callahan had raised over $118 million thanks to at least 40 investors, by telling them that the money that was raised will be placed in hedge funds, mutual funds and securities. According to the statement, he instead has used majority of the money to fund his lifestyle and support the operations of the resort he co-owned with his brother-in-law in Montauk, New York.
When Bloomberg asked lawyer Robert Knuts, who represents Callahan in the lawsuit, for comment about his client's case, Knut's office did not return a call to the news agency.
Newsday said that one of the potential victims in Callahan's scheme was the Montauk Fire Department, the money manager reportedly said. The fire department supposedly invested its $600,000 scholarship fund initially to Callahan. However, department officials had said that they were suspiciois about Callahan and his operations and opted to get out with their investment prior to the collapse of the money manager's scheme.
Callahan was released by federal magistrate A Kathleen Tomlinson on a $2 million bond that was secured by the homes owned by his father and sister, Newsday reported.
