Mutual fund executive John Mattera, of Fort Lauderdale, Fla., pleaded guilty this week to three criminal counts, including conspiracy, securities fraud and wire fraud, in connection to an $11 million scam involving the sale of non-existent private shares in companies such as Facebook (FB) and Groupon (GRPN).
Mattera—who ran Praetorian Global Fund Ltd., which is registered in the British Virgin Islands—tried to plead guilty to a fourth count, money laundering, but U.S. District Judge Richard Sullivan stopped him, saying he was not sure that Mattera fully conceded his guilt in that crime. Judge Sullivan, of the U.S. District Court for the Southern District of New York, also denied Mattera’s request for bail, and instead immediately ordered him to jail to await sentencing on Feb. 1 where he could face a sentence of between 10 and 12 years.
Mattera, who has four prior convictions for similar crimes in Kentucky and Florida, was arrested at his home in Florida in November 2011. At that time, the U.S. Securities and Exchange Commission filed a civil case, outlining the charges against Mattera.
At his Oct. 2 hearing, Mattera admitted he lied to potential fund investors in 2010 and 2011 when he promised them privately traded shares in companies such as Facebook and Groupon, which were then preparing to hold their IPOs. Investors were then instructed to send money into escrow accounts in one of the 10 Delaware limited liability companies specially created by Mattera to hold these investments. Once deposited in the escrow accounts, the money was transferred to Mattera’s own bank accounts within days of deposit.
Prosecutors said investors sent more than $11 million into these accounts, and Mattera spent at least $4 million of the money on a lavish lifestyle that included high-priced jewelry, luxury cars and interior decorating.
Mattera did not endear himself to the judge by not showing up to his originally scheduled hearing, set for Oct. 1, because he missed his flight from Florida. In denying bail, the judge cited Mattera’s previous convictions and a recent contempt citation for violating terms of his agreement with the SEC. The contempt charge stemmed from Mattera’s sale of a Lamborghini and transfer of the proceeds to his mother during a court-ordered asset freeze.
As part of his plea deal, Mattera also agreed to forfeit $13 million, though his lawyer said Mattera did not have that amount of money.