wmlro.com: Malibu man accused of USD12 million ponzi scheme

Frommer was arrested after being named in a 17-count indictment that was returned on 4th February by a federal grand jury in Los Angeles. The indictment accuses Frommer of two counts of mail fraud, seven counts of wire fraud, five counts of money laundering and three counts of failing to file federal income tax returns for the tax years 2004 until the end of 2006.

According to the indictment, Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X” that purported to trade in surplus property of defunct companies. Frommer told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices.

From January 2004 until August 2006, Frommer allegedly solicited at least USD12 million from victims by promising “guaranteed” returns of 8 percent to 15 percent during cycles as short as six weeks. Frommer claimed that he would use victims’ money to buy the distressed assets for Cap X, and then would share profits from the subsequent sales. In addition to personal promissory notes, Frommer issued account statements that purported to show returns in the Cap X investment. The indictment alleges that Frommer solicited investments in the bogus scheme from more than 50 investors throughout the United States, including residents of California, Oregon, Virginia, Illinois and Massachusetts.

The indictment alleges that Frommer did not purchase distressed assets with the victims’ money. Instead, Frommer allegedly misappropriated this money to maintain his lavish personal lifestyle and to make ponzi payments to victims, while falsifying Cap X account statements to lull victims into believing that their money was safe and earning high returns.

No plea has been entered. If found guilty of all 17 counts, the maximum sentence that may be imposed is 233 years in jail.