President of NY Investment Firms Charged in $370 Million Ponzi Scheme
By: Jim Kouri, CPP
Nicholas Cosmo, 37, the owner and president of Agape World, Inc. and Agape Merchant Advance, LLC, was arrested Tuesday night as a result of a federal complaint charging him with mail fraud, according to a report obtained by the Fraud & Corruption Committee of the National Association of Chiefs of Police.
Federal agents executed search warrants at the Agape and AMA offices located in Hauppauge, Maspeth, and Jackson Heights (Queens County), New York, and the government has moved to freeze bank accounts related to Agape, AMA, Cosmo, and others, and has seized $1.5 million thus far. The defendantâ€™s initial appearance occurred yesterday before United States Magistrate Judge E. Thomas Boyle at the U.S. Courthouse, 100 Federal Plaza, Central Islip, New York.
The charges were announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, Ronald J. Verrochio, Inspector-in-Charge, New York Division, U.S. Postal Inspection Service, and Joseph M. Demarest, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
According to the complaint, the defendant planned and carried out a fraudulent scheme in which he, and others acting at his direction, represented to investors that money they invested in Agape and AMA would be used to provide short-term loans to businesses, that the loans would be secured by borrowersâ€™ assets with 99% security on their investments, and that investors would receive substantial interest returns ranging as high as 48% to 80% per year.
While a small number of interest-generating loans were made to commercial borrowers, bank and trading records reveal that most of the money invested in Agape and AMA was used to pay prior investors, to pay more than $55 million to brokers who recruited the investors, and to fund seven commodities futures trading accounts controlled by Cosmo and through which he lost more than $80 million between October 2003 and October 2008.
The records also indicate that, from January 1, 2006, until November 30, 2008, more than $370 million was deposited into Agape and AMA bank accounts, the vast majority of which was provided by more than 1,500 investors, and that less than $10 million of the $370 million was actually lent to commercial borrowers. As of January 22, 2009, there was approximately $746,000 remaining in the Agape and AMA bank accounts.
By paying investors partial returns — represented to be profits from interest-generating loans — Cosmo persuaded current investors to invest additional funds in Agape and AMA, and also encouraged new victims to invest in the two companies. To conceal the fact that the returns paid to investors were really funds provided by new investors, Cosmo falsely inflated profits from some of the commercial loans that were actually made.
For example, he distributed approximately $5.2 million to more than 100 investors, claiming that the money represented the principal and profits related to a single commercial loan. In fact, that particular loan generated less than $45,000 in interest for Agape, and the balance of the $5.2 million return was drawn from funds provided by new victim-investors.
â€œThis defendant, who operated a classic Ponzi scheme to enrich himself and his colleagues at the expense of investors, is now in custody and the governmentâ€™s investigation is continuing,â€ stated United States Attorney Campbell. â€œIn these difficult economic times, it bears repeating that if an investment opportunity seems too good to be true â€“ promising unusually high returns and virtually no risk â€“ it is probably not on the level.â€ Mr. Campbell extended his grateful appreciation to the Postal Inspection Service and the FBI for their assistance.
FBI Assistant Director-in-Charge Demarest stated, â€œInvestors generally understand that thereâ€™s a correlation between risk and reward, and high-yield investments offer higher rates of return to compensate investors for greater risk. But Nicholas Cosmo not only understated the risk, he completely misrepresented the underlying investments. When you lie about what youâ€™re selling people, thatâ€™s fraud.â€
Postal Inspector-in-Charge Verrochio stated, â€œOperators of Ponzi schemes tell investors they canâ€™t lose, when in fact most never win. The defendant in this case lured his clients with promises of high returns on their investments, but in the end his pyramid of deception came crumbling down but not before losing millions of dollars, their dollars! As long as Americans are victimized by those who use the U.S. Mail to defraud, Postal Inspectors will be on their trail.
If convicted, Cosmo faces up to 20 years in prison on the mail fraud charge. He also faces a fine of up to the greater of $250,000, or twice the pecuniary gain or loss. The governmentâ€™s case is being prosecuted by Assistant United States Attorneys Grace M. Cucchissi and Vincent Lipari.
Jim Kouri, CPP is currently fifth vice-president of the National Association of Chiefs of Police and he’s a staff writer for the New Media Alliance (thenma.org). In addition, he’s the new editor for the House Conservatives Fund’s weblog. Kouri also serves as political advisor for Emmy and Golden Globe winning actor Michael Moriarty.
He’s former chief at a New York City housing project in Washington Heights nicknamed “Crack City” by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. He’s also served on the National Drug Task Force and trained police and security officers throughout the country. Kouri writes for many police and security magazines including Chief of Police, Police Times, The Narc Officer and others. He’s a news writer for TheConservativeVoice.Com and PHXnews.com. He’s also a columnist for AmericanDaily.Com, MensNewsDaily.Com, MichNews.Com, and he’s syndicated by AXcessNews.Com. He’s appeared as on-air commentator for over 100 TV and radio news and talk shows including Oprah, McLaughlin Report, CNN Headline News, MTV, Fox News, etc. His book Assume The Position is available at Amazon.Com. Kouri’s own website is located at http://jimkouri.us
Jim Kouri, CPP is currently fifth vice-president of the National Association of Chiefs of Police and he's a columnist for The Examiner (examiner.com) and New Media Alliance (thenma.org). In addition, he's a blogger for the Cheyenne, Wyoming Fox News Radio affiliate KGAB (www.kgab.com). Kouri also serves as political advisor for Emmy and Golden Globe winning actor Michael Moriarty. He's former chief at a New York City housing project in Washington Heights nicknamed "Crack City" by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. He's also served on the National Drug Task Force and trained police and security officers throughout the country. Kouri writes for many police and security magazines including Chief of Police, Police Times, The Narc Officer and others. He's a news writer and columnist for AmericanDaily.Com, MensNewsDaily.Com, MichNews.Com, and he's syndicated by AXcessNews.Com. Kouri appears regularly as on-air commentator for over 100 TV and radio news and talk shows including Fox News Channel, Oprah, McLaughlin Report, CNN Headline News, MTV, etc. To subscribe to Kouri's newsletter write to COPmagazine@aol.com and write "Subscription" on the subject line.