Monmouth County Financial Adviser Sentenced to Seven Years in Prison for $9 Million Ponzi Scheme

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2013-06-07

Maxwell B. Smith, a Monmouth County, New Jersey-based financial adviser and broker, was sentenced to 84 months in prison for defrauding New Jersey investors of more than $9 million, U.S. Attorney Paul J. Fishman announced.

Smith, 73, of, Red Bank, New Jersey, previously pleaded guilty to a five-count information charging him with mail fraud in connection with his creation of a sham entity known as Health Care Financial Partners (HCFP). Smith entered his guilty plea before U.S. District Judge Mary L. Cooper, who imposed the sentence in Trenton federal court.

HCFP purported to be an investment fund with more than $300 million in assets under management, comprising loans to health care facilities such as nursing homes. Using his relationships with his investor clients, Smith sold supposed securities in HCFP through sham bond offerings ranging in price from $25,000 to $300,000 per investment.

Smith induced individual investors by creating an investment prospectus falsely stating that the total value of HCFP’s holdings exceeded $300 million. He also falsely claimed that investors’ money would earn yearly dividend interest of between 7.5 and 9 percent and that the returns on their investments would be tax-free, similar to municipal bonds.

To lull investors into thinking their investments were legitimate and earning returns, Smith used a portion of investors’ funds to purchase bank checks, which he then sent to investors as purported earnings on their investments.

At his plea hearing, Smith admitted he did not invest the money as promised but rather misappropriated the investors’ money for his personal expenses including dining, entertainment, gambling, and international travel. Smith admitted defrauding HCFP investors out of more than $9 million.

In addition to the prison term, Judge Cooper sentenced Smith to three years of supervised release. Restitution will be determined at a future hearing.

Source: U.S. Attorney’s Office

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