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Virgin Islands financier accused of $105M Ponzi scheme is arrested

A U.S. Virgin Islands financier accused by the Securities and Exchange Commission of running a $105 million Ponzi scheme was charged with criminal fraud and taken into custody in Chicago.

Daniel Spitzer, of St. Thomas, controlled a group of 12 investment funds, collectively called the Kenzie Funds, through which he raised more than $100 million from 400 investors between 2004 and 2010, according to a sworn statement by U.S. Postal Inspector Natalie Reda, attached to the criminal complaint.

“Rather than invest those funds as represented to investors, Spitzer used the vast majority — approximately $71 million — to make Ponzi payments to investors to keep his scheme afloat,” said Reda.

Spitzer, 51, who also has a home in Barrington, Illinois, was charged yesterday and is being held in federal custody after appearing before a U.S. magistrate judge in Chicago, said Kimberly Nerheim, a spokeswoman for Chicago U.S. Attorney Patrick J. Fitzgerald.

Ponzi schemes, named after 1920s swindler Charles Ponzi, typically involve the use of newer investors’ money by the perpetrator to repay those who got in earlier.

The SEC, in June, filed a civil lawsuit against Spitzer in the same Chicago courthouse, alleging he used some investor money for business expenses and comingled assets to conceal his activities.

Chicago attorney Steven Shanin, identified by Nerheim as Spitzer’s lawyer, didn’t immediately reply to voicemail and e- mail messages seeking comment.

His client is charged with a single count of using the Postal Service to further a scheme to obtain money by fraudulent pretenses, a crime punishable by up to 30 years in prison.

The case is U.S. v. Spitzer, 10cr651, U.S. District Court for the Northern District of Illinois (Chicago).