Just 11 days after Bernard Madoff was arrested last year, federal regulators say an enterprising Queens gentleman started a Ponzi scheme of his own.
Just 11 days after Bernard Madoff was arrested last year, federal regulators say an enterprising Queens gentleman started a Ponzi scheme of his own.
Genadi Yagodayev, 32, opened a firm last Dec. 22 called Rockford Funding Group, which he marketed as “a leading private equity firm” with an $800 million pipeline of investments. It offered customers such things as “fixed dividend contracts” with annual returns of as much as 21%. At least 200 hundred people sent more than $11 million in less than eight months to Rockford, which operated from an office at 80 Broad St. in lower Manhattan.
On Tuesday, the Securities and Exchange Commission filed fraud charges against Mr. Yagodayev and Rockford. A hearing is scheduled for Friday in federal court. A federal judge yesterday issued an order freezing Rockford's assets, most of which were wired to banks in Latvia and Hong Kong, according to investigators.
A woman who answered the phone at Rockford's office Wednesday said Mr. Yagodayev wasn't available. SEC attorney Jack Kaufman said the defendant doesn't appear to have retained a lawyer yet.
Rockford lured in customers via the Internet and cold calls with a series of appealing—but bogus—claims, the SEC says.
The firm falsely stated it had 20 Fortune 500 companies as pension plan clients, according to the SEC suit. Rockford, which was less than a year old, also falsely said that since August 1999 its investment portfolio had increased 251% compared to a 12.8% increase in the “Dow Jones Index.” The firm also falsely said it was a member of the Securities Industry Protection Corp., a group that has gotten a lot of attention in the past year since it is providing Madoff victims with up to $500,000 each to help ease their losses.
Until the SEC stepped in, Rockford customers were getting paid dividends as promised them because enough new money was coming in to pay accounts. However, the SEC says Mr. Yagodayev never invested his customers' money as he said he would but rather spent or pocketed it.
Among other things, he wired more than $400,000 to buy electronic and “cooling equipment” from vendors and another $80,000 for “monitoring” and “alarm equipment.”
Aaron Elstein is a senior reporter at Crain's New York Business, where this story originally ran.
