Brian Callahan, an investment fund manager who used his clients’ cash to purchase Panoramic View Resort in Montauk, among other misappropriations of their money, pleaded guilty Tuesday to securities fraud and wire fraud, according to the Justice Department.
Using various offshore investment funds, Callahan, 44, of Old Westbury, ran a $96 million Ponzi scheme, authorities said. He has agreed to forfeit $67.4 million, including proceeds from the sale of his Old Westbury residence and his beachfront condo in Westhampton, and at sentencing he faces 40 years in prison plus $96 million in restitution payments.
“Callahan used six offshore entities to perpetrate one of the largest investment frauds in Long Island history,” U.S. Attorney Loretta E. Lynch said. “Through lies and deceit, he misled investors and stole investor funds, including investments from a local fire department, to support a lavish lifestyle and operate a multi-million dollar Ponzi scheme.” Lynch thanked the FBI, the IRS, the Securities and Exchange Commission, and the British Virgin Islands Financial Investigation Agency for assistance in investigating and prosecuting Callahan.
According to the U.S. Attorney’s Office for the Eastern District of New York, between December 2006 and February 2012 Callahan raised more than $118 million from at least 40 investors in connection with four different investment funds that he managed. He assured those investors that their money would be invested in mutual funds, hedge funds, and other securities. Instead of investing the money as he promised, Callahan misappropriated approximately $96 million and began to operate the investment funds as a large-scale Ponzi scheme, the office stated.
“Among other things, Callahan diverted millions of dollars towards the Panoramic View, an unprofitable 117-unit beachfront resort and residence development in Montauk, New York, that he owned with his brother-in-law and co-defendant, Adam Manson,” the office stated. “He also commingled the money from the various investment funds and used it to pay tens of millions of dollars in partial redemptions to his victim investors to keep the Ponzi scheme afloat, and to purchase luxury items such as expensive cars and homes in Old Westbury and Westhampton, New York. To avoid detection and continue the scheme, Callahan sent fake account statements to investors that falsely showed that their funds were invested and performing well, and he repeatedly lied to his investors about both the nature and status of their investments.”