Ponzi Schemes: US - Man sentenced to 25 years for operating $27 million Ponzi scheme

U.S. Attorney’s Office 
District of Connecticut

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that Gregory P. Loles, 54, formerly of Easton, Connecticut, was sentenced today by U.S. District Judge Alvin W. Thompson in Hartford to 300 months of imprisonment, followed by three years of supervised release, for defrauding investors, including a Connecticut church, of approximately $27 million.

“For nearly a decade, this defendant abused the trust of friends and clients and stole millions from his own church,” stated U.S. Attorney Daly. “He engaged in a carefully calculated fraud that included the use of sham companies, phony documents, and endless lies to investors. His scheme was for his own material gain, including the purchase of an extravagant home and the funding of a professional car racing team. This long sentence is clearly appropriate as the defendant preyed upon and devastated innocent victims who had placed their trust in him.”

“Today’s sentence will hopefully deter investment advisors and other financial services professionals from defrauding their investors,” stated Special Agent in Charge Ferrick. “For years, the defendant systematically swindled numerous victims, including friends and fellow parishioners, of approximately $27 million. While most of the details of his heartless frauds have been uncovered, the depth of the destruction of trust and faith may never be fully revealed. Unfortunately, this is an all too common occurrence and another reminder to investors to do your due diligence before investing with anyone.”

According to court documents and statements made in court, Loles owned Apeiron Capital Management Inc., which was an investment adviser and broker dealer registered with the U.S. Securities and Exchange Commission from 1995 through 1998, at which point the registrations were cancelled. However, Loles continued to operate Apeiron as an unregistered investment adviser and falsely represented Apeiron to be a registered investment management firm. Loles also was the majority owner and managing member of Farnbacher Loles Motor Sports, Farnbacher Loles Racing, Farnbacher Loles Street Performance, and various other Farnbacher Loles businesses, which were based in Danbury and were engaged in the business of professional race team operations and servicing high-performance automobiles.

For nearly a decade, Loles falsely represented to numerous victim-investors, including friends and fellow parishioners of a church in Orange, Connecticut, that he would act as their investment adviser and invest their funds through Apeiron in various securities including in what he described as “Arbitrage Bonds,” which Loles represented would provide investors with a safe and steady return. Loles also was selected to serve on the board of the church’s endowment fund and was entrusted to manage the church’s investment funds, including the endowment fund and the building fund, by investing in, among other things, Arbitrage Bonds. However, the Arbitrage Bonds did not exist.

Instead of investing funds as promised, Loles used the money to fund his Farnbacher Loles operation, to pay personal expenses, and to purchase a large home with a pool, tennis court, and multi-car garage for his sports cars. In order to keep his scheme from being detected, Loles provided investors with fraudulent account statements and also made periodic “lulling” payments to certain investors using a portion of other victim-investors’ funds.

Through this scheme, Loles stole approximately $27 million from more than 50 victims, including approximately $2 million from his church and approximately $14 million from a single family in Greece. Loles also defrauded clients of Farnbacher Loles.

Some of the individual investors lost their life savings, and provided Loles with funds that had previously been invested in IRAs or 401(k)s or were proceeds of life insurance payments.

Loles has been detained since his arrest on December 15, 2009. On July 26, 2011, he pleaded guilty to one count of mail fraud, one count of wire fraud, one count of securities fraud, and one count of money laundering.

Judge Thompson found that Loles attempted to obstruct the investigation of this matter, after he was arrested, by making false statements to the Federal Bureau of Investigation in relation to the $14 million he stole from the family in Greece. Judge Thompson also found that Loles willfully attempted to mislead the court and committed perjury while testifying during multiple pre-sentencing hearings.

This matter was investigated by the Federal Bureau of Investigation, with the assistance of the U.S. Securities and Exchange Commission, Internal Revenue Service-Criminal Investigation, and the Social Security Administration, Office of Inspector General. The case was prosecuted by Assistant U.S. Attorney Michael S. McGarry.