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Thursday, May 30, 2024

Feds: Man used $2.6 million COVID-19 fraud to fund Ponzi scheme

A Mooresville man faces federal charges that he bilked the government out of $2.6 million meant for people who had suffered economic hardship due to the COVID-19 pandemic.

Steven Andiloro, 51, faces other charges that he defrauded individuals in a Ponzi-style investment scheme that began before the pandemic.

In the COVID-19 related case, the indictment alleges that from April 2020 to March 2021, Andiloro fraud obtained Paycheck Protection Program money by submitting fraudulent applications that contained false financial information about his businesses, including fake employment data, inflated revenues, costs and payroll expenses.

The government alleges Andiloro received $2.6 million in relief funds as a result, which he used to fund his personal lifestyle and to make payments to people in his investment fraud scheme.

Allegations in the indictment related to the investment scheme allege that from 2018 to 2021 Andiloro induced individuals to invest money in both real and fictitious businesses. To induce people to invest their money, Andiloro allegedly made false representations about where and how the money would be invested.

For example, the indictment alleges Andiloro promised some investors their money would be invested in a non-existent marijuana dispensary business in exchange for a 10% ownership stake. Instead of investing the money as promised, Andiloro used the funds to pay for personal expenses and to make Ponzi-style payments to other investors.

The indictment charges Andiloro with securities fraud and wire fraud, which carry a maximum prison sentence of 20 years and a $250,000 fine for each offense, and money laundering, which carries a maximum penalty of 10 years in prison.

The Attorney General established the COVID-19 Fraud Enforcement Task Force in 2021 to help agencies across government to combat and prevent pandemic-related fraud.

Over the course of the pandemic, the federal Small Business Administration disbursed approximately $1.2 trillion of COVID-19 Economic Injury Disaster Loan and Paycheck Protection Program funds. The SBA estimates more than $200 billion (17%) of that was lost to fraud.

A Ponzi scheme promises investors a high rate of return with little risk of loss. The scam generates returns for earlier investors with money taken from later investors, similar to a pyramid scheme. Ponzi and pyramid schemes unravel when money from new investors dries up and there isn’t enough money to keep paying returns.

While this type of scam dates back to the 1800s, the term itself dates back to 1920 and Charles Ponzi, who defrauded people with a postal coupon scheme.

In 2008, Bernie Madoff was convicted of running a Ponzi scheme that falsified trading reports to indicate profits on investments that did not exist. The global financial crisis of 2007-2009 exposed Madoff’s true financial picture when investors began to withdraw money from Madoff’s firm. Madoff stated he had $50 billion in liabilities owed to 4,800 investors, making it the largest Ponzi scheme in history. Madoff died in a federal prison in Butner on April 14, 2021, while serving a 150-year prison sentence.

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