CENTRAL ISLIP, N.Y. -- Four associates of a New York businessman convicted in a $400 million Ponzi scheme were arrested early Wednesday on charges they pocketed nearly $38 million in commissions for their efforts in advancing the fraud, federal prosecutors said.
Three of the suspects were arrested without incident in New York and a fourth was taken into custody in Florida, said FBI spokesman J. Peter Donald. The three New York suspects were due to make initial court appearances later Wednesday in U.S. District Court in Central Islip.
The defendants were identified as Jason Keryc, 34; of Wantagh, N.Y.; Anthony Massaro, 40, of Boynton Beach, Fla.; Anthony Ciccone, 39, of Locust Valley, N.Y.; and Diane Kaylor, 36, of Bethpage. Their attorneys' names were not immediately known
The four were account representatives of Hauppauge-based Agape World Inc. and Agape Merchant Advance, according to a criminal complaint. The two investment companies were run by Nicholas Cosmo, who has pleaded guilty to mail and wire fraud charges in a scheme that bilked more than 4,000 investors in a $400 million Ponzi scheme.
Cosmo was called a "mini-Madoff" because he was arrested in January 2009, just weeks after the billion-dollar swindler Bernard Madoff was arrested in New York City. Unlike Madoff, who admitted cheating charities, celebrities and institutional investors out of billions, prosecutors said Cosmo's scheme targeted mainly blue-collar workers.
The complaint unsealed Wednesday alleges the four pocketed huge commissions for assisting Cosmo and Agape in running the scheme. Keryc, Massaro, Ciccone and Kaylor are accused of receiving commissions of approximately $16 million, $6.5 million, $10.7 million and $4.75 million, respectively.
Agape promised huge returns on investments, which were to be used only to fund specific, short-term secured bridge loans to commercial borrowers or to make short-term loans to small businesses, prosecutors said. They say the defendants knew that Agape and AMA did not produce or earn rates of return that could support the exorbitant returns promised to investors, but continued to solicit money from investors.
Prosecutors said that the defendants learned in November 2008 that all of Agape's 2007 bridge loans were in default or on extension, but the four allegedly failed to disclose that information to existing or new investors.
As investors became increasingly concerned about their investments, the four allegedly offered them a fictitious insurance policy, promising that those who purchased the insurance plan would own a portion of liens that purportedly secured repayment of the bridge loans. They raised approximately $865,000 for what turned out to be bogus insurance, prosecutors said.
At Cosmo's sentencing last fall, several people spoke about how they had lost their life's savings investing with Agape. The more than 4,000 victims include teachers, police officers, firefighters, nurses and construction workers.
"I'm going to be working until they put me in the grave," said one of the victims, Ellen Gabriel, of Yaphank, N.Y. The hairdresser said she lost $130,000 _ "my entire life savings."
Cosmo apologized at the sentencing, saying he never intended to hurt anyone.
Madoff is serving a 150-year prison sentence for his fraud.