Financial advisor sentenced to 42 months in prison on fraud, false statements

BELARDINO had previously pled guilty to two counts of wire fraud and one count of making a false statement to a government agency. He was sentenced today by U.S. District Judge Kenneth M. Karas.

According to the allegations in the Superseding Information to which BELARDINO pled guilty and other court documents:

Embezzlement from Victim-1

BELARDINO had managed Victim-1's investments at another firm before he founded Maddox in July 2019. In August 2019, BELARDINO convinced Victim-1 to liquidate some of her portfolio and to transfer the liquidated funds to Maddox for investment. Victim-1 then transferred more than $313,000 to Maddox in eight separate transactions between August 2019 and October 2020. Instead of investing Victim-1's money as he had promised, BELARDINO used her money to pay the operating expenses of Maddox, including payroll and office rent; to pay down prior debt; to pay credit card charges, which consisted primarily of personal items; and to pay for personal travel.

In September 2021, Victim-1 directed BELARDINO to transfer her portfolio at Maddox to her brokerage account at another firm. From September 2021 to February 2022, BELARDINO sent Victim-1 and members of her family emails and texts in which he said he was liquidating the portfolio and would return the funds shortly. BELARDINO also provided Victim-1's family with documents suggesting that a wire transfer of the funds to Victim-1's bank account was imminent or pending. BELARDINO also deposited checks drawn on a checking account held by Maddox ("the Maddox Account") into Victim-1's bank account for what he claimed was the full value of her portfolio.

Victim-1 never received any funds by wire and the checks BELARDINO deposited into her bank account were returned because the Maddox Account did not have sufficient funds to cover the checks. BELARDINO sent members of Victim-1's family emails and texts in which he said in substance and in part that he was working with bank officials to resolve the problem and that his family would repay Victim-1 if he was unable to do so. BELARDINO also sent members of Victim-1's family a document that falsely stated that the Maddox Account had sufficient funds to repay Victim-1.

Scheme to Obtain Fraudulent Life Insurance Commissions - Victim-2

In or about May 2019, BELARDINO served as the agent for Insurance Company-1 in connection with an application by Victim-2 for a life insurance policy with a face amount of $1 million, which amount was eventually increased to $18 million. As an agent, BELARDINO received commissions from Insurance Company-1 once Victim-2's application was approved.

In or about April 2020, BELARDINO applied for a life insurance policy with a face amount of $3 million with Insurance Company-2 on behalf of Victim-2 without Victim-2's knowledge or authorization. BELARDINO made materially false statements regarding Victim-2's income, net worth, and health in the application. In or about August 2020, BELARDINO caused Insurance Company-2 to increase the face amount of the policy to $6 million without Victim-2's knowledge or authorization. BELARDINO paid and attempted to pay the policy premiums of $194,280 with Victim-2's funds without her knowledge or authorization. BELARDINO received approximately $84,997 in commissions from Insurance Company-2.

In or about January 2021, BELARDINO applied for a life insurance policy with a face amount of $5 million with Insurance Company-3 on behalf of Victim-2 without Victim-2's knowledge or authorization. BELARDINO made materially false statements regarding Victim-2's income, net worth, and health in the application. BELARDINO caused Insurance Company-3 to increase the face amount of the policy to $6.5 million in March 2021 and to $12.1 million in May 2021, all without Victim-2's knowledge or authorization. BELARDINO paid the policy premiums in a total amount of $105,000 with Victim-2's funds without her knowledge or authorization. BELARDINO received approximately $94,500 in commissions from Insurance Company-3.

False Statement in Connection with Fraudulent Withholding of Employee 401(k) Contributions

BELARDINO adopted a retirement savings plan pursuant to Title 26, United States Code, Section 401(k) (the "Plan") on behalf of the Maddox Group that became effective on January 1, 2020. He served as the trustee of the Plan. Under the Plan, an employee of Maddox could elect to have money withheld from his paycheck each pay period in an amount he chose within specified legal limits. BELARDINO was required to deposit these withheld funds into the Plan for investment at the employee's direction in various options offered by the Plan. Taxes on the money deposited to the Plan as well as gains from investment of those funds would be deferred. BELARDINO was required to deposit funds withheld for the Plan into the Plan's trust account for investment within seven business days.

From on or about November 1, 2020, through on or about August 13, 2021, BELARDINO withheld $8,004.67 from the paychecks of the four Maddox employees other than himself who chose to participate in the Plan. BELARDINO failed to deposit these withheld funds into the Plan's trust account and instead converted those funds to his and Maddox's use.

On or about October 14, 2021, BELARDINO authorized the Plan administrator to file with the Internal Revenue Service a Form 5500-SF for the 2020 calendar year in which he falsely answered in the negative when asked "During [2020]: Was there a failure to transmit to the plan any participant contributions . . .?"

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In addition to his prison sentence, BELARDINO, 36, of New York, New York, was sentenced to three years of supervised release. He was also ordered to pay restitution in the amount of $501,499.67 and to forfeit $501,499.67.

Mr. Williams praised the outstanding investigative work of the Special Agents of the Federal Bureau of Investigation and Criminal Investigators of the Employee Benefits Security Administration of the United States Department of Labor.

The prosecution of this case is being handled by the Office's White Plains Division. Assistant U.S. Attorney James McMahon is in charge of the prosecution.

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Original text here: https://www.justice.gov/usao-sdny/pr/financial-advisor-sentenced-42-months-prison-fraud-and-false-statement-charges