A business that promises huge returns on resold tickets to hot Broadway shows like Hamilton or concerts featuring big-ticket names like Adele might seem like a worthwhile investment, but federal prosecutors say victims lost millions as part of an alleged Ponzi scheme involving secondary market tickets to popular events.
U.S. Attorney Preet Bharara announced today that his office has arrested two men in New York City on charges of securities fraud, wire fraud, and conspiracy. The alleged scammers also face civil charges filed by the Securities and Exchange Commission.
According to officials, the defendants raised millions of dollars from investors who thought the money would go toward large blocks of tickets to major concerts and musicals that could then be resold at a profit.
The SEC says only a small amount of the $81 million the alleged scheme brought in from 125 investors actually went toward ticket purchases. A bulk of the rest of the investor funds were allegedly used “for other undisclosed purposes, namely making Ponzi payments to prior investors using money from new investors” to the tune of $48 million.
Almost $2 million in investor money was allegedly diverted for personal expenses for the pair, including jewelry purchases, private school and camp tuition, and casino payments.
The defendants went so far as to “misrepresent that an agreement was in place with the producer of Hamilton to purchase 35,000 tickets to the musical,” the SEC alleges. Investor money was supposedly paying part of that cost with the return on investment promised within eight months. But — surprise! — the SEC alleges that no such agreement or purchase ever happened.
As alleged in the complaint, the defendants “raised millions from investors by promising big profits from reselling tickets to A-list events when in reality they were moving investor money in a circle and creating a mirage of profitability,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office.
by Mary Beth Quirk via Consumerist