New York (HedgeCo.Net) – Hedge fund founder and adviser Fredrick Douglas Scott, one of Ebony magazine’s “Top 30 under 30,” has pleaded guilty to engaging in a wire fraud conspiracy to steal over $1 million from investors and lying to officials from the SEC.
Scott was the CEO of ACI Capital Group LLC., an investment adviser registered with the SEC since July 2011. He was arrested in June of this year.
“Fredrick Douglas Scott admitted that he used ACI Capital to steal his clients’ investments and fund his own lavish lifestyle.” Attorney Loretta E. Lynch said. “Rather than the historic figure he presented to the media, Scott stands revealed as a common thief who lied his way into his investors’ pockets and then continued his web of lies when confronted by the SEC. Scott has now been brought to justice for lying, cheating, and stealing for his own personal financial gain.”
“Scott told brazen lies about the value of ACI’s assets under management and its ability to deliver huge returns on various investments,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Our examination and enforcement staff aggressively pursue investment advisers who flout the registration provisions of the securities laws for their personal gain, especially those who attempt to cover up their misdeeds by flat-out lying to our examiners.”
According to documents filed in this case, Scott touted his bona fides as an investor to potential clients, including distributing the May 2010 issue of Ebony magazine that described him as “the youngest African-American hedge fund founder in history,” in reality, Scott used ACI to execute his fraudulent scheme, causing more than $1 million dollars in losses.
Scot preyed on his own community, saying at the time of the launch: “My goal is to redefine and advocate for economic sustainability and wealth creation in our community,” Scott said, “The minority banking industry, more specifically the African-American owned banking segment, is fragmented and under tremendous pressure from larger and more robustly capitalized mainstream competitors who have embraced the growing diversity of the marketplace. I believe that, in addition to capital, I can contribute fresh energy and new strategies that would improve the competitive posture of African-American owned banking and financial services businesses, as well as advance the mission of multi-generational economic strength and wealth creation in our community.”
Once victims wired money to ACI, Scott stole the funds for his personal use. Bank records show that Scott used client funds to finance his lifestyle, purchasing expensive personal items and wiring stolen client funds directly into his personal checking account.
Scott faces up to 20 years’ imprisonment on the fraud charge and five years’ imprisonment on the false statement charge. Scott also faces a fine equal to double the investors’ losses, mandatory restitution of $1,338,770 to the victims, and forfeiture of assets.
Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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