Brooklyn, NY - April 1, 2014 - Fredrick Douglas Scott, 29, the chief executive officer of ACI Capital Group LLC (ACI), an investment adviser registered with the Securities and Exchange Commission (SEC), was sentenced today in federal court in Brooklyn, New York, to 63 months in prison, to be followed by three years of supervised release. As part of the sentence, Scott was ordered to pay more than $1,388,190 in restitution to the defrauded victims. In September 2013, Scott waived indictment and pleaded guilty to engaging in a wire fraud conspiracy to steal over a million dollars from investors and lying to officials from the SEC who were conducting a regulatory examination of ACI.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation (FBI), New York Filed Office.
“Fredrick Douglas Scott claimed to be a part of history. In reality, he was a con man and a thief who fleeced unsuspecting retail investors, his so-called clients, out of more than a million dollars. Rather than help his clients invest their hard earned money, Scott stole their money for his own personal use to buy expensive dinners, clothes, and other goods and services. Scott then lied to SEC examiners who were investigating his firm. Instead of a place in the history books, Scott’s crimes bought him a room with the Bureau of Prisons for 63 months. We remain committed to protecting the retail investor from the effects of fraudsters like Scott,” stated United States Attorney Lynch. Ms. Lynch thanked the FBI, the agency responsible for leading the government’s investigation, and the SEC, Division of Enforcement in New York, for their assistance in this case.
ACI was founded by Scott in 2009 and purported to be an investment banking and advisory firm with an office located at 477 Madison Avenue, New York, New York. ACI registered as an investment adviser with the SEC in July 2011 and, pursuant to its most recent regulatory filing, claimed to manage $3.7 billion in assets. While 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 over a million dollars in losses.
In connection with his scheme, Scott worked with intermediaries or finders to locate potential victims. Once a potential victim was identified, Scott promised a high rate of return for providing short-term financing to businesses purportedly associated with ACI. Once victims wired money to ACI, Scott stole the funds for his personal use. Scott used client funds to purchase personal items at Louis Vuitton, the Apple Store, Starbucks, Fair Bail Bonds, True Religion Jeans, Tao Restaurant, the Hampton Inn SoHo, and Dizzy’s Coca-Cola Club, among others. Scott also wired stolen client funds to his personal checking account.
The sentencing proceeding was held before U.S. District Judge Roslynn R. Mauskopf.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The government’s case is being prosecuted by Assistant United States Attorney James P. Loonam.
Defendant:
Frederick Douglas Scott
Age: 29