Federal prosecutors last week charged a Broward County, Florida banker with a felony count of wire fraud. Authorities believe the banker fed some $20 millions from investors to Scott Rothstein’s ponzi scheme just months before it collapsed.
The Broward County banker, 70-year-old Frank Preve of Coral Springs, faces up to five years in prison and a $250,000 if convicted.
Rothstein was an attorney working for a Fort Lauderdale law firm. During the course of his massive $1.2 billion ponzi scam, Rothstein allegedly sold bogus legal settlements to clients, claiming they would be rewarded with huge returns — a practice commonly used in ponzi schemes to attract new investors. Investors would be sold on the false promises of receiving steep returns on their original investment. While some of the early investors may receive their promised return, the structure of a ponzi scam prevents any sustainable or lasting success among investors, which ultimately leads to the system’s downfall with clients losing their investment.
As the scam was coming to a close, Rothstein needed additional funding to keep investors satisfied, at which point he allegedly consulted with Frank Preve. Federal prosecutors say Preve became aware that Rothstein was depleting investors’ funds in various trust accounts held at the Toronto Dominion Bank in Fort Lauderdale. Rather than warning investors about this critical risk, though, Preve allegedly encouraged investors to dump more money into Rothstein’s scam — just months before it toppled over.
Preve was charged by information rather than indictment, which suggests he will plead guilty to wire fraud charges. Peeve’s attorney, Ramon Rasco, made a statement following the news of his client’s arrest, saying Preve intends to “enter a plea agreement with the government,” and that “he is cooperating with the government and doing everything in his powers to help investors.”
“Levin and Prevé fueled Rothstein’s Ponzi scheme with the false sense of security they gave investors,” Eric Bustillo, director of the SEC’s Miami regional office, said in a statement. “They promised to safeguard investors’ assets, but gave Rothstein money with nothing to show for it.”
“Levin and Prevé sold promissory notes and created a feeder fund to funnel investor capital to Rothstein, ultimately becoming his largest source of capital,” according to the SEC complaint.
Rothstein left a trail of wake following the collapse of his ponzi scheme, destroying his law firm of 70 employees and leading to the subsequent arrest of several dozen other individuals whom were believed to play a role in the scam.