Kenneth Marsh, who pleaded guilty in April to charges he misled investors into paying fees for phony investment advice, should be sentenced leniently in part because he consistently helped clients turn profits, his lawyer said.
Marsh, 44, who ran Gryphon Holdings Inc. on Staten Island, New York, pleaded guilty April 14 to one count of securities fraud and is scheduled to be sentenced Aug. 11. He faces as long as 14 years in prison under federal guidelines, Assistant U.S. Attorney Roger Burlingame said at the plea hearing.
“Gryphon’s trade recommendations were generally more profitable than the market overall and often were considerably more profitable,” Alan S. Futerfas, Marsh’s lawyer, wrote in a court filing yesterday seeking leniency for his client.
Futerfas said that the U.S. Securities and Exchange Commission was wrong in its assumption in a related lawsuit that Gryphon lied about reaping a 385 percent profit on its recommendation to buy an option on eye-care company Alcon Inc. and sell it in two parts soon after.
The 2009 trade made a gain of 145 percent in three days and 385 percent in two weeks, Futerfas said. Novartis AG bought Alcon in April.
Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in Brooklyn, declined to comment on the filing.
The average return for Marsh’s buy option recommendations with a matching sell recommendation in 2009 was 167 percent and was profitable 100 percent of the time, Futerfas said, citing a report done for Marsh by Jerry DeNigris, president of Riverside Financial Group, an analysis firm in Cranford, New Jersey.
Buy recommendations for equities with matching sell recommendations in 2009 brought an average return of 76 percent during the same period the S&P 500 Index grew 14 percent, Futerfas said, citing the report.
“The proof is incontrovertible and shows that Gryphon was responsible for providing a steady stream of mostly profitable trade recommendations,” Futerfas said.
Gryphon charged clients as little as $99 and as much as $250,000 for access to its investment recommendations, according to the SEC’s lawsuit.
Gryphon’s employees lied about their credentials, falsely claiming to oversee billion-dollar hedge funds from offices on Wall Street and in London and Sydney, prosecutors said. The shop was run from a strip mall in the New York borough of Staten Island, they said.
All 18 people charged in the Gryphon criminal case, including members of its sales force, pleaded guilty.
Marsh was charged in April 2010. He has been in jail since November, after he was accused by prosecutors of engaging in conduct similar to the actions that led his arrest and he was unable to raise the additional bail required.
The criminal case is U.S. v. Marsh, 10-cr-00480, and the SEC case is SEC v. Gryphon Holdings Inc., 10-cv-01742, U.S. District Court, Eastern District of New York (Brooklyn).