Nicholas Cosmo’s 25-year prison sentence for running a $413 million Ponzi scheme was upheld by a federal appeals court in New York.
The punishment handed down by U.S. District Judge Denis Hurley in Central Islip, New York, wasn’t unreasonable, the appeals court said in a decision today. Cosmo, owner of Agape World Inc. and Agape Merchant Advance LLC, pleaded guilty in 2010 to fraud charges in connection with a scheme in which he promised to use investor money to make short-term loans.
Only about $30 million of the investors’ funds were actually used to make the loans, and victims’ losses totaled about $195 million, the government said. At the time Cosmo claimed to have founded Hauppauge, New York-based Agape World, in 1999, he was finishing a sentence for other financial crimes in Allenwood Federal Penitentiary in White Deer, Pennsylvania, according to U.S. Bureau of Prisons records.
“The court in imposing sentence on this plea was considering a multiyear Ponzi scheme, undertaken by a recidivist offender who began committing the instant crime within months of finishing his previous fraud sentence,” the appeals court said. In light of the magnitude of the crime, Cosmo’s sentence wasn’t an abuse of discretion, the court found.
Cosmo was sentenced in October 2011 on one count of wire fraud and one count of mail fraud, according to the opinion. He was accused of defrauding thousands of investors in a scheme that ran from about October 2003 through January 2009.
Prosecutors alleged that Cosmo used some of the money to pay for limousines, to fund a baseball league and to pay off a restitution order from his earlier fraud conviction.
Cosmo promised Agape investors that their money would be used to provide short-term loans to businesses, called bridge loans, prosecutors alleged. He allegedly claimed that the loans would be secured by borrowers’ assets and promised returns as high as 80 percent.
U.S. authorities said Cosmo used recruiters, many of whom were ex-convicts with records including robbery and heroin importation, to lure investors. He paid the recruiters $55 million from money he collected in the scheme, the U.S. said.
Before starting the Agape scheme, Cosmo was accused of misappropriating funds while working as a stockbroker at Carle Place, New York-based Continental Broker Dealer Corp., according to court records.
He pleaded guilty to a single federal charge of mail fraud in 1999 and was sentenced to serve 21 months in prison and pay $177,000 in restitution. He was also ordered to undergo “extensive gambling therapy” while in prison, according to court records.
Bruce Bryan, a lawyer for Cosmo, didn’t immediately return a call seeking comment on the appeals court’s ruling.
The case is U.S. v. Cosmo, 11-cv-4506, U.S. Court of Appeals for the Second Circuit (Manhattan).