Philip Barry told investors he was investing in stock options but instead he allegedly bought himself upstate property, tried to start a mail-order porn business, and lost millions in the process. The FBI arrested Brooklyn money manager this morning saying he ripped off more than 800 people of their life savings.
Running what he called The Leverage Group, Barry had told investors his firm -- run out of a shabby storefront in Bay Ridge -- was earning them anywhere from 12% - 21% on their money since 1979.
But prosecutors said Barry never made real investments and stole as much as $40 million in the decades-long swindle. Investigators said Barry also lied to investors claiming their money was insured through the Securities Investors Protection Corporation. But The Leverage Group was not a licensed brokerage so investors funds are not covered.
In mailings, Barry allegedly told investors his firm had a "100% record of safety" and that his fund had done well "in times when many famous names and institutions have failed their clients and fallen into disrepute."
Several investors grew suspicious and filed lawsuits after they tried to withdraw their funds but the checks they received bounced.
"The defendant allegedly convinced hundreds of individuals to hand over their life savings for what was supposed to be a safe investment," US Attorney Benton Campbell said. "In reality ... the defendant's investment fund was nothing more than a classic Ponzi scheme."
Investigators said Barry was able to carry out his fraud for years by paying off some investors with new cash invested by other clients. "This case is fundamentally about deceit," FBI Assistant Director Joseph Demarest said.
Barry's lawyer could not be reached for comment but in the past has said the money is in real estate and that he has worked to pay back investors who were seeking redemptions.
Investigators said he bought 20 properties in Sullivan County worth at one time 9 million dollars. But they say 19 of those properties are now in foreclosure. Prosecutors say Barry has admitted funneling investors money into upstate real estate with the hopes of developing the area. The Securities and Exchange Commission alleges Barry used some of the money to try to start a mail order porn service.
Authorities now say the millions Barry invested could now be worth just 1 or 2 million dollars.
