Federal prosecutors have secured two guilty pleas in a $96 million Ponzi scheme that they characterized as one of the largest in Long Island history.
Adam Manson, 42, of Old Westbury, pleaded guilty Monday to conspiracy to commit securities fraud, two weeks after his 44-year-old co-defendant and brother-in-law, Brian Callahan, also reached a deal with the government.
Prosecutors said Manson assisted Callahan “in orchestrating one of the largest Ponzi schemes in Long Island history” by lying to auditors and lending institutions.
The scheme, which prosecutors said occurred between December 2006 and February 2012, involved Callahan raising more than $118 million from at least 40 investors, promising that their millions would be invested in mutual funds, hedge funds, and other securities, authorities said.
Instead, they misappropriated approximately $96 million and diverted large amounts toward a 117-unit beachfront resort and residence development in Montauk, which they owned, prosecutors said.
Manson’s alleged role also included submitting phony promissory notes to independent auditors that overvalued the assets of the funds and lying about debt owed on the waterfront resort.
Manson has agreed to forfeit all of the resort’s unsold units—valued at $60 million, according to the plea deal. He faces up to five years in prison.
Callahan, who pleaded guilty to securities fraud and wire fraud on April 29, faces up to 40 years in prison. He agreed to forfeit $67.4 million from the sale of his former Old Westbury home and a beachfront condo in Westhampton.
Both could pay up to $96 million in restitution to victims.
