Posted in: Ponzi Schemes | SEC | Greedy Brokers |
Kenneth I. Starr, a financial adviser who managed investments for celebrities and wealthy residents of New York City, was arrested last week for operating an alleged $30 million Ponzi scheme.
The media were quick to label Starr a “mini-Madoff,’ because his client list has included Uma Thurman, Annie Leibovitz, Sylvester Stallone, Goldie Hawn, Wesley Snipes and Ron Howard.
The Securities and Exchange Commission formally charged Starr Thursday with defrauding clients through his company, Starr & Co., Starr Investment Advisers. Sometimes, Starr would invest his clients’ money in companies for which he had a personal interest. Other times, the SEC claims, Starr used the money to pay for lavish expenses.
In addition to a $7-million-dollar Manhattan condo, a $77,490 watch and a $150,000 summer house in The Hamptons, New York.
Starr is now facing criminal charges, civil charges from the SEC, and will likely face a battery of individual lawsuits over the next few years.
Even if his scheme didn’t top Madoff’s scheme in money taken, both defendants likely displayed equal amounts of cruelty. Starr testified against Wesley Snipes in 2008, which led to the actor being convicted on tax evasion charges.
If you believe the SEC’s claims, it won’t surprise you to learn that when federal authorities raided his condominium, he was hiding in his closet behind jackets.
As the New York Daily News noted, Starr’s victims must be wondering why he wasn’t arrested sooner. In April 2008, Joan Stanton, a wealthy widow from Manhattan, sued the ex-financial adviser for stealing millions of dollars over two decades.
Today a federal judge appointed a temporary monitor, which will be replaced later by a permanent receiver, to oversee Starr’s frozen assets. Former investors should act quickly in pursing action Mr. Starr, because prosecutors believe he may have more than 200 victims.
Like Madoff before him, Starr’s actions-for which he is accused-would qualify as affinity fraud. For years Starr rubbed elbows with the wealthy and famous, which in turn made him appear more reputable and trustworthy to potential clients.
We can only hope that federal regulators did not miss to many of the warning signs, and that enough of Starr’s damage can be undone.
