U.S. Department of Justice FORMER FUGITIVE FINANCIER SALMAN SHARIFF PLEADS GUILTY TO SECURITIES FRAUD IN HEDGE FUND SCHEMER. Alexander Acosta, United States Attorney for the Southern District of Florida, and Jonathan I. Solomon, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Miami Division, announced that defendant Salman Shariff, a former Miami-based hedge fund operator, pled guilty yesterday afternoon, June 4, 2008, to one count of securities fraud stemming from his 2003 Indictment. Shariff had been a fugitive from justice until February 2008, when he was arrested by FBI agents in Queens, New York, where he had been living under an assumed identity. Shariff is facing a maximum sentence of ten years imprisonment. Sentencing is scheduled for August 13, 2008, before U.S. District Court Judge Federico A. Moreno. At the change of plea hearing, Shariff admitted to defrauding investors of millions of dollars through the operation of several hedge funds, including the Vestron Investment Club, Crescent Capital Partners L.P., and Crescent Capital Offshore Fund. Shariff admitted that he controlled and operated these hedge funds from March 1996 through June 2001. To solicit investors, Shariff held himself out to be a successful investment manager who would invest his clients’ money in various securities and commodities he selected. The investors who agreed to invest received limited partnership interests in the hedge funds, which they hoped would rise in value and generate substantial profits for the investors in the hedge funds. Shariff, in turn, allegedly would profit from managing his clients’ money through the receipt of various fees associated with operating the hedge funds. These fees included a monthly “performance” fee consisting of 20% of the profits generated by the hedge funds’ investments and an annual “management” fee consisting of 1% of the value of the investors’ accounts. At the time of the defendants’ scheme, hedge funds were not regulated by the U.S. Securities and Exchange Commission and they were generally considered to be exclusive investments reserved for sophisticated and wealthy individuals. To attract investors to the hedge funds, Shariff made various misrepresentations, including gross overstatements relating to the performance of the various hedge funds. For example, Shariff represented to investors that the investment returns generated by his management company – Vestron Financial Corporation – for the years 1997, 1998, 1999, and 2000 were 86.1%, 81.8%, 84.4%, and 58.8%, respectively. In truth, however, Shariff’s trading activity generated losses in three out of four of those years, and in 1998, the only year that yielded a positive return, the actual rate of return was significantly less than the rate of return represented to investors. In total, from approximately January 1998 through June 2001, the defendant’s hedge funds received approximately $10.9 million from investors. The defendant, however, failed to inform investors that, of that $10.9 million, less than half was actually invested in securities and commodities on the investors’ behalf. Instead, the defendant misappropriated approximately $2,000,000 of investors’ money to pay for personal expenses, including, among other things, the purchase of an oceanfront condominium on Miami’s South Beach, a 42 foot yacht, a 1988 Ferrari Testarossa sports car, a 1999 Lexus Sports Utility Vehicle, a 2000 BMW Sports Utility Vehicle, a 2001 Chevy Corvette, a Ducati motorcycle, and a Miami Beach modeling agency for his girlfriend to operate. The defendant also misappropriated more than $650,000 of investors’ money to pay for various Vestron Financial business expenses, including, among other things, employee salaries, rent for office space, and corporate income taxes. In addition, in Ponzi-scheme fashion, the defendant failed to inform investors that he was misdirecting a substantial amount of the investors’ money to make distributions to investors who requested to receive their profits on a monthly basis or who occasionally withdrew money from their investment accounts. In total, the defendant made Ponzi distributions of more than $4,000,000 in this manner thereby creating a false sense of assurance among investors that their money was being safely invested on their behalf. By December 2000, the defendant ceased trading and investing in securities and commodities all together. By June 2001, all of the investors money was gone. Shariff fled Miami and was living as a fugitive under an assumed name until earlier this year when he was arrested in Queens, New York, by agents with the Federal Bureau of Investigation. Mr. Acosta commended the investigative efforts of the Federal Bureau of Investigation, as well as the cooperation of the Southeast Regional Office of the United States Securities and Exchange Commission, and the South Florida region of the State of Florida Office of the Comptroller, Department of Banking and Finance. The case is being prosecuted by Assistant United States Attorney Harold E. Schimkat. A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.
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