US Arrests Financier in Purported $400 Million Scam [Nicholas Cosmo]

Authorities on Monday arrested the chief executive of a private New York financing firm on suspicion of running a purported Ponzi scheme that attracted $400 million in investments, U.S. law enforcement officials said.

Nicholas Cosmo, head of Agape World Inc on New York's Long Island, was said to provide commercial bridge loans, but was instead operating a traditional Ponzi scheme in which early investors are paid with the money of new clients, officials said.

"Nicholas Cosmo took the advice of an attorney and complied with an arrest warrant," said Al Weissmann, spokesman for the U.S. Postal Inspection Service, which is investigating Agape World and Cosmo along with the FBI.

Cosmo's attorney confirmed to CNBC that he voluntarily surrendered to authorities and "intends to work with them to allay investor's concerns."

Another law enforcement official, said agents had visited Cosmo's office on Monday expecting to arrest him, but he was not there.

He complied with the warrant on Monday night and was expected to appear in magistrate's court on Tuesday in Central Islip on Long Island, FBI and USPIS officials said.

The amount of money, while large, pales compared with the purported $50 billion fraud masterminded by investment manager Bernard Madoff. Law enforcement officials said they expect to uncover more Ponzi schemes following the sharp decline of the U.S. financial industry.

Agape World, a private firm with its office in Hauppauge, New York was not registered with the U.S. Securities and Exchange Commission.

"Some of the early investors made money but as this scheme started to crumble, the later investors did not see a penny," a law enforcement official said of the firm.

Cosmo was convicted of a federal charge of felony fraud and swindle in 1999 and sentenced to 21 months in prison. He was released in August 2000, according to the U.S. Bureau of Prisons.

According to the firm's Web site www.agapeworldinc.net/ it has made commercial bridge loans, construction loans, acquisition loans and financing for properties nationwide with capital obtained from private sources since 1999.

Projects in New York, California, Texas and South Carolina are among those listed as recipients of its loans in the past two years.

Investors had been raising concerns about Agape long before the financial crisis unearthed the recent rash of Ponzi schemes, seeking advice and intelligence on Internet investment chat boards such as www.scamvictimsunited.com and www.fatwallet.com.

"Has anyone invested with Agape World Inc? They provide bridge loans and offer investors 13-14% returns? When my brother was telling me about it, it sounded kinda fishy and risky," reads a March 2, 2008 website posting.

"The pictures on their website would make you believe that they funded the San Francisco Bay Bridge, the Taipei 101 Tower, and the Tower of Babylon, and the Baghdad Railroad," reads another post.

Others defended Agape. "I have been an investor with Agape World Inc for 2 years. I have always received my interest payments on time," reads an Oct. 14, 2008 comment.

"Only twice in a 9 year history of the company has an interest payment been extended ... Nicholas Cosmo does have a past and he has paid for it," writes another ten days later.

Former Nasdaq stock market chairman Madoff was arrested Dec. 11 and charged with securities fraud after authorities said he confessed to running "a giant Ponzi scheme" over many years.

Since then, authorities have announced charges in investigations of at least three other alleged Ponzi schemes -- in California, Georgia and Florida -- with amounts ranging from $25 million to hundreds of millions of dollars.

Arthur Nadel, head of Florida-based Scoop Management, was reported missing by his family in early January. He left behind a suicide note. It expressed guilt for losing his clients' money and said someone might try to kill him.

The U.S. Securities and Exchange Commission charged the money manager with fraud last Wednesday in a complaint, saying the six hedge funds Nadel oversaw, which he valued at more than $300 million, actually contain less than $1 million. It obtained an emergency court order freezing Nadel's assets and appointed a receiver.

Corso update:
Accused Swindler Cosmo Owed Thousands to Mob

Accused Ponzi-schemer Nicholas Cosmo onced owed tens of thousands of dollars in gambling debt to the Genovese crime family, the latest twist in a scheme federal authorities believed bilked small investors out of $370 million, according to people with knowledge of the matter.

A former Genovese family associate, Michael Durso, who is now in the federal witness protection program, and another associate met Cosmo in in the late 1990s, sometime around 1997, according to these people.

It was at that time that they put pressure on Cosmo to pay around $139,000 owed to loan sharks connected with the Genovese family, they said.

At one point, members of the Gambino family intervened on Cosmo's behalf and paid some of the debt, these people said. Durso, these people say, has been in contact with the FBI about his alleged involvement with Cosmos.

An attorney for Cosmo when informed about the alleged connections with New York crime families had no comment.

Cosmo, the owner of Agape World, a Long Island investment firm, surrendered at a U.S. Postal Inspection Service office in Hicksville on Monday night. He is expected to appear in court Tuesday.

A letter hanging in Cosmo's office window denies there was any Ponzi scheme, the type of fraud Bernard Madoff is accused of committing. A Ponzi, or pyramid, scheme promises unusually high returns and pays early investors with money from later investors.

"Right now, I think I've been scammed," Richard Bennett, 55, a Valley Stream real estate investor who invested $30,000 with Agape World, told Newsday.

Unlike Bernard Madoff, who is accused of bilking wealthy individuals and nonprofits, Agape World investors are more "blue collar and they invested their life savings," Michael Kessler, a forensic accountant hired last year to investigate the firm, told Newsday.

Defense attorneys at the Herrick Feinstein law firm haven't returned telephone calls seeking comment.

When Cosmo was in prison in the Allenwood Federal Correctional Complex in Pennsylvania in 2000 he hired a fellow inmate---a heroin dealer---as a salesman. The two languished in prison where Cosmo was serving time for misappropriation of funds when he was a stockbroker. Cosmo eventually made the druggie vice president of his company, Agape World Inc.

Cosmo did his deeds on this presidential desk.

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