A case against a Florida hedgie John Mattera who is accused of defrauding investors looking to buy into some hotly anticipated initial public offerings took a turn for the bizarre.
John Mattera, 50, was accused of participating in a scheme that defrauded investors out of $11 million. Prosecutors said Mr. Mattera offered investors the chance to get a piece of high-profile companies like Facebook Inc. FB -1.30% and Groupon Inc. GRPN +0.22% before they went public. In reality, he never owned shares of the companies and used the proceeds to fund “his own extravagant lifestyle,” according to prosecutors. He faced four charges of securities fraud, wire fraud and money laundering.
Hedgie was accused of sending the proceeds from the alleged scheme to a bank in Geneva as part of the money laundering charge. He was originally supposed to enter a plea to the charges on Monday, but the hearing was delayed because he missed his flight to New York. Judge Richard Sullivan, who questioned Mr. Mattera at length, wasn’t ready to accept Mr. Mattera’s guilty plea on the money laundering charge.
The judge asked Mr. Mattera if he knew funds he had allegedly sought to launder had been obtained illegally. Mr. Mattera responded that he did not.
Then it’s not a crime, responded Judge Sullivan.
“If I carry a suitcase, and I didn’t know what was in it, and I later learn it contained two kilos of coke, that’s not a crime,” said an increasingly frustrated Judge Sullivan, who continued to press Mr. Mattera.
“I wanted to set up accounts that were overseas and not reported to the government,” Mr. Mattera said.
“That sounds like a tax fraud scheme,” said the judge.
At one point, the lawyers in the case asked for a break to discuss the confusion. The judge reluctantly agreed.
“I think I’m being pretty indulgent,” Judge Sullivan said. “We were supposed to do this yesterday for crying out loud.”
Ultimately, the judge accepted Mr. Mattera’s guilty pleas to the charges of securities fraud and wire fraud. But he said he needed time to review the day’s transcript before signing off on the money laundering plea.
Mr. Mattera was ordered to be detained without bail. He will be sentenced on Feb. 1.
Read More: WSJ