MOSCOW, March 20 - RAPSI. Former gubernatorial hopeful and known snake oil salesman Craig Berkman has been charged for defrauding investors of upwards of $13 million by way of a Ponzi scheme built on empty promises of pre-IPO shares in Facebook, LinkedIn, and other hot social media websites, according to a statement released by the US Securities and Exchange Commission (SEC) Tuesday.
SEC Director for the New York Regional Office Andrew M. Calamari berated the accused, stating: “Berkman blatantly capitalized on the market fervor preceding highly anticipated IPOs of Facebook and other social media companies to fleece investors whose cash flow he treated like an ATM to fund his own living expenses and pay court-ordered claims to victims of his past misdeeds.”
Between October 2010 and December 2012, Berkman allegedly cashed in on the anticipation leading up to Facebook’s IPO by tricking investors into believing that their money would go toward the purchase of Facebook shares or, alternatively, to acquiring a company that possessed pre-IPO Facebook shares.
He duped another set of investors into investing in the pre-IPO shares of various other social media companies.
In total, Berkman is accused of having collected at least $13.2 million from approximately 120 investors.
According to an SEC order detailing the charges against Berkman and his co-accused, the vast majority of that income was misappropriated: “Instead of using the investor funds to acquire pre-IPO shares or fund technology ventures, Berkman misappropriated most of the offering proceeds.”
The document claims that Berkman used most of the funds to pay off earlier investors in order to maintain the illusion of legitimacy. He then put about $5.43 million toward satisfying an earlier judgment levied against him that had remained unpaid. The remaining funds were invested to the cause of living in the lap of luxury. He allegedly poured $1.6 million of the fraudulently acquired funds into personal expenses, including dining and travel.
A second defendant was charged for having aided and abetted in the fraud in his capacity as legal counsel to various of Berkman’s companies.