Federal authorities charged Joseph S. Forte, a Broomall investment manager, with operating a multi-million-dollar Ponzi scheme since at least 1995.
Civil charges were brought yesterday in federal court in Philadelphia by the Commodities Futures Trading Commission and by the Securities and Exchange Commission.
Forte, 53, obtained an estimated $50 million from as many as 80 investors, reporting annual gains that ranged from 18.52 percent to 36.19 percent, the CFTC and the SEC said.
He confessed to taking $10 million to $12 million for himself and used $15 million to $20 million of investors' money to pay off other investors - the hallmark of a Ponzi scheme, the authorities said.
Forte's latest report to investors, on Sept. 30, claimed that his fund's value was more than $154 million. The actual balance of his trading account was $146,814.
Late last month, he told authorities that he does not have money to repay investors, the SEC complaint said. It is not clear what he did with the money.
"His deception was complete," said Daniel M. Hawke, director of the SEC's regional office. "It wasn't until he realized that he wasn't going to be able to continue honoring redemption requests" that he gave up on the scheme, Hawke said.
The lawsuits allege that Forte told investors in his firm, Joseph Forte L.P., that he would trade in securities futures contracts, such as Standard & Poor's 500-stock index futures, foreign currency futures, and metal futures.
However, Forte did very little trading. From October 2002 to February 2007, Forte deposited no money in the trading account. Between 1998 and 2008, he lost $3.3 million trading mostly S&P 500 futures contracts, according to the lawsuits.
Forte, who has never been registered with the SEC, admitted that he misrepresented and falsified Forte L.P.'s trading performance from the beginning, the SEC said.
The CFTC charged Forte with solicitation fraud, misappropriation of pool funds, sending customers false account statements, and failing to register with the CFTC as a commodity pool operator.
One investor said he understood it to be fine that Forte was not registered because he was investing only for "friends and family," which in some cases can exempt an investment manager from regulation.
"He should have been registered, given the size of the pool and the number of people in the pool," said Stephen J. Obie, the CFTC's acting director of enforcement.
A federal judge in Philadelphia, Paul S. Diamond granted a preliminary injunction late yesterday, freezing Forte's assets and preserving records. Forte and Forte L.P. consented to the order without admitting or denying the allegations, the SEC said.
Forte was in court yesterday without a lawyer. This week he has not returned calls seeking comment.
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.
