Hedge fund manager to spend over a decade in prison for multimillion-dollar investment fraud
Faced with investors’ questions about their money, Nicholas Genovese said he would only return funds after “the stars have aligned.”
Nicholas Genovese, a founder of Willow Creek Investments LP, will spend 140 months in prison due to a multimillion-dollar fraudulent securities scheme he ran.
Genovese induced more than $11.2 million in investments in his hedge fund – Willow Creek, by misrepresenting his qualifications and professional background and concealing that he had prior felony convictions for fraud-related crimes.
In or about 2015, Genovese started soliciting individuals to invest in the hedge fund. He claimed that he was part of the Genovese family that had owned the Genovese Drug Store chain in the New York area and was an heir to this family’s fortune from the sale of that business for hundreds of millions of dollars in the late 1990s. He also falsely claimed that he had graduated from Dartmouth College’s Tuck School of Business; and that he had extensive Wall Street experience. In particular, Genovese presented that he had been a Goldman Sachs partner and a Bear Sterns portfolio manager before forming Willow Creek.
These representations were false. Genovese is not related to the Genovese family that owned and sold the Genovese Drug Store Chain, did not attend the Tuck School of Business, and had never worked for Goldman Sachs or Bear Stearns. Genovese also did not tell his investors that he had multiple prior felony convictions for fraud-related offenses including forgery, identity theft, and grand larceny.
When investors began to ask for their money back, Genovese sought to brush off their requests. He told one investor that he would only return that investor’s funds after “the stars have aligned,” or else there would be a risk that almost all the money would be lost as a result of the purported impracticalities of unwinding unspecified trading positions. Genovese lost about $8 million trading in TD Ameritrade accounts between January 2015 and December 2017.
In February 2018, Genovese was charged, arrested, and detained for perpetrating this fraud. In October 2018, he pleaded guilty to one count of securities fraud before United States District Judge William H. Pauley III, who also imposed the sentence.
In addition to his prison term, Genovese was sentenced to three years of supervised release and ordered to pay restitution to his victims in the amount of $11.2 million on top of the forfeiture of the proceeds of his crime.