Former Wall Street trader embezzled $19M from investors: Prosecutors

A former Wall Street trader is facing a potentially lengthy prison sentence after admitting he defrauded investors out of millions of dollars for his own financial gain.

For at least four years, Paul Andrews Rinfret sold investors limited partnership interests in Plandome Partners L.P., an investment fund is operated by Rinfret and Plandome LLC, with the intention of using the majority of the proceeds to enrich himself and his family, according to federal prosecutors.

Rinfret pleaded guilty Tuesday to one count of wire fraud and one count of securities fraud. Both counts carry a maximum sentence of 20 years in prison.

According to federal prosecutors, Rinfret falsely claimed he would use all of their investment funds to trade futures contracts tied to the Standard & Poor’s 500 index to which he would take 25 percent of the net profits on the trades. However, the lies Rinfret told ran even deeper. Within his scheme, federal prosecutors say Rinfret told investors that Plandome Partners traded through certain brokerage accounts that either didn’t exist or were not open at a time when he claimed to be trading in them.

Rinfret also told his victims they would be investing in a “successful” trading strategy with a proven track record, according to the SEC complaint.  “Rinfret boasted to investors that the trading strategy had generated triple-digit returns as high as 362 percent for Plandome investors over a multi-year period, and that Plandome had never lost money in a single month since 2012,” according to the SEC complaint.

The small portion of the funds that was invested, never made a profit, according to court documents.

Rinfret allegedly used most of the money to purchase luxury goods and high-end vacation rentals for himself and his family members. 

“Paul Rinfret callously lied to investors at every step.  He lied about his past returns to get them to invest," U.S. Attorney Geoffrey S. Berman said. "He lied about having invested all of their money, when he was actually spending much of it on things like jewelry, cars, and a house in the Hamptons.”

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In utilizing the Plandome Partners account, Rinfret spent nearly $50,000 on a Hamptons vacation rental. He also utilized the funds to purchase more than $40,000 on jewelry, and tens of thousands of dollars for his son’s engagement party venue, according to federal prosecutors.

And to keep investors appeased, federal prosecutors say Rinfet sent “excellent investment performance results” to his victims in addition to sending fake brokerage account statements to them.

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Rinfret is expected to be sentenced in February 2020.