YOU READ IT HERE FIRST: A Hackensack day trader was sentenced today to three years in federal prison for cooking up a pair of bank fraud schemes that netted nearly $2 million that he used for hair salon visits, skin-care treatments, payments on his Harley and other expenses.
U.S. District Judge Anne Thompson in Trenton also sentenced 46-year-old Victor E. Cilli to five years supervised release and ordered him to pay $710,000 in restitution, as well as more than $410,000 in taxes, penalties and interest.
She also ordered him to comply with the IRS in filing amended tax returns.
In one scheme, Cilli admitted last October, he and 16 other people scammed KeyBank of more than $1.5 million by claiming they would attend a flight training school in Florida and use students loans for educational expenses.
None ever enrolled at Tab Express International, Inc. (“Tab”), a pilot and flight crew training school in DeLand, Fla., after KeyBank deposited the money into accounts solely owned and operated by Cilli, New Jersey U.S. Attorney Paul J. Fishman said.
“Cilli then made kickback payments totaling approximately $130,000 to his co-conspirators for signing up for the loans,” Fishman added. “Tab retained approximately $900,000 of the total loan proceeds. KeyBank has, to date, not been repaid any of the principal or accrued interest on the loans.
In the other scheme, at least four commodity pool investors were conned into ponying up $506,000. Of that, Cilli traded about $263,000, losing roughly $200,168.
“Though Cilli returned some funds to the investors, the payments were not from actual trading profits but from funds of existing pool participants,” Fishman said.
“Cilli never disclosed to the pool participants that he had traded less than half of their money or that most of his trading had resulted in significant losses,” the U.S. attorney added.
Instead, Cilli told a judge last October, he used much of the money for himself. In doing so, he ducked $158,000 in federal income taxes.
Cilli was the sole owner and president of Progressive Investment Funds, LLC (PIF), a commodity pool operator (CPO) that solicited funds for trading commodity futures, from 2006 through 2009, when the scams occurred.
More than four years ago, National Futures Association (NFA) prohibited Progressive — then based out of Cilli’s former home in Glen Rock — from soliciting or accepting any funds from customers, pool participants, or investors, placing trades on futures or disbursing or transferring funds without the association’s approval after a customer complained and Cilli failed to cooperate with an NFA investigation.
The victim told the NFA that she had begun receiving payments on $65,000 she had invested in the fund, but that these suddenly stopped.
Records show there was all of $138 left in the account when regulators checked.
They demanded records, but Cilli never produced them, the NFA said.
Cilli tried to conceal his crimes, Fishman said, “by maintaining bank accounts in the names of Northeast Flight Training, Inc., which was not a flight training school, and United Charities of America, Inc., which was not a charitable organization.
“Both accounts were maintained by Cilli solely to perpetuate his frauds and fund his personal expenditures,” Fishman said.
Cilli was also convicted of DWI in Northvale — a charge that originally rejected by a judge by reinstated by a state appeals panel.
Fishman credited the FBI and IRS with making the case, prosecuted by Assistant U.S. Attorney Aaron Mendelsohn of the U.S. Attorney’s Office Economic Crimes Unit in Newark. He also thanked the CFTC’s Eastern Regional Office in New York and the NFA’s New York Office.
Fishman noted that the case was brought in coordination with President Obama’s Financial Fraud Enforcement Task Force, established to “wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.” The group includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement.