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A 26-year-old Chicago man was sentenced Wednesday in Illinois federal court to nearly six years behind bars after copping to conning investors out of more than $1.7 million in what federal prosecutors have called a “mini-Bernie Madoff scam.”

Chicago 'Mini-Madoff' Gets Nearly 6 Years In $1.7M Fraud

Chicago ‘Mini-Madoff’ Gets Nearly 6 Years In $1.7M Fraud

By Jon Hill of Law360.com

A 26-year-old Chicago man was sentenced Wednesday in Illinois federal court to nearly six years behind bars after copping to conning investors out of more than $1.7 million in what federal prosecutors have called a “mini-Bernie Madoff scam.”

Randall Rye, who pled guilty in April to one count of wire fraud in connection with the scam, was ordered by U.S. District Judge Ronald A. Guzman to serve a 70-month sentence in federal prison followed by three years of supervised release and pay back his investors $1.72 million in restitution.

The prison term handed down by the judge is at the low end of the 70 to 87 months that federal prosecutors requested last week but almost double the 36-month sentence that Rye asked for on Monday.

Rye, who is in custody at Chicago’s Metropolitan Correctional Center, was arrested in February after federal authorities accused him of engaging for more than a year in a scheme to defraud his investment management clients.

According to the government, Rye solicited investments by claiming that he had a proprietary trading program that invested in options and futures contracts. Rye told federal authorities after his arrest that he did not actually have such a program but had “hoped” to finish one, prosecutors said.

Beginning with his girlfriend, Rye went on to raise $1.72 million from roughly 20 investors for his company Faster Than Light Trading LLC between September 2015 and February 2017, the government said. Rye never traded with that money but instead spent it on lavish travel, expensive watches, restaurants and tickets to marquee sporting events — including the Super Bowl, Masters Tournament and World Series — all while abusing alcohol and cocaine, according to prosecutors.

The government said that Rye kept the scheme going by preparing false statements for his investors, reflecting how their funds were allocated and what Rye said were their significant returns. At times, he paid his investors their purported returns, using money from other investors, prosecutors said.

When his clients requested their money back, Rye prepared fake wire transfer sheets he said were from Citibank, purportedly showing his request to transfer money out of his account there to the investor, prosecutors said.

“In reality, the only thing defendant Rye did that was faster than light was spend the victims’ funds,” prosecutors told the court in their sentencing memorandum.

As part of his sentence, the judge has also ordered Rye to complete a substance abuse treatment program. Rye, who said in his sentencing memo that his fraud was “fueled in part by drug and alcohol addiction,” had requested that the court recommend treatment for him to the Bureau of Prisons.

Counsel for Rye declined to comment.

A spokesman for the U.S. attorney’s office was not immediately available for comment Thursday.

 

The government is represented by Joel R. Levin and Sunil R. Harjani of the U.S. Attorney’s Office for the Northern District of Illinois.

Rye is represented by Mary Higgins Judge of the Federal Defender Program.

The case is U.S. v. Rye, case number 1:17-cr-00079, in the U.S. District Court for the Northern District of Illinois.

Source: Law360.com

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The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.

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