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Florida Business, Whistleblower, & Securities Lawyers / Blog / Fraud / Miami Businessman Pleads Guilty to $880 Million Ponzi Scheme

Miami Businessman Pleads Guilty to $880 Million Ponzi Scheme

Nevin Shapiro, the former owner of Capitol Investments USA Inc. and a booster of University of Miami athletics, pleaded guilty yesterday to running an $880 million Ponzi scheme. Shapiro, 41, of Miami Beach, Florida, admitted in federal court that he defrauded more than 50 investors between $50 million to $100 million in his bogus wholesale-grocery distribution business.

Shapiro’s Miami Beach company was an alleged grocery diverter, which purchases low-priced groceries in one region and sells them for profit in another. From January 2005 to November 2009, Shapiro promised investors that their money would fund the grocery business, with returns between 10 to 26 percent. Shapiro boasted to investors that the company had tens of millions of dollars in annual sales, when in truth “Capitol had virtually no active wholesale grocery business,” according to court papers. In reality, Shapiro was using new investors’ money to pay off earlier investors.

Shapiro also admitted to using $35 million of investor funds to make mortgage payments on his $5 million house, pay off illegal gambling debts, and buy floor seats to Miami Heat basketball games. Shapiro also gave $150,000 to the University of Miami for an athletic lounge, as well as cash and gifts to numerous UM student-athletes.

According to U.S. Attorney Paul Fishman, “Nevin Shapiro made a name for himself as a big contributor to student athletics — showering his favorite players with gifts and cash, living the high life, and rubbing elbows with the pros. Shapiro admitted that he built the fa├žade of his lifestyle with money he stole from those who trusted him.”

Shapiro pleaded guilty to one count of securities fraud and one count of money laundering. He faces as long as 30 years in prison on both counts. Sentencing is set for January 4.

In a related civil case, the Securities and Exchange Commission estimated Shapiro received approximately $900 million from new investors and used $769 million of those funds to pay the so-called returns to earlier investors. The SEC seeks to have Shapiro forfeit any ill-gotten gains and pay unspecified fines. The SEC also claims Shapiro paid $13 million in undisclosed commissions and fees to individuals who attracted new investors.

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