Levy, Ezra Complaint

8/14/2019 Levy, Ezra Complaint

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Approved:

Before :

WILLIAM J . STELLMACHDAVID I . MILLERAss i s t an t United Sta tes AttorneysHONORABLE RONALD L. ELLISUnited S ta t e s Magis t ra te JudgeSouthern Dis t r i c t of New yo9 IVL\b

- - - - - - - - - - - - - - - xSEALEDCOMPLAINT

UNITED STATES OF AMERICA

- v. -EZRA LEVY,

Defendant .

- - - - - - - - - - - - - - - xSOUTHERN DISTRICT OF NEW YORK, s s . :

Viola t ions of15 U:S.C. 78 j (b),78f f ; 17 C.F.R. 240.10b-S; and18 U.S.C. 1343 and 2.

COUNTY OF OFFENSE:NEW YORK AND ELSEWHERE

\ROBERT W. MANCHAK, being duly sworn, deposes and sayst h a t he i s a Criminal Inves t iga to r with the United S ta t e sAt to rney ' s Office fo r the Southern p i s t r i c t of New York andcharges as fo l lows:

COUNT ONE

(Securi t ies Fraud)1. In o r about June 2009, in the Southern Dis t r i c t ofNew York and e lsewhere , EZRA LEVY, the def end an t, u nl aw f ul ly ,wi l l fu l l y and knowingly, d i r ec t ly and i nd i r e c t ly , by th e use ofmeans and i n s t rumen t a l i t i e s of i n t e r s t a t e commerce, the mails and

th e f a c i l i t i e s of na t iona l s ecur i t i e s exchanges, did use andemploy, in connect ion with the purchase and sa l e of the commons tock of At las Energy ("ATLS") and Atlas Energy Resources("ATN"), manipu la t ive and d ec ep ti ve d evic es and cont r ivances , inv io l a t i on of Ti t l e 17, Code of Federa l Regulat ions, Sect ion240.10b-S, by: (a) employing dev ices , schemes and a r t i f i c e s todef raud ; (b) making u ntr ue s ta temen ts of mate r i a l fac t s andomit t ing to s t a t e mater ia l fac t s necessary in orde r to make thes ta tements made, in l i gh t of the circumstances under which they


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were made, n ot m is le ad in g; and (c) engaging in ac t s , p rac t i ces andcourses of b us in ess which opera ted and would opera te as a f raudand dece i t upon persons and en t i t i e s .

(Ti t l e 15, United Sta tes Code, Sect ions 78j (b) & 78ff ;Ti t l e 17, Code of Federa l Regulat ions , Sect ion 240.10b-5,and Ti t l e 18, United Sta tes Code, Sect ion 2 .)

COUNTS TWO THROUGH ELEVEN(Wire Fraud )

2. On o r about th e da te s s e t fo r th below, in theSouthern Dis t r i c t of New York and elsewhere , EZRA LEVY, thedefendant , unlawfu l ly , wi l fu l ly , a nd knowing ly , having devisedand in tend ing to devise a scheme and a r t i f i c e to def raud and toob ta in money and proper ty by means of fa l se and f raudulentp r et en s es , r ep r es en ta ti on s and promises , t r ansmi t ted and causedto be t ransmi t t ed by means of wire communication in i n t e r s t a t eand fo re ign commerce, the fol lowing w rit in gs , s ig ns , s igna l s ,p i c t u r e s , and sounds fo r th e purpose of execu t ing such scheme anda r t i f i c e :

COUNT DATE WIRECOMMUNICATION

TWO January 5, 2009 $60,000 wiret r ans f e r from abank account inMinnesota to abank account inNew York, NY

THREE February 2, 2009 $66,666 wiret r ans f e r from abank account inMinnesota to abank account inNew York, NYFOUR March 2, 2009 $66,666 wiret r ans f e r from a

bank account inMinnesota to abank account inNew York, NY

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FIVE Apr i l 2/ 2009 $66/666 wiret r an s fe r from abank account inMinnesota to abank account inNew York, NYSIX May 1/ 2009 $66/666 wiret r an s fe r from abank account inMinnesota to abank account inNew York, NYSEVEN June 1/ 2009 $66/666 wiret r an s fe r from abank account inMinnesota to abank account inNew York, NYEIGHT Ju ly 1/ 2009 $66/666 wiret r ans f e r from abank account inMinnesota to abank account inNew York, NYNINE August 3/ 2009 $66/666 wiret r ans f e r from abank account in

Minnesota to abank account inNew York, NYTEN September 1/ 2009 $66/666 wiret r ans f e r from abank account inMinnesota to abank account inNew York, NYELEVEN Octo be r 1/ 2009 $66/666 wiret r ans f e r from a

bank account inMinnesota to abank account inNew York, NY

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(T i t l e 18, United Sta tes Code, Sect ions 1343 and 2 .)The bas is fo r my knowledge and th e foregoing charge i s ,in p a r t , as fo l lows:3. I am a Criminal Inves t iga to r in th e Office of the

United Sta tes Attorney fo r the Southern Dis t r i c t of New York,ass igned to th e Secur i t i e s and Commodities Fraud Task Force, andI have been persona l ly involved in the inves t iga t ion of th i smat te r . For th e pas t t en years , I have been respons ib lep rim a ri ly fo r th e i nves t iga t ion of offenses involving v io la t ionsof the federa l secu r i t i e s and commodities laws and re la tedoffenses . I have pa r t i c ipa t ed in numerous i nves t iga t ions of suchoffenses . Pr io r to my emploYment a t the United Sta tes At to rney ' sOff ice , I was a Spec ia l Agent with the General ServicesAdminis t ra t ion and an Inves t iga to r with th e N atio nal Associat ionof Secur i t i e s Dealers .

4. The informat ion contained in t h i s Complaint i sbased upon my persona l knowledge, as wel l a s in fo rma tio n obtaineddur ing t h i s i nves t iga t ion , d i rec t l y or i nd i r e c t ly , from o thersources , as ind ica ted below. Because t h i s a f f i d av i t i s preparedfo r l imi t ed purposes , I have not s e t fo r th each and every fac t Ihave learned in conne ctio n w ith t h i s i nves t iga t ion . Whereconversat ions and events are re fe r red to here in , they are re la tedin subs tance and in pa r t unless ind ica ted otherwise . Wheref igu res and ca lcu la t ions are s e t fo r th here in , they a reapproximate .

Overview

5. Based on my t r a in ing and experience, as s e t for thmore fu l l y below, I be l ieve t ha t there i s probable cause tobe l i eve t h a t from in o r a bo ut Ja nu ary 2009 up to and including ino r ab ou t O cto ber 2009, EZRA LEVY, the defendant , and others knownand unknown, engaged in a t l e a s t two schemes to defraud h isemployer , a Manhat tan-based hedge fund ("Hedge Fund"), of morethan approximately $1.3 mil l ion . Fi r s t , between in o r aboutJanuary 2009 and in o r about October 2009, LEVY diver tedapproximately $726,000 owed to the Hedge Fund in to a bank accountt h a t he con t ro l l ed and then u t i l i zed t ha t money through ATMwithdrawals , paYments to c red i t card companies and t r ans fe r s to apersona l bank account . Second, in o r about June 2009, LEVYcaused th e Hedge Fund to purchase s tocks a t i n f l a t ed pr ices froman account t ha t he p e rs o na ll y c o nt ro ll ed , re su lt in g in a gain fo rLEVY, a t th e Hedge Fund's expense, of more than approximate ly$600,000.

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Diversion o f Funds6. Based on my discuss ions with r ep resen ta t ives ofth e Hedge FundI in clu din g th e f irm /s g en era l pa r tne r ( the

~ G e n e r a l Partner") I and my review o f t ransac t iona l documentsr e l a t ing to an investment by the Hedge Fund t ha t i s descr ibed inmore de t a i l below l I learned t ha t :

a . At a l l t imes r e levan t to t h i s Complaint I theHedge Fund inves ted funds on beha l f of i t sGeneral and Limited Par tne rs .b . At a l l t imes re lev an t to t h i s Complaint I EZRALEVY I the defendan t I was employed a t th eHedge Fund/s headquarters in Manhattan andserved as both the f i rm /s ch ie f t r ade r andChief Financ ia l Off ice r .c . In o r about November 2008 1 th e Hedge Fundinves ted in a co l l a t e r a l i z ed note i s sued by acompany based in Arizona (the ~ I s s u e r " ) .This investment genera ted approximately

$66 1 000 per month in i n t e r e s t paYments fo rthe Hedge Fund.d. LEVY was the employee a t the Hedge Fund

respons ib le f or re co nc il in g the f i rm/smonthly accounts and t racking paYments fromen t i t i e s such as the I s suer .7. I have a l so reviewed bank records fo r an accountheld in the name of the Hedge Fund a t Washington Mutual Bank ( the"Washing ton Mutual Bank Account") fo r the period between in o rabout February 2006 and in o r ab ou t O cto ber 2009. From my review

of th e bank records and conversa t ions with r ep resen ta t ives of theHedge FundI I l ea rned t ha t :a . On o r about February 151 2006 1 EZRA LEVY I thedefendant I opened the Washington Mutual BankAccount a t a bank branch loca ted in New York lNew York.b . LEVY was the on ly s igna tory on the account .Based on my di scuss ions with r ep resen ta t ives

of the Hedge FundI LEVY did not d isc lose theexis tence of t ha t account to anyone a t theHedge FundI which maintained i t s bankaccounts a t ano ther f inanc ia l i n s t i t u t i on .

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c . Between in o r about January 2009 and in orabout October 2009, the I s sue r each monthwired approximate ly $66,000 from i t s bankaccount located in Minnesota i n to theWash ington Mutua l Bank Account t ha t LEVYcont ro l led , located in New York, New York.In t o t a l , th e I s suer wire t r ans fe r redapproximate ly $726,000 in to th e WashingtonMutual Bank Account t ha t was owed to theHedge Fund.

d. LEVY never informed th e Hedge Fund t ha t hewas receiv ing the monthly in s ta l lmen ts owedto th e f i rm, and the Hedge Fund neverauthor ized him to d ive r t any funds owing tothe f irm in to any account t h a t LEVYcon t ro l l ed .

e . Following depos i t of those funds, LEVYwithdrew the money from th e Washington MutualBank Account through numerous ATMwithdrawals , e lec t ron ic t r ans f e r s to variousc red i t card compan ie s a nd t r ans f e r s to a bankaccount in the name of "Ezra C Levy or Dyan CLevy".f . On o r about October 5, 2009, LEVY withdrew

the remaining funds in th e Washington MutualBank Account, by wiring the money to anaccount in the name of "Ezra C Levy o r DyanC Levy".

g . The address of record fo r the WashingtonMutual Bank Account was a "mail-drop"f a c i l i t y located in Manhattan.8. Records obta ined from the mail -drop f a ~ i l i t yi nd ica te EZRA LEVY, the d ef en dant, p ro vid ed h is dr ive r ' s l icenseand a c red i t card in h is name as i den t i f i ca t i on when the mail drop as soc ia ted with th e Wash ington Mutua l Bank Account was

es tab l i shed . Those records also show t ha t th e mail -drop wases tab l i shed on February 15, 2006, the same day t ha t theWashington Mutual Bank Account was opened.

Diversion o f Funds through Unauthorized Trading9. During my i nves t iga t ion , I have a l so reviewed

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t r a d i n g r e c o r d s f o r an account t h a t EZRA LEVY, t h e defendant ,h e l d a t I n t e r a c t i v e Brokers (the "Levy Brokerage Account") andt r a d i n g r e c o r d s f o r t h e Hedge Fund's own t r a d i n g account ("HedgeFund Trading Account") . Based on my review o f those t r a d i n gr e c o r d s and c o n v e r s a t i o n s with the SEC and r e p r e s e n t a t i v e s of theHedge Fund, I l e a r n e d t h e fo l lowing:

a . Among o t h e r r e s p o n s i b i l i t i e s , LEVY executedt r a d e s , as d i r e c t e d by t h e General P a r t n e rand t h e p o r t f o l i o manager a t t h e Hedge Fund(the "Designated Hedge Fund P e r s o n n e l " ) , onb e h a l f of t h e f i rm.

b . LEVY was only a u t h o r i z e d t o execute t r a d e sd i r e c t e d by t h e Designated Hedge FundPersonnel ; he had no a u t h o r i t y t o make t r a d e sa t h i s own d i s c r e t i o n .c . On o r about June 12, 2009, LEVY purchased,through t h e Levy Brokerage Account,approximately 50,000 s h a r e s o f A t l a s EnergyResources, whose t i c k e r sYmbol was "ATN", a tan average c o s t of approximate ly $22.36 p e r

s h a r e .d. F o ~ l o w i n g t h o s e purchases , on o r about June12, 2009, LEVY caused t h e Hedge Fund TradingAccount t o pu rcha se app rox ima te ly 51,000

s h a r e s o f ATN a t average c o s t ofapproximately $24.93 p e r s h a r e . At l e a s t34,200 o f those s h a r e s were purchased a f t e rt h e m a r k e t ' s c l o s e from t h e Levy BrokerageAccount a t a p r i c e of $26.10 p e r s h a r e . Ont h i s day, ATN t r a d e d no h i g h e r than $22.70and c l o s e d a t $22.62.

e . On o r about June 15, 2009, LEVY s o l dapproximately 51,000 s h a r e s o f ATN from theHedge Fund Trading Account a t an averagep r i c e o f approximate ly $21.36 p e r s h a r e ,r e s u l t i n g i n a l o s s t o t h e Hedge Fund ofapproximate ly $185,000.

f . On o r about June 22, 2009, LEVY purchased,through t h e Levy Brokerage Account,approximately 65,000 s h a r e s o f A tl a s Energy,whose t i c k e r sYmbol was "ATLS", a t an averagec o s t o f approximate ly $15.92 p e r s h a r e .

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g . Following those purchases , on o r about June22, 2009, a f t e r th e ma rk et 's c lo se , LEVYcaused the Hedge Fund Trading Account topurchase from th e Levy Brokerage Accountapproximate ly 112,000 shares of ATLS a tapproximate ly $19.48 per share . On t h i s day,ATLS t raded no highe r than $17.21 and closeda t $15.75.

h . On o r about June 23, 2009, LEVY sold theapproximate ly 112,000 shares of ATLS from theHedge Fund Trading Account a t approximate ly$15.69 pe r share , re su lt in g in a lo s s to theHedge Fund o f a pp ro xima te ly $427,000.i. No one a t the Hedge Fund author ized , o r a t

the t ime was aware o f , LEVY's t r ad ing in ATNand ATLS on behalf of the f i rm.

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j . On o r about October 21, 2009, LEVY approachedthe General Par tne r and s ta ted , among o therth ings , t ha t :i . LEVY had rece ived a subpoena from the

SEC seeking product ion of h is persona lt r ad ing records ;ii. LEVY held b ro ke ra ge a cc ou nts t ha t he had

not di sc losed to h is employer; andiii. LEVY had t raded ce r t a in s tocks in thoseaccounts which were pa r t of the SEC'si nves t iga t ion .

WHEREFORE, deponent prays t h a t an a r r e s t warran t bei s sued fo r th e above-named defendan t and t ha t he be imprisoned o rba i l ed as the case may be.

Due to the ongoing nature of t h i s i nves t iga t ion , Ir eques t t ha t t h i s Complaint and any a r r e s t warrant i s sued on itbe f i l ed under sea l . ~ L . - 1 - t v - ~

ROBERT W. MANCHAK ~ CRIMINAL INVESTIGATOROFFICE OF THE UNITED STATES ATTORNEYFOR THE SOUTHERN DISTRICT OF NEW YORK

s ~ to before me t h i sday of November, 2009

, @ / f - ~ tlV 0 9 211\9,RONALD L. ELLISUNITED STATES MAGISTRATE JUDGESOUTHERN DISTRICT OF NEW YORK

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Levy, Ezra Complaint