Rinfret Pleads Guilty To Ponzi Scheme

Faces up to 40 years in prison, failed to answer SEC civil complaint and filed bankruptcy

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Paul Rinfret filed for Chapter 13 bankruptcy at the Eastern District of New York in Central Islip. (Photo via CC BY-SA 3.0)

Paul A. Rinfret, a resident of Manhasset, pled guilty to one count of wire fraud and one count of securities fraud on Oct. 8 after running a $19 million Ponzi scheme that defrauded six investors. The counts of wire and securities fraud carries a sentence of 20 years in prison each and he will be sentenced by U.S. District Judge Gregory H. Woods on Feb. 10, 2020.

Rinfret, 70, was arrested in Manhasset on June 28 after the Southern District of New York unsealed a criminal complaint against him. In 2011, Rinfret formed a limited partnership called “Plandome Partners,” which he controlled; he had one of his daughters named as a general partner and his son listed as the limited partner, according to the grand jury indictment. Rinfret’s same daughter was listed as the only signatory and authorized user of the Plandome Partners bank account. Rinfret did not have signature authority on the Plandome Partners bank account and his name does not appear as an authorized user of the account.

Paul A. Rinfret

From 2014-19, Rinfret acquired investments from at least six individuals. He claimed that by using a propriety algorithm on S&P 500 stocks, his investments never received a loss since 2012 and said his fund generated returns as high as 362 percent. Rinfret would receive 25 percent of the net profit as part of the agreement with investors. In reality, Rinfret only invested $3.1 million and that investment lost money month after month.

After investors came asking for their money in 2019, Rinfret admitted to a portion of his fraud to at least two investors. He admitted that he had sent falsified account statements to investors each month, he had lost all of Plandome’s money trading and that the algorithm had never worked.

Instead of investing the money, Rinfret used it on himself and his family. According to an SEC complaint that was filed on June 28, Rinfret used the Plandome Partners account to pay $30,000 for a lavish engagement party for his son at a Manhattan restaurant complete with a custom photo wall with the hashtag #RinfretAllDay; $50,000 for a Southhampton vacation home rental; $35,000 for custom kitchen cabinets; $170,000 on jewelry, watches and cars; more than $105,000 on wine and other alcohol; approximately $12,000 on cigars and more than $130,000 at restaurants; Rinfret withdrew almost $570,000 in cash from the Plandome Partners account, including more than $500,000 in ATM withdrawals; and he paid for everyday expenses such as dry cleaning, gas, car wash, gym membership, DMV and AAA fees, student loan payments, eyeglasses, tanning and shoe store purchases.

The SEC complaint lists five investors of Plandome Partners. Investor A invested an initial $350,000 between March and April 2018 and after Rinfret provided false documentation of positive growth, Investor A invested another $400,000 in May 2018.

Investor B made an initial investment of $700,000 between late May and early June. After receiving a falsified account statement of a 4.9 percent increase, Investor B invested another $450,000. Rinfret provided more faulty account statements, leading the investor to add another $1.8 million through December 2018.

Investor C made an initial $1 million investment in February 2018. After receiving falsified account statements of 2.91 percent and 5.92 percent for February and March 2018, Investor C invested another $4 million in April 2018.

Investor D invested $1 million on May 20, 2016. Rinfret told Investor D four days later by email “I will start trading your money today.” Rinfret did not trade any of Investor D’s money. As Rinfret sent falsified monthly account statements, Investor D invested another $4 million between July and September 2016. Investor D would again invest an additional $2.3 million in Plandome Partners in 2017 and 2018 for a total of $7.3 million. On one occasion, Rinfret pretended to call the brokerage firm with Investor D on the line to assure him of the monthly account statements. Rinfret had someone else impersonate a representative of that brokerage firm who relayed the falsified records.

Investor E invested an initial $50,000 in 2014. Rinfret sent falsified monthly account statements and in 2015 sent a document stating that PAR Capital’s equity index futures contract strategy had a total return of 235 percent from January 2012 through April 2015 and 40 consecutive profitable months. Investor E would invest another $3.2 million between April 2015 and May 2018.

Rinfret initially had a bond of $1 million and put his mother-in-law’s home as part of the bond. A revised bond agreement stated that Rinfret did not need property or cosigners as part of the bond, but still needed to surrender his passport, wear a GPS monitoring device and undergo mental health evaluation and treatment.

“Paul Rinfret callously lied to investors at every step,” U.S. Attorney for the Southern District of New York Geoffrey Berman said in a statement. “He lied about his past returns to get them to invest. 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. To keep investors appeased, Rinfret lied about how their money was growing. Today, Rinfret has admitted to his scheme, through which he obtained approximately $19 million, and now faces a prison term for his lies.”

Rinfret also failed to answer the SEC’s complaint. On Oct. 10, the SEC requested that the court give until Nov. 19 for the SEC to file a motion of default judgments against the defendant, which Judge Alison Nathan of the United States District Court granted.

Rinfret filed for Chapter 13 bankruptcy on Sept. 2 in the Eastern District of New York. Chapter 13 allows individuals with regular income to develop a plan to repay all or part of their debts within three to five years using a repayment plan. In the filing, Rinfret selected $0 to $50,000 for an estimation on how much his assets were worth and $100,001 to $500,000 for an estimation on his liabilities.

Six creditors are listed as part of the filing: North Shore University Hospital; New York State Department of Taxation and Finance; Online Collections, a collecting agency; Physician Diagnostic Imaging, a medical group located in Rosyln; Sunharbor Acquisition, a post-operational rehabilitation center; and the Wilmington Trust, a provider of international corporate and institutional services, investment management and private banking.

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