Wallingford Man Charged with Operating $1.5 Million Ponzi Scheme: Feds

WALLINGFORD, CT — A Wallingford man faces federal charges for allegedly operating a Ponzi scheme that defrauded more than 10 people out of more than $1.5 million.

Joseph Castellano, 58, was charged with fraud and money laundering offenses after a federal grand jury returned an 18-count indictment on Thursday, U.S. States Attorney Deirdre M. Daly announced in a press release.

The indictment alleges that Castellano operated various entities out of offices in Wallingford, including Casbo Investments, Wallingford Investors Limited Partnership, AIM Realty Investors, and Castellano & Co., LLC.

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Casbo Investments, located at 15 South Elm Street in Wallingford, was raided by the FBI last July and Castellano was reportedly the target of the raid.

As the owner of Castellano & Co., LLC, and as a certified public accountant, Castellano prepared federal and state tax returns for individuals and local businesses. In connection with his tax preparation business, Castellano established a base of clients to which he offered financial services and investment opportunities in addition to preparing their taxes, according to Daly.

Beginning in approximately July 2007, Castellano is accused of falsely representing to victim-investors that he had clients who were in need of capital to fund businesses or real estate development projects, but was unable to secure funding from traditional sources such as financial institutions.

Castellano allegedly told victim-investors that he would obtain for them a consistent rate of return of between approximately 6 percent and 8 percent annually on their money by taking their money and placing it with, or loaning it to, one or more of his other clients.

Castellano, through Casbo Investments, prepared and executed official-looking documents and investment contracts termed “Demand Notes,” which contained a promise to return the principal amount, with interest, at any time, according to Daly.

“In fact, there were no actual investments or investment opportunities, and the money was not invested with or loaned to other clients of Castellano,” Daly said in the press release. “Castellano diverted the funds for his own use and benefit, including making payments to other victim-investors that were falsely represented to be ‘interest’ payments. Castellano also made false statements to certain victim-investors to explain various delays in the purported interest payments.”

Castellano was arrested on Thursday and was released on a $250,000 bond.

He was charged with 10 counts of wire fraud, one count of mail fraud and four counts of securities fraud, offenses that carry a maximum term of imprisonment of 20 years on each count.

The indictment also charges Castellano with three counts of money laundering, an offense that carries a maximum term of imprisonment of 10 years on each count.