Pound Ridge Resident Sentenced In $22 Million Ponzi Scheme

POUND RIDGE, NY — A former Pound Ridge resident who defrauded investors in his hedge fund to the tune of $22 million was sentenced to eight years in prison. The 45 investors in Michael Scronic's Scronic Macro Fund were actually underwriting a lavish lifestyle that included a vacation home in Stratton, Vermont, as well as the $12,275 monthly rent for his home in Pound Ridge.

“For years, Scronic lied to his investors about his Fund’s return, but he has now been brought to justice,"said Geoffrey S. Berman, the United States Attorney for the Southern District of New York. "We will continue to pursue aggressively frauds like this one, which caused millions of dollars in losses, in order to preserve investor confidence in our capital markets.”

The 47-year-old raised more than $22 million from 45 investors in the Scronic Macro Fund for seven years — from April 2010 to October 2017.

He told investors that the Fund had positive returns in all but one of the 22 quarters from January 2012 through June 2017, with the highest reported quarterly return being 13.4 percent in the fourth quarter of 2014.

But he was not only a liar, he was a poor hedge fund manager. The Fund’s only positive quarter was its first quarter of operation in 2010. (For more local stories, subscribe to Patch to receive daily newsletters and breaking news alerts.)

In reality, the Fund lost money in 28 out of 29 quarters of its operation, with a total net loss of about $15.7 million before commissions.

As a result of these trading losses, the total assets Scronic claimed the Fund had in each quarter far exceeded its actual assets. For example, he sent account statements to investors that together showed total fund assets of $21.7 million as of June 30, 2017. In actuality, on that date, the combined balance of his brokerage and bank accounts was just $102,376.

In addition to losing money on trades, he used investor money for what the prosecutors delicately called "personal expenses."

Those averaged more than $500,000 annually, including monthly rent of $12,275 for his primary residence in Westchester, New York, mortgage payments on a vacation home in Stratton, Vermont, fees for multiple beach and country clubs, including a $30,000 payment to the Stratton Mountain Club in July 2017, and miscellaneous items charged to credit cards in amounts averaging more than $15,000 a month.

As of the summer of 2017, he was unable to pay redemptions requested by Fund investors because he did not have sufficient funds on hand. He told investors seeking redemptions that he would pay redemptions only at quarter-end, that he was too busy and preoccupied with a relative’s medical condition to pay redemptions, and that he was unavailable to pay redemptions because he was on vacation. In some cases, SCRONIC ignored redemption requests.

In addition to the prison term, Scronic, 46, of New York, New York, was sentenced to 3 years of supervised release, and ordered to pay $22,026,427 in restitution to his victims.

Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities & Exchange Commission for its assistance in the investigation.

The criminal case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys James McMahon and Daniel Loss are in charge of the prosecution.

SEE:

Hedge Fund Manager Stole $19M From Clients In Ponzi Scheme

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