SOUTHAMPTON, N.Y. — A Southampton investment adviser has been convicted of fraud and money laundering, federal officials said Thursday.
Jeffrey Slothower, 46, a former registered investment advisor and founder of New York investment advisory firm Battery Private, Inc., was convicted Thursday in federal court in Central Islip of all three counts of an indictment charging him with wire fraud, counsel investment fraud and money laundering in connection with a scheme to embezzle more than $1 million from clients, federal officials said.
The verdict followed a three-day trial before United States District Judge Gary R. Brown. When convicted, Slothower faces up to 30 years in prison, officials added.
Breon Peace, United States Attorney for the Eastern District of New York, and James Smith, Assistant Director of the Federal Bureau of Investigation, New York field office, announced the verdict.
“This case was about the greed and betrayal of customers who trusted the defendant and believed their money was safely invested with him,” Peace said.
“Slothower tricked these customers into stealing their money and splurging on a new car, high-end clothes and jewelry, and a membership to an East End country club,” Peace added. “Protecting investors from fraudsters like the defendant has always been a priority of this office, and today's verdict underscores our determination to vigorously prosecute those who enrich themselves at the expense of victims.”
As proven at trial, Slothower orchestrated a scheme to embezzle more than $1 million from current and prospective clients, federal officials said.
Specifically, while operating Battery Private, Slothower solicited business from Victim-1 and Victim-2, a California couple whose money Slothower had managed at another financial services firm where he previously worked, Peace said.
Slothower promised victims that he could beat any rate of return they had and do so with no market risk, federal officials said. In 2017, he offered to invest Victim-1's money in what Slothower described as bonds backed by homeowner association fees, or an “HOA bond,” which would yield 8 percent, Peace said.
Slothower sent instructions to wire Victim-1 for his investment and attached a document that made additional statements about Victim-1's purported investment, asserting that Victim-1's money would be held in Battery Private's “capital reserves,” Peace said. Between Jan. 25, 2017, and Jan. 27, 2017, Victim-1 sent more than $500,000 to Slothower at Battery Private to invest in the purported HOA bonds, federal officials said.
Instead of investing in HOA bonds or keeping the funds in “capital reserves,” Slothower funneled the money into his personal bank accounts and then used those funds to buy a $125,000 Mercedes Benz SUV and memberships at Long Island National Golf Club, a private East End country club, Irene said. “To further the fraudulent scheme, Slothower made payments to Victim-1 falsely presented as quarterly distributions from Victim-1's 'investment,'” Peace said.
Later, Slothower asked Victim-1 to invest additional money, including funds controlled by Victim-1's wife, who was then a Battery Private client, Peace said. Lured by the supposed fixed rate of return, Victim-2 agreed to invest in the same supposed HOA bonds, and in December 2017, Victim-2 sent more than $500,000 to Slothower at Battery Private, federal officials said.
However, like Victim-1, Victim-2's money was not invested in HOA bonds or held in “capital reserves,” as represented by Slothower, Peace said. Instead, she used that money to pay off tens of thousands of dollars in personal credit card debt, including a $6,500 Chanel purse, a Rolex watch worth about $13,000 and more than $11,000 in Ralph Lauren clothing, Peace said.
To further the fraudulent scheme, Slothower made payments to Victim-2 that were falsely presented as quarterly distributions from Victim-2's investment, federal officials said.
In June 2018, still unaware of the fraudulent scheme, Victim-1 made an additional investment of approximately $84,000 in the purported HOA bonds, Peace said. Slothower used Victim-1's money to make purported quarterly payments to Victim-1 and Victim-2 that were falsely represented as returns on their investment and to pay membership fees at the private golf club, Peace said.
Evan Sugar, a federal defender for Slottower, was not immediately available for comment.
