Shervin Neman, whose given name is Shervin Davatgarzadeh, 31, Century City, California, was arrested by FBI special agents after he was charged with running a Ponzi scheme and then bilking another victim out of millions of dollars that he used to pay back earlier victims after the S.E.C. took him to court.
The defendant was arrested without incident this morning at his residence. Neman was arrested pursuant to a three-count fraud indictment that alleges he caused victims to suffer losses of more than $3 million.
The indictment alleges that Neman claimed to be a successful investor who made significant profits, but he in fact operated a Ponzi scheme from the summer of 2010 through last June by soliciting funds from investors with false claims that their money would be used to purchase foreclosed real estate and stocks, including pre-initial public offering shares. Instead of using investor funds to make these investments, the indictment alleges that Neman was spending most of the victims’ investment funds on personal expenditures and to repay other victims.
The Securities and Exchange Commission filed a civil complaint against Neman and his company, the Century City-based Neman Financial, Inc., on April 11, 2012, in United States District Court in Los Angeles. The lawsuit alleged that Neman was operating a multi-million dollar Ponzi scheme that was targeting primarily members of the Persian-Jewish community in Los Angeles. Subsequently, a federal judge issued orders prohibiting Neman from committing securities fraud..
The month after the SEC filed its lawsuit, Neman solicited $2 million from another victim with false promises that Neman could obtain pre-IPO shares in Facebook, according to the indictment. Neman allegedly used the funds obtained from the new victim to pay, among other things, most of his earlier victims and the law firm representing him in the SEC action. Neman then had victims who had been “paid back” write e-mails saying that Neman did not owe them money, according to the indictment, which goes on to say that Neman used these e-mails as part of his defense in the SEC case. In June 2012, Neman sent to the later victim a $2,235,800 check that purported to be the return on the Facebook investment, but that check bounced, according to the indictment.
Neman was charged in an indictment returned under seal Wednesday by a federal grand. That indictment, which was unsealed this morning after Neman’s arrest, charges him with two counts of wire fraud and one count of mail fraud.
The three fraud charges in the indictment each carry a statutory maximum sentence of 20 years in federal prison.
Neman is expected to be arraigned in United States District Court in downtown Los Angeles.
This case is the result of an investigation by the Federal Bureau of Investigation.