The Commodity Futures Trading Commission
has filed a federal lawsuit against accused Long Island swindler
Nicholas Cosmo, saying he used "tens of millions" of dollars from investors
intended to finance bridge loans to instead engage in improper, unauthorized
commodity futures trading.
At the request of the commission, U.S. District Court Judge Leonard Wexler in Central Islip issued an order late Tuesday freezing all of Cosmo's assets and those of his companies, Agape World Inc. and Agape Merchant Advance.
Despite what he reportedly told investors, Newsday learned Cosmo, 37, of Lake Grove - accused in a $370 million Ponzi scheme - never registered with the regulators who oversee commodities trading and require those who do register to disclose if they had a previous criminal history. In 1999, Cosmo went to prison, was fined $68,000 and was banned from the securities market for a mail fraud conviction involving an earlier misuse of investor funds.
"He never registered with us and was operating under the radar," said Larry Dyekman, a spokesman for the National Futures Association, the self-regulating industrywide agency that works with the federal commodities commission in combating commodities fraud. "We have no record of him ever registering with us. He told [investors] he had, but he never did."
Federal law enforcement authorities estimate Cosmo funneled as much as $100
million from his investors over a five-year period for improper commodities
trades and lost $80 million of it. By the time federal officials stepped in Jan.
22, only one account remained open, and it contained just $2,000, court papers
Dyekman could not explain how Cosmo was able to carry out trades without being a properly registered agent.
Cosmo's alleged Ponzi scheme "swindled tens of millions of dollars from unsuspecting customers through phony profitability promises, while in actuality losing millions speculating in commodity futures trading," said Stephen J. Obie, acting director of the Division of Enforcement in a prepared statement that called Cosmo's scheme "insidious."
The head of the Hauppauge-based investment firm, which also had an office in Queens, may learn today whether he will be released on bail or confined to jail following his arrest Monday by postal inspectors and FBI agents on charges of running a Ponzi scheme.
U.S. Magistrate E. Thomas Boyle has scheduled a detention hearing in District Court in Central Islip for Cosmo after federal prosecutors said that they could only locate a fraction of the $370 million. Potential access to this money makes Cosmo a flight risk, Assistant U.S. Attorney Grace Cucchissi has said.
Cosmo's attorney, Steven Feldman, declined to comment on the commission's action or Judge Wexler's order.
Staff writer Robert E. Kessler contributed to this story.