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Two California financial consultants who acted as brokers for an “absurd” Los Angeles Ponzi scheme failed to pick up on the lies of schemer Zachary Horwitz — and raked in millions of dollars in commission in the process — a new nationwide class action lawsuit alleges.
Plaintiff Jocelyn Carter filed the class action lawsuit Wednesday in a California federal court against Jeffrey Spiegel and Ryan Spiegel, the managers of SAC Advisory Group (SAC).
She says SAC was one of five principal brokers for the Los Angeles Ponzi schemer Zachary Horwitz, and one of the last ones to stop selling the securities to investors for Horwitz’s sham business 1inMM.
“Defendants kept their head in the sand long after other funds feeding 1inMM realized the fraud,” the class action lawsuit alleges.
Carter says Horwitz, a Los Angeles based actor and Indiana University alum, and his company 1inMM conducted a Ponzi scheme raising over $690 million from investors through several placement agents including SAC.
On meeting the Spiegels, the claim states, Horwitz told them the 1inMM offering was to finance its acquisition and licensing of distribution rights in movies primarily from Latin America, to major media companies like Netflix and HBO.
“In reality, 1inMM and Horwitz had no relationship with either HBO or Netflix and never licensed any movie rights to either company.”
To support his falsities, Horwitz sent forged documents to the Spiegels as evidence of his business dealings with HBO and Netflix. The Spiegels apparently bought the lies, the class action alleges, and proceeded to raise funds from friends, family, and other downstream investors.
“Horwitz’s scheme was absurd and it wouldn’t have been funded but for sophisticated placement agents including Defendants parroting his lies, cloaking the scheme in their own credibility as financial professionals, and selling the offering to their closest friends,” the claim states.
Carter says the Spiegels could have easily debunked Horwitz’s lies prior to any investment by her or the Class with a phone call to Netflix or HBO. However, she says that call was not made until long after the scheme imploded and the Spiegels had reaped millions in commissions.
As a result, the claim alleges the Spiegels solicited more than $75.1 million in investment via sales of units in three funds in the 1inMM offering, of which $29.7 million remains outstanding.
In late 2019, Horwitz and 1inMM stopped making payments to investors, the class action says, adding that Horwitz provided the Spiegels false explanations for why he had stopped making payments. Prior to this, the amount repaid by 1inMM to SAC was approximately $56.9 million. Carter says she believes in excess of $20 million was retained by the Spiegels.
Carter alleges the Spiegels had a duty to do “some investigation” into the investment before offering it, but instead operated in “willful ignorance” of Horwitz’s stories. She says SAC owes her over $400,000 from her investments in the Ponzi scheme.
Carter is seeking to represent anyone who invested in SAC Movie Fund One, LLC, Fortune Film Fund One, LLC, and Fortune Film Fund Two, LLC from Jan. 1, 2018 to Dec. 31, 2020, a Class estimated to include thousands of people.
She is suing for negligent misrepresentation, violations of the California Corporations Code, and unjust enrichment. Carter is seeking certification of the class action, damages, fees and costs.
Consumers sometimes sue financial institutions to recoup money lost in scams. In 2019, a group of Zions Bank customers lodged a class action lawsuit against the financial institution alleging that it used their money to fund a massive Ponzi scheme.
What do you think of the Spiegels’ alleged handling of the Ponzi scheme? Let us know in the comments.
The plaintiff is represented by Alexander Loftus of Loftus & Eisenberg, LTD., and William Aron of Aron Law Firm.
The Spiegels Horwitz Ponzi Scheme Class Action Lawsuit is Carter et al., v. Spiegel et al., Case No. 3:21-cv-03990-TSH, in the U.S. District Court Northern District of California Oakland Division.
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