Home Delivery

Northport man charged in $68M scam

By ROBERT E. KESSLER | robert.kessler@newsday.com

6:38 PM EST, January 15, 2008

Article tools

E-mail

Share
- Digg
- Del.icio.us
- Facebook
- Fark
- Google
- Newsvine
- Reddit
- Yahoo

Having spent time in prison for stock fraud, a Northport man did not go legitimate, but instead switched confidence schemes to go into fraud involving foreign-currency exchange, federal prosecutors said yesterday.

Michael MacCaull, 36, was charged yesterday with bilking hundreds of customers out of more than $68 million by setting up a company, Razor FX, with offices in Great Neck and Saddle River, N.J., that purportedly could earn investors astronomical returns by trading in foreign currency.

In fact, the company was a Ponzi scheme, which did almost no trading in foreign currency but rather paid interest out of the money from new clients, according Benton Campbell, the U.S. Attorney for the Eastern District. In addition, the money from investors also was used to support MacCaull's luxurious lifestyle, which included an upscale condo in Northport and an Aston Martin automobile, Campbell said.

MacCaull, who pleaded not guilty to fraud charges yesterday, was held without bail following an arraignment before U.S. Magistrate Ramon Reyes in Brooklyn.

MacCaull's attorney, Richard Leff of Kew Gardens, declined to comment after the arraignment, as did Assistant U.S. Attorney Richard Faughnan.

According to court papers filed by prosecutor Faughnan, MacCaull had served 15 months in prison, starting in 2002, for his involvement in a securities fraud scheme when he was a securities broker at Melville-based Sterling Foster.

To back up the Razor FX Ponzi-scheme, MacCaull's firm sent out fictitious account statements listing phony trades and profits, minus trading commissions, prosecutors said. If investors wanted money back, they would receive money put in later by other investors, the prosecutors said.

In 2007 alone, Razor FX took in $68 million, according to an investigation by inspectors from the U.S. Postal Inspection Service.

The bilked investors came from all over the United States, as well as Canada, the United Kingdon and Hong Kong, according to an arrest warrant filed by a postal inspector. Officials declined to release the names of any victims.

At one point in the investigation, postal inspectors taped a telephone call between MacCaull and an unnamed source, according to court papers. The source tells MacCaull that one investor wants $10 million returned, but the company does not have sufficient funds to repay the amount. MacCaull tells the source "that they should just 'squash' the account, meaning book false losses to demonstrate a lack of funds in the account to meet the cash call," according to the court papers.

Legitimate traders in foreign-currency exchange attempt to make money by trading on minute fluctuations in the value of various currencies around the world during a given day.

Get breaking news | Most popular stories | Dining and Travel deals all via e-mail!

Would you recommend this?

Rate it: