Philip Barry, an alleged Brooklyn version of Bernie Madoff, was charged Tuesday with running a $40-million storefront Ponzi scheme for 31 years that scammed Bay Ridge neighbors and as many as 800 investors from Long Island, New Jersey and beyond.
Barry, 52, was accused of securities fraud in a criminal complaint in Brooklyn federal court and a civil suit by the Securities and Exchange Commission that said he used investor money to speculate in real estate in Sullivan County, fund a mail-order porn business, and support himself.
Beginning in the late 1970s, operating as "the Leverage Group," Barry allegedly told investors that he would be investing in stock options, assured them of annual returns from 12 to 21 percent, and falsely claimed that investor money would be protected by a federal fund.
He allegedly issued phony account statements, and built his reputation by using new investor money to cash out old investors who wanted to liquidate their holdings. The SEC said investor losses totaled at least $20 million, including $700,000 from a now-deceased nursing home patient and $25,000 from a religious organization.
"This defendant allegedly convinced hundreds of individuals to hand over their savings for what was supposed to be a safe investment," said Brooklyn U.S. Attorney Benton Campbell. "In reality . . . the defendant's investment fund was nothing more than a classic Ponzi scheme."
Beginning early last year, Barry was named in multiple civil suits by investors who couldn't get their money out. Late last year, he filed for bankruptcy protection, and a trustee in that case has seized whatever assets can be found, including the real estate.
Alan Pralgever, a New Jersey lawyer whose clients include investor Rosa Armetta of Kings Park, said she invested $125,000 after hearing about Barry from a network of friends living in Bay Ridge. He said that was a typical scenario.
"He operated with impunity in a community that trusted him in the same way others trusted Bernie Madoff," Pralgever said. "He preyed on that trust."
Barry was held without bail at his initial appearance on the criminal charges in federal court Tuesday.
The SEC said he has agreed to settle the civil suit, pay financial penalties, and be enjoined from associating with investment advisory activities.