Roslyn adviser accused in Ponzi scheme

Roslyn investment adviser Edward Stein preyed upon

friends to run a $55-million Ponzi scheme, the U.S. Securities and Exchange

Commission said yesterday in a lawsuit filed in U.S. District Court in

Manhattan.

In freezing assets in seven investment funds he controls, the SEC said

Stein produced false statements showing healthy returns to bilk more than 83

people. Instead of investing his clients' funds, Stein paid off selected

investors, purchased a million-dollar condominium for himself and funded a

failed magazine venture, the lawsuit said.

"Today's enforcement action alleges that a trusted adviser defrauded

long-standing clients for personal gain," James Clarkson, acting director of

the SEC's regional office in New York City, said in a statement.

In a separate criminal case in federal court in Brooklyn, Stein also was

charged yesterday with defrauding a client of $6.5 million. Stein, 59, was

arrested at his Manhattan apartment and appeared before U.S. Magistrate Joan M.

Azrack, federal officials said. He was released on $2-million bond and

surrendered his passport.

Stein, who operates Edward T. Stein Associates Ltd. in Roslyn, faces a

maximum of 30 years in prison if convicted in the fraud case. In the alleged

Ponzi scheme, the SEC is attempting to recover funds.

Stein's lawyer, Brian Maas of the Manhattan firm Frankfurt, Kurnit, Klein &

Selz, declined to comment.

In the case involving the $6.5 million, Stein allegedly had the client

deposit $3 million in accounts he controlled in May 2008 under the pretense he

would invest the money on the client's behalf, according to the charge. The

client also said Stein stole $2 million he was supposed to invest and made

seven unauthorized transfers totaling $1.5 million from an Ameritrade Advisors

account, according to federal officials.

According to the SEC filing, Stein began his Ponzi scheme in 1992 by

setting up Gemini Fund I, which he marketed to prospective investors as a

feeder fund to other investment vehicles engaging in hedge trading. Instead, he

used money from the investors to fund Detour Media Group Inc., which published

a fashion magazine called Detour. Stein, as president of Detour Media, filed

for Chapter 7 bankruptcy in 2003, according to the SEC's complaint.