Investment firm Senior Managing Director Sentenced to 2 Years for Fraud in Ponzi Scheme

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WPCNR FBI WIRE. From the Federal Bureau of Investigation. October 26,2016:

Preet Bharara, the United States Attorney for the Southern District of New York, announced that GREGORY W. GRAY, JR., was sentenced today in Manhattan federal court to two years in prison for securities fraud and perjury charges stemming from his scheme to defraud an investor of approximately $5 million to cover up his mismanagement of other investor funds.

GRAY pled guilty on December 23, 2015, and was sentenced today by United States District Judge Sidney H. Stein.

Manhattan U.S. Attorney Preet Bharara said:

“Gregory Gray deceived investors, claiming he would use their funds to buy shares of high-flying technology companies like Twitter and Uber.  In reality, Gray did not make the investments he said he would, and later used new investor funds to pay back earlier investors.  In an attempt to cover his tracks, Gray then lied about his investments to the SEC.  Today, his federal crimes have led to a sentence of imprisonment.”

According to the allegations contained in the Information, the underlying criminal Complaint, and other statements made during court proceedings:

From at least in or about April 2014 through in or about February 2015, GRAY engaged in a Ponzi scheme to defraud investors who believed they had invested in funds GRAY controlled at Archipel Capital, LLC (“Archipel”), where GRAY was the Senior Managing Director.

Previously, from in or about June 2012 through in or about November 2013, GRAY raised over $5.2 million, from approximately 52 investors, for four Archipel “Social Media Funds.”  GRAY promised to use that capital to purchase shares of Twitter before the company’s initial public offering (“IPO”).  Based on GRAY’s representations to investors, GRAY promised to purchase over 200,000 pre-IPO Twitter shares.

GRAY frequently comingled funds between the various Archipel investment vehicles that he managed.  Ultimately, GRAY’s withdrawals from the Social Media Funds left those funds with insufficient money to purchase the full complement of pre-IPO Twitter shares he had promised investors.

On or about November 6, 2013, Twitter had its IPO and began trading on the New York Stock Exchange.  At that time, contrary to his representations to investors, GRAY had purchased only 80,000 pre-IPO Twitter shares for a total cost of $1,875,000.  GRAY accordingly owed his investors millions of dollars’ worth of Twitter shares.

In an attempt to make up the shortfall of Twitter stock, in or about April 2014, GRAY persuaded Investor-1 to invest $5 million in Archipel’s “Late Stage Fund,” which GRAY also controlled.

GRAY promised that, through that fund, he would use Investor-1’s $5 million investment to purchase a purported multimillion-dollar, privately held allotment of Uber shares.

However, instead of using the $5 million as promised, GRAY instead used the money to make cash payments to investors in the Social Media Funds and to purchase post-IPO Twitter shares for those same investors, including Investor-1 himself.

When Investor-1 requested documentation of the purchase of Uber shares as promised, GRAY provided Investor-1 with a fabricated stock transfer agreement (the “Uber Stock Transfer Agreement”) that purported to show that the Late Stage Fund had purchased 175,438 Uber shares.  In truth and in fact, and as GRAY well knew, the fund had not purchased any Uber shares.

On or about February 24, 2015, GRAY gave sworn testimony to the SEC.  During his testimony, GRAY falsely stated, in substance and in part, that the Uber Stock Transfer Agreement reflected a bona fide purchase of Uber shares by the Late Stage Fund.

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In addition to the prison sentence, GRAY, 41, was sentenced to three years of supervised release.  The Court further ordered that GRAY forfeit $5,000,000 and pay $5,000,000 in restitution.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.

Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit       

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Damian Williams and Michael Ferrara are in charge of the prosecution.

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