Cosmo, Alleged Ponzi Scheme Runner, to Surrender, Lawyers Say

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Cosmo, Alleged Ponzi Scheme Runner, to Surrender, Lawyers Say
By Patricia Hurtado, Allan Dodds Frank and David Evans


Jan. 26 (Bloomberg) -- A New York businessman sought by U.S. authorities in connection with an alleged $380 million Ponzi scheme intends to surrender, his lawyers said.

Agents with the U.S. Postal Inspection Service and Federal Bureau of Investigation were seeking Nicholas Cosmo, founder of Agape World Inc. in Hauppauge, New York, said a person who wasn’t authorized to speak about the case. Officials unsuccessfully sought to arrest Cosmo earlier today at his office and executed a search warrant of the premises and could be seen carrying out boxes of documents from the office.

“Mr. Cosmo is voluntarily surrendering to the authorities,” said his lawyers, Steven D. Feldman and Arthur G. Jakoby, of the New York-based law firm of Herrick Feinstein LLP in an e-mailed statement. “He intends to work with them to allay investors’ concerns.”

Cosmo had not appeared at the Hicksville, New York, offices of the U.S. Postal Inspection Service as of 6:30 p.m., minutes after Cosmo’s lawyers said he intended to surrender.

Cosmo is suspected of defrauding thousands of investors through his firm, which purports to provide bridge loans, the person said. Heidi Cesare, a lawyer at the Federal Defenders Office who represented Cosmo in a prior federal criminal case, didn’t immediately respond to a call seeking comment.

In 1997, while working as a stockbroker at Continental Broker-Dealer Corp. in Carle Place, New York, Cosmo was accused of misappropriating funds, according to court records. He pleaded guilty to a single federal charge in 1999 and was sentenced to serve 21 months in prison and pay at least $135,000 in restitution. He was also ordered him to undergo “extensive gambling therapy” while in prison, according to court records.

‘Since 1999’

In the earlier case, the NASD found Cosmo “inserted the name Cosmo and Associates to replace a public customer’s name,” on a transaction, according to court filings. He was censured, fined more than $68,000 and barred from associating with NASD members.

While Agape World claims that it has been a “private bridge lender” since 1999, U.S. Bureau of Prisons records show that Cosmo wasn’t released from the federal penitentiary in Allenwood, Pennsylvania, until Aug. 23, 2000.

Agape World “works with you and your potential project to help raise assets to meet approval for traditional lending at a later date,” according to the firm’s Web site, which shows images of skyscrapers under construction and building sites. “We arrange Equity Participations, Joint Ventures, Acquisition Loans, Bridge Loans, Construction Loans.”

In an October interview with Bloomberg at his Hauppauge office, Cosmo said he wasn’t operating a Ponzi scheme after being asked about his prior federal conviction.

Hot 100

In that interview, Cosmo handed a Bloomberg reporter a reprint of a page from Entrepreneur Magazine’s May 2008 issue, which listed Agape World as number 73 in its HOT 100 fastest growing businesses. Cosmo told the magazine he began the business with one employee in August 1999. Actually, he was imprisoned at Allenwood that summer.

“I wouldn’t ever want to go through that again,” he said. He said he was introduced to the business of making “hard money” loans by an “old friend,” an attorney who he declined to name, he said in the interview.

Cosmo claimed his first investors were family and friends, and said Agape World charges no upfront fees, just a “good faith” deposit that averages about $20,000 per investor.

He claimed to have a Rolodex filled with the names of 5,600 people who have invested in his bridge loans and claimed he hadn’t accepted any new investors for three years.

Cosmo said he arranges the loans, which are then funded by his investors. He says sample investors include FBI agents, New York State Police officers, hedge funds and retirement plans.

“How could we not be legit,” he said.

Firefighters, Police

He declined to say how much Agape World pays out to the investors who fund its loans. In an Oct. 23 e-mail message to a Bloomberg writer, Cosmo said, “I have at least 100 law enforcement officers” and 75 New York City firefighters as investors, he asserted in an e-mail.

Cosmo said he has 15 employees in Hauppauge, ten other workers at two locations in Queens and four employed in a Manhattan Beach, California, office.

His office’s reception area displays a letter inviting Cosmo to be a “delegate” to the House Republic Trust’s dinner with President George Bush in March, 2008. Cosmo said he didn’t attend.

Richard Cinnamo, a U.S. Postal Inspector, said in a briefing earlier today, just before agents searched Agape World offices, that federal authorities had obtained an arrest warrant for Cosmo and that agents were going to go look for evidence that investors had given Cosmo money.

To contact the reporters on this story: Patricia Hurtado in U.S. District Court for the Eastern District of New York in Brooklyn at pathurtado@bloomberg.net; David Evans in Los Angeles at davidevans@bloomberg.net.

Last Updated: January 26, 2009 18:55 EST