Guilty Plea Expected in $300 Million Ponzi Scheme

Lawyers for a Cincinnati man accused of orchestrating a massive Ponzi scheme that bilked investors out of hundreds of millions of dollars and currently under criminal investigation indicated that a guilty plea to criminal charges is likely in the next few months.  Glen Galemmo is currently facing multiple lawsuits from victims alleging total losses exceeding $300 million, and has also acknowledged that he is the target of criminal investigations by the Internal Revenue Service and U.S. Attorney's Office.  During a recent hearing, Galemmo's attorneys cited the likelihood of a soon-to-come guilty plea as the basis for a requested 90-day delay in civil proceedings.  

Galemmo operated Queen City Investment Fund ("Queen City"), along with a dozen other investment entities.  In a 2001 newspaper article touting his successes, Galemmo claimed that he focused on identifying "severely-undervalued" stocks that were poised for a potential runup.  Likening the strategy to a search for "diamonds in the rough that can soar," investors were promised hefty profits.  Indeed, from 2006 to 2011, Galemmo and his funds claimed a 432% return - including a 9.84% return in 2008 when the S&P 500 index was down nearly 39%.  At Queen City's peak, Galemmo claimed that he had total assets under management of $200 million.  Based on these figures, Galemmo would have collected over $60 million in management fees.

However, Galemmo's clients were shocked in mid-July when they received an email from Galemmo announcing that the fund had shuttered, and directed all further inquiries to an IRS Special Agent.  Investors later filed a flurry of lawsuits against Galemmo, alleging that he duped approximately 165 investors out of over $300 million.  Galemmo was accused of using investor funds to make interest and principal payments to existing investors in a classic example of a Ponzi scheme.  

Shortly after the lawsuits were filed, federal authorities moved to seize various assets under forfeiture laws allowing turnover of funds derived from criminal acts, including

• A condominium on Marco Island, Florida;
• Five cars totaling over $100,000 in value;
• Bank and brokerage accounts containing nearly $1 million; and
• Galemmo's firm's former office building.

In addition, the Internal Revenue Service has announced it has seized over $500,000.  

Authorities recently interviewed Galemmo's wife, Kristine, a former second-grade teacher purportedly referred to as "Kris the Closer" for her ability to bring investors into the scheme.  According to attorneys present at her deposition, Galemmo's wife repeatedly invoked her Fifth Amendment right against self-incrimination.