New Jersey Man Receives 12-Year Sentence for $7.5 Million Mortgage Fraud Ponzi Scheme

A New Jersey man was sentenced to a 12-year term in state prison for a mortgage refinance Ponzi scheme that duped more than 40 victims out of more than $7 million.  Frederick Tropeano, 47, received the sentence from Monmouth County Superior Court Judge Ronald L. Reisner, who also ordered that Tropeano would be ineligible for parole until mid-2019.  Tropeano previously pled guilty in January to the equivalent of money laundering, which carries a maximum prison sentence of twenty years. In handing down the sentence, Judge Reisner made a downward departure from the 14-year sentence recommended by prosecutors as part of Tropeano's plea agreement.  

Tropeano, through his company Hawthorn Capital Corporation, solicited homeowners to refinance their existing mortgage at a much lower rate, with the understanding that proceeds from the new mortgage would be used to satisfy the original mortgage.  In total, Tropeano raised over $7 million from more than 40 homeowners who thought they were taking steps to reduce their mortgage payments.

However, according to authorities, Tropeano and his conspirators failed to use proceeds from the new mortgages to satisfy the homeowners' existing mortgages.  Instead, they operated the classic Ponzi scheme, using investor funds for unauthorized purposes that included paying personal expenses to support a lavish lifestyle.  Many homeowners were shocked to discovery that their existing mortgage had never been satisfied, often resulting in negative implications on their credit scores.  Additionally, several homeowners had their identity stolen by Tropeano and his associates, who in turn secured additional refinancings unbeknownst to the homeowners.  

Three of Tropeano's co-conspirators previously pled guilty to third-degree conspiracy charges, and are awaiting sentencing.  Tropeano was also ordered to pay nearly $7 million in restitution to his victims.