Venture Capital Chairman gets six years for wire fraud, securities fraud, and Ponzi scheme
David Wagner, Chairman of the Venture Capital funds, was sentenced to 72 months for wire and securities fraud. Wagner admitted that he illegally solicited around ten million dollars from investors by lying to them. He was in charge of a number of corporate entities that were referred to Downing and using it as a Ponzi-like scheme.
Wagner mislead new investors with false statements and promises and then used their money to pay management fees, repay prior investors and for personal expenses. For approximately four years, Wagner told investors that his venture capital firm would invest people’s money in health care start-ups or portfolio companies and would provide management expertise, operations, sales to bring these start-ups to market and bring a great return to investors.
In reality, Wagner did not have access to millions in funding, had almost no products to sell, and often could not make payroll. In fact, employee investments were the overwhelming source of funding. When the employees realized the scheme, several employee-investors brought suit against Wagner alleging fraud.
Wagner did not stop after the allegations and instead decided to recruit employee investors into a new company, Cliniflow Technologies. Once again, Wagner mislead new employee-investors to receive funding. The new company that was made to recruit new employee-investors that did not know about lawsuit against Wagner. Wagner was able to raise over 1.5 million dollars which he used to pay for personal expenses and prior investors.
Later on, Wagner was received a $400,000 loan and $100,000 grant from the state of Connecticut based on false statements. The funds were to be used for relocation of one of the companies to Connecticut, but instead Wagner used the money for other means including buying a BMW for his daughter.