A former Oregon gubernatorial candidate was arrested on Tuesday for his alleged role in defrauding investors who had hoped to buy shares of Facebook Inc before its initial public offering in May 2012, federal authorities said.
Craig Berkman, 71, falsely told investors he had access to scarce pre-IPO shares of Facebook and other social media companies such as LinkedIn Corp, Groupon Inc and Zynga Inc, they said in a statement on Tuesday.
Continue Reading Below
But instead of buying shares for investors as promised, Berkman made "Ponzi-like" payments to earlier investors and funded personal expenses, including costs in a bankruptcy case, according to the U.S. Securities and Exchange Commission, which filed a parallel civil case.
The defendant received at least $8 million from various schemes, according to U.S. Attorney Preet Bharara in Manhattan.
The SEC case includes additional allegations.
"Berkman blatantly capitalized on the market fervor preceding highly anticipated IPOs of Facebook and other social media companies to fleece investors whose cash flow he treated like an ATM to fund his own living expenses and pay court-ordered claims to victims of his past misdeeds," said Andrew Calamari, director of the SEC's New York office.
Berkman was arrested at his home in Odessa, Florida, and was expected to appear in a Tampa, Florida federal court on Tuesday.
The defendant was charged with two counts of securities fraud and two counts of wire fraud. Each count carries a maximum of 20 years in prison.
The SEC brought a separate case against John Kern of Charleston, South Carolina, whom it said took part in the fraud as legal counsel to some of Berkman's companies.
Marc Blackman, a lawyer for Berkman, was not immediately available for comment.
It was not immediately clear whether Kern has hired a lawyer for his defense. Kern was not immediately available for comment.
The criminal case is U.S. v. Berkman, U.S. District Court, Southern District of New York, No. 13-mg-00732.
(Editing by Bernadette Baum)