Like most things associated with the pornography industry, what you see is artificially inflated, and it may simply be faked. So it comes as no surprise that pornography purveyor Philip Barry was running a financial Ponzi scheme on the side with inflated and faked promised returns.
The FBI arrested the Bay Ridge, N.Y., money manager Tuesday morning for running a scam that promised returns of up to 21%. Barry allegedly told investors his firm the Leverage Group, which was run out of a Brooklyn storefront, was investing in stock options and earning anywhere from 12% to 21% on their money since 1979. However, Barry allegedly never produced or earned the rates of return that he advertised and told clients in their account statements. Rather, the extraordinary returns were simply made up.
A complaint filed by the Securities and Exchange Commission says Barry never made investments and stole as much as $40 million. Investigators said Barry also lied to investors claiming their money was insured through the Securities Investors Protection Corp. But neither the Leverage Group nor any of Barry's firms were registered with the SEC in any capacity. And none were a licensed brokerage so investors funds are not covered.
The SEC says Barry defrauded some 800 investors, including senior citizens and retirees.
According to an SEC statement, Barry ceased investing any of the investors' funds in options or securities in 1999 and began running a Ponzi scheme and diverting funds for his own personal use. This involved acquiring interests in at least 60 real estate deals but also helped support his mail order pornography business, Barry Publications, the SEC said.
Several investors grew suspicious and filed lawsuits after they tried to withdraw their funds, but the checks they received bounced.
George S. Canellos, director of the SEC's New York Regional Office, said:
Barry was an unscrupulous and unregulated investment manager who lured victims with false promises of investment safety, lofty performance, and liquidity. While Barry guaranteed investors high returns and provided them with false account balances, he was secretly diverting the funds into unauthorized ventures and for his personal use.
Barry is expected to be arraigned on criminal conspiracy charges in the U.S. District Court for the Eastern District of New York late Tuesday. He faces up to 20 years in jail. - Donna Block
Paulson's proposal to purchase an equity stake in Yellow Pages publisher Idearc is the second time in recent months an investor group has used its prepetition debt position to execute a bargain price 'exit LBO.'
Like most things associated with the pornography industry, what you see is artificially inflated, and it may simply be faked. So it comes as no surprise that pornography purveyor Philip Barry was running a financial Ponzi scheme on the side with inflated and faked promised returns. 
