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Fake Billionaire Busted in Alleged Ponzi Scheme

He posed as a successful billionaire to lure people in, the authorities say. 

But in the end, he only offered them a sandcastle, which collapsed when he was arrested on May 11. 

Phillip Galles, 57, a former Chicago commodities trader, has been charged in an investment scheme that defrauded victims of more than $2 million since 2019, the U.S. attorney for the District of New Jersey, Philip R. Sellinger, announced.

Galles is charged in a complaint with one count of wire fraud. 

He made his initial appearance on May 11 before U.S. Magistrate Judge Gabriel A. Fuentes in Chicago federal court and was detained, the statement said.

History of 200% Annual Return: U.S. Attorney

Galles falsely told his victims that he would invest their money in commodity futures through a Chicago investment company called Tyche Asset Management, investigators charged. 

The former trader and those working for him falsely told prospective investors that Tyche had a history of success, with returns in recent years exceeding 200% annually from trading commodity futures and options on CFTC-regulated markets while employing sophisticated technology and strategies, the authorities charged.

“Tyche made virtually no legitimate investments in commodity futures or otherwise,” regulators said. “Galles instead ran Tyche like a Ponzi scheme and used investor money to pay back other investors and for his own personal expenses.”

Galles told prospective clients that he held undergraduate and graduate degrees from a prestigious midwestern university, regulators said without specifying the school. But he did not hold any university degrees, undergraduate or graduate.

He also lied that he’d started his own hedge fund in 2011, backed by billionaires, and sold that fund in 2018, they said.

Galles allegedly made other outlandish statements to his victims, such as within some 60 days of officially beginning Tyche, the fund had about $2 billion under management. 

He allegedly told victims that a Kuwaiti sovereign-wealth fund was interested in investing in his hedge fund, and claimed during a videoconference that a well-known owner of a professional sports team was interested in a potential investment. 

Charges: Funds Used for Ferraris, Lamborghinis

He claimed to his potential victims that he led a billionaire’s lifestyle. He reportedly said he owned 122 cars, including certain high-end luxury vehicles, which he stored in a fortified warehouse he owned in Florida. Among these high-end cars were Lamborghinis and Ferraris.

But Galles does not own any cars registered in Florida, court documents show. He did spend some $48,000 on luxury-car rentals with a company based in Florida. 

Instead of applying investors’ funds to commodity-futures trades as promised, he used that money to pay back other investors and for his own personal expenses –including high-end clothing, rent on a luxury apartment, and luxury automobiles. 

For example, investigators indicate in the complaint that someone described as Victim-2, a mortgage professional from Texas, on Sept. 7, 2022, wired him about $100,000 to invest. The same day, Galles transferred, court documents show, $19,300 to pay a personal credit card bill, $14,800 to a jewelry store, $10,000 to another victim in the scheme, $9,000 to a bed and mattress store, $3,200 to his girlfriend and $6,000 to a luxury-car-rental company.

Through this scheme, the charges say, Galles allegedly defrauded a total of about 50 victims.

“As alleged, the defendants lied to participants and prospective participants with outlandish claims of experience, expertise and success, and also lied to regulators using CFTC registration to create an aura of legitimacy for a fraudulent scheme,” said Ian McGinley, director of enforcement at the Commodity Futures Trading Commission. 

Galles was arrested in an undercover operation set up last month. The count of wire fraud with which Galles is charged is punishable by a maximum 20 years in prison and a fine of $250,000 or twice the gross gain or loss involved in the offense, whichever is greater.

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