PROVIDENCE – A Rhode Island mortgage broker has admitted to misappropriating $1.5 million in investors’ money in an elaborate Ponzi scheme and then spending the money for personal expenses and to pay other investors.
Joseph Giuttari, owner of Hybrid Capital Group, THE FENS Co., and Realty Funding Advisors, among other entities, pleaded guilty Thursday to wire fraud and filing a false tax return for failing to report more than $500,000 in income, U.S. Attorney Zachary Cunha’s office announced..
In addition, Giuttari, of Cranston, admitted to theft of government property for filing fraudulent applications for economic disaster loans during the COVID pandemic, netting him $160,000 that he spent for personal use and pay investors under the scheme.
How the scheme worked
Giuttari held himself out as a broker specializing in short term mortgage loans financed by third-party investors by matching borrowers seeking short-term loans with private lenders looking to yield high rates of return. Giuttari acted as the middleman, receiving money from the investors to be distributed to borrowers.
From 2015 through August 2023, Giuttari misled investors he solicited through ads in The Wall Street Journal and other newspapers about his experience and success. He falsely told them that their money would be used to fund loans for real estate projects and that all loans were secured by mortgages. He also lied to them that loan amounts and purpose of the investments were legitimate and that the borrowers were actually receiving the money.
He misappropriated funds from borrowers by inflating how much they owed to investors for loans and he used borrowers’ names without their knowledge or authorization to get money from investors. He also created fraudulent promissory notes and real estate security instruments using forged signatures of borrowers.
Losses of up to $9.5 million
He admitted that he lulled investors with false and fraudulent excuses and promises, and that he appeased some early investors and lenders by paying them back using new investors’ money. Court documents show that the amount of loss between $3.5 million and $9.5 million.
According to court records, he spent the money on personal expenses such as credit card payments, mortgage payments for his home, cash withdrawals, and payments for his own international investments.
He admitted, too, to falsely stating in his 2019 income tax return that his income was $22,176 when it was actually at least $541,000.
This article originally appeared on The Providence Journal: How a RI mortgage broker created a multi-million dollar Ponzi scheme