A Santa Barbara man pleaded guilty Nov. 23 to fraud charges that could land him in federal prison for up to 33 years.
Peter Jerald Frommer, 35, entered guilty pleas in federal court in Los Angeles to charges of wire fraud, money laundering and three counts of failing to file income tax returns, according to a statement released by the U.S. Attorney’s Office.
By his guilty pleas, Frommer admitted to running a bogus investment scheme under the names “Cap Exchange” and “Cap X,” the U.S. Attorney’s Office said. Prosecutors believe he raised at least $12 million from victims across the country.
Frommer told his victims that he used commercial auction websites to purchase large lots of equipment for resale at higher prices, prosecutors said. He promised returns of up to 15 percent in as little as six weeks.
The investors’ money was used for Frommer’s personal expenses and to pay off other investors. Paying off investors with previous investors’ money is a type of fraud known as a Ponzi scheme.
The U.S. Attorney’s Office said it will argue at Frommer’s sentencing hearing that he caused his investors to lose about $9 million, and that he concealed more than $5 million in income from the Internal Revenue Service.
Frommer is scheduled to be sentenced March 10. He faces a maximum sentence of 33 years in federal prison.