Fredrick D. Scott, who presented himself as a well-heeled hedge fund manager who sought in recent months to pursue African American businesses to invest in, is a fraud according to federal prosecutors.
Scott was arraigned Tuesday in U.S. District Court for the Eastern District of New York for bilking investors out of “at least” $750,000. A criminal complaint filed Monday says that Scott, 29, stole the money and used the funds for his personal use, all while he touted himself as a hedge fund manager of $3.7 billion in assets. The story of his success was propagated through a website which prominently featured him with photos of celebrities and well-known figures.
His personality and reputation was also promoted through a press release which was made available through a third party to BlackEnterprise.com.
It consisted of the following:
Fredrick D. Scott announced today that he has launched Fredrick D. Scott, LLC (FDS). FDS is a venture capital and private equity firm that will principally invest in and acquire minority-focused financial and banking institutions.
Scott was formerly the head of ACI Capital Group, LLC (ACI). Founded in August 2009 and registered as an Investment Advisor with the United States Securities and Exchange Commission, ACI was a privately held investment banking and advisory firm that managed $3.7 billion in assets.
“My goal is to redefine and advocate for economic sustainability and wealth creation in our community,” said Scott. “The minority banking industry, more specifically the African-American owned banking segment, is fragmented and under tremendous pressure from larger and more robustly capitalized mainstream competitors who have embraced the growing diversity of the marketplace. I believe that, in addition to capital, I can contribute fresh energy and new strategies that would improve the competitive posture of African-American owned banking and financial services businesses, as well as advance the mission of multi-generational economic strength and wealth creation in our community.”
It was not immediately clear Thursday who Scott’s alleged victims are, but the type of fraud alleged in the criminal complaint is aligned to what’s known as affinity fraud, in which victims are lured to invest because of a similar interest, religious association, racial background, etc.
Said one insider, miffed by Scott’s apparent success, $3.7 billion in investments “would have made ACI Capital Group one of the largest hedge funds in the U.S. … why would a hedge fund of this size [have] no transactions, virtually no employees, no coverage in mainstream publications, no executive alumni, and no registered funds?”
Scott was ordered held without bail.