TAMPA — A federal judge late this afternoon ordered that Sarasota hedge fund manager Arthur Nadel remain behind bars, finding the risk is too high that he would try to flee prosecution.
“He had access to millions and millions and millions of dollars. There is no explanation of the money trail, and the risk of flight is out there,” U.S. Middle District of Florida Magistrate Judge Mark A. Pizzo said following a more than three hour bail hearing in Tampa.
Federal prosecutors and the Securities and Exchange Commission have charged Nadel, 76, with securities and wire fraud. He is accused of fleecing more than 600 investors nationwide of hundreds of millions of dollars in several hedge funds he managed. Investigators are calling his actions a Ponzi scheme.
During the hearing, federal Prosecutor Terry Zitek had argued that Nadel, who turned himself in Wednesday more than two weeks after he disappeared from Sarasota, should remain in jail while awaiting trial.
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“He already fled once rather than face the consequences of his actions,” said Assistant U.S. Attorney Terry Zitek.
Zitek said Nadel has access to private airplanes, and because of his age, any prison term would amount to a life sentence.
He also said millions and millions of dollars are unaccounted for.
“Where they are we don’t know,” Zitek said.
Tampa-based defense attorneys Todd Foster and Barry Cohen argued that Nadel should be allowed to be placed under house arrest, claiming Nadel doesn’t have the money needed to post a high bond. They also said their client is broke and does not have access to any money.
“He doesn’t have a bunch of money somewhere,” Foster said. “If he wanted to run, he would have run by now.”
Their client, they said, is not a flight risk, shown by his voluntary surrender to the FBI, and that he should be released on his own recognizance.
In the end, the judge disagreed.
“Your lawyers said you don’t have anything,” Pizzo said to Nadel. “I don’t know that frankly. There is a quantifiable risk, and simply house arrest with an electronic monitor doesn’t resolve this situation.”
Because Nadel is charged with two counts of securities fraud and wire fraud in the Southern District of New York, his Tampa-based attorneys said they plan to hold his trial there.
Pizzo said he will issue a written order of today’s ruling on Monday.
He also said he plans to issue a warrant of removal, putting the case out of the jurisdiction of the Middle District of Florida.
Pizzo also said that when Nadel gets to New York his bail conditions can be reviewed by a judge there.
Until then, Nadel will remain incarcerated without bond at the Pinellas County jail.
Nadel disappeared Jan. 14, the same day he was to remit $50 million to investors.
He left his wife a note saying he felt guilty about losing other people’s money and threatened to kill himself.
On Tuesday he surrendered at the FBI office in Tampa.
Meanwhile, a judge has issued orders preventing two banks from honoring two checks totaling $170,000 that Nadel wrote in the days before his Jan. 14 disappearance, court records show.
U.S. District Judge Richard Lazzara issued a temporary restraining order at 7:30 a.m. today at the request of a court-appointed receiver.
The receiver, Burton Wiand, sought the order late Thursday after obtaining copies of two checks for $50,000 each. Wiand was appointed to seize the assets of Nadel and his hedge funds on behalf of creditors and investors.
The first check, from the account of Nadel’s Scoop Capital LLC, was written by Nadel to Wachovia Bank. The check’s memo line said “Official ck - B.O.A.”, which Wiand said indicated it was being used to purchase an official check. The check was dated Jan. 9, five days before Nadel disappeared.
Wiand said he also obtained a copy of a $50,000 official check credit issued by Wachovia, also dated Jan. 9. However, the check had not cleared and Wiand sought to restrain Wachovia from honoring it.
Later in the day, Lazzara granted Wiand’s motion to seize $120,000 believed to be in a Colonial Bank account.
Wiand said Nadel wrote a check on a Scoop Capital account for that amount to Wachovia on Jan. 13, again apparently to acquire an official check. Records obtained from Wachovia indicate an official check for that amount was issued the same day to a “Shaul and Annie Blumenfeld.”
Wiand said he did not know who they are, but that he had found no records indicating that they were investers of Nadel’s. The check later was cashed at Colonial.
“The receiver believes the $120,000 is composed of investor funds,” wrote Carl Nelson, an attorney for Wiand.
Following today’s hearing, Zitek said that Nadel is scheduled to be interviewed on Monday in connection to the civil case.