Republican Representative George Santos said a company later accused of running a “Ponzi scheme” was “100% legitimate” when it was accused by a potential client of fraud in 2020, more than a year before it was sued by the US Securities and Commission of exchange. After the company where he worked came under investigation by the federal government, Santos publicly stated that he was unaware of allegations of fraud at the company, according to a CNN KFile review of social media and statements by Santos.
Santos, the embattled freshman Republican, faces mounting pressure to resign after lying and misrepresenting his educational, professional and family history, including falsely claiming he was Jewish and descended from Holocaust survivors. Santos admitted to having “embellished” his resume, but stated that he “is not a criminal”.
Santos worked at Harbor City Capital Corp. in 2020 and 2021, a company the SEC said was a “classic Ponzi scheme” in an April 2021 complaint against the company. A Ponzi scheme is a type of scam where existing investors are paid with funds from new investors, often promising artificially high rates of return with little risk. Santos was not named in the SEC complaint.
Joseph Murray, attorney for Representative Santos, told CNN in an email on Thursday that Santos was not aware of wrongdoing at the company.
“As for any questions regarding the capital city of Harbor City, in light of the ongoing investigation and for the benefit of the victims, it would be inappropriate to respond other than to say that Representative Santos was completely unaware of any illegal activity taking place in Harbor City. Capital,” Murray told CNN.
Santos told The Daily Beast in 2022 that he was “just as distraught and distraught as everyone else” upon learning of the allegations against Harbor City. But in a now-deleted tweet on his since-deleted personal Twitter account, a potential customer questioned claims that the company had a 100% bank guarantee on its investment in the form of a stand-by line of credit (SBLC).
“The market instability is leading to a strong (sic) erosion of capital. @HarborCityCap offers you a strategy that mitigates losses and risks while creating cash flow, while its principle is 100% guaranteed by an SBLC maintained by several leading institutions. #fixed income #alternative investment #gain”, Santos tweeted in April 2020 under the name George Devolder, using his mother’s surname.
In June, a potential client responded to this tweet from Santos by saying he looked into a Harbor City SBLC and found it to be fraudulent.
“George, this SBLC I received from Harbor City has been reviewed and Deutsche Bank claims it is a complete fraud and not signed by the bank official on the document. How do you explain this?”, said the user.
“I’m sorry I’m not following you. Would you please email me at George.firstname.lastname@example.org and we can work this out together. Our SBLC is 100% legit and issued by your institution. I look forward to hearing from you”, replied Santos.
In fact, according to the SEC’s complaint, “at no time” did Harbor City Capital “issue an SBLC,” despite the company’s claims.
Dylan Riddle, a spokesperson for Deutsche Bank, told CNN on Monday that they had no affiliation with Harbor City Capital.
“Harbor City Capital was not a customer of Deutsche Bank,” he said.
Attorney Katherine C. Donlon, court-appointed recipient for Harbor City Capital, told CNN in an email Friday that Santos was affiliated with Harbor City Capital from mid-January 2020 to April 2021.
On Wednesday, the Nassau County GOP and several New York Republican congressmen called for Santos’ resignation. Santos still has the tacit support of House Speaker Kevin McCarthy, who said it was up to voters to decide.
In other media analyzed by CNN’s 2020 KFile, Santos called himself “the boss” of the Harbor City New York office and the company’s executive. In a 2020 interview, Santos said that he managed a $1.5 billion fund for the company with 12% and 26% returns on investors’ money.
“Currently at Harbor City Capital, I manage a fund of 1.5 billion, right?” said Santos. “And I know how to manage it well. I give record returns to anyone who watches this, they’ll understand. I’m giving a fixed income return of 12% a year, which nobody in the market is giving four and we’re giving 12. We’re also giving 20 to 26% in IRR return on our investors’ capital. So if there’s one thing I know how to do, it’s manage money and grow it.”
The SEC filed a complaint in April 2021 against Harbor City Capital and founder Jonathan P. Maroney, alleging that Maroney raised $17.1 million by misleading more than 100 investors through a series of unregistered fraudulent securities offerings and used the money to enrich himself and his family. . The SEC alleged that of the investor money collected and deposited in Harbor City Capital’s bank accounts “no more than” only $449,000 was used for business expenses.
Neither Santos nor other Harbor City Capital employees were named in the complaint.
In October, Maroney obtained a stay in federal court for the SEC’s civil suit after Maroney noted that he is “currently the subject of a related criminal investigation.” He is representing himself in the case.
CNN reached out to Maroney for comment, but did not hear back.
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