US AUTHORITIES have charged a Miami businessman with running a $900 million (€672 million) Ponzi scheme and illegally using investors’ money to fund his lavish lifestyle.

The US Securities and Exchange Commission has accused Nevin Shapiro, founder of Capitol Investments, of defrauding investors by selling the securities that he told them would fund the company’s grocery distribution business, but instead spending their money on other ventures and on himself.

“Shapiro lured investors by falsely touting Capitol’s securities as a risk-free investment with extraordinarily high returns,” Eric Bustillo, head of the SEC’s Miami office, said yesterday.

“He used his prominence and prestige to gain investors’ trust in funding Capitol’s grocery diverting business, but behind their backs he diverted their money to enrich himself.”

According to the SEC, Mr Shapiro promised 60 investors 26 per cent annual returns.

His grocery business was supposed to be buying low-cost groceries in certain regions and reselling them at higher prices in other more expensive areas.

The SEC said that Capitol, which was founded in 1998, began operating at a loss in 2004 and ceased normal operations. It then began operating as a Ponzi scheme until 2009, paying investors with funds from other investors.

Mr Shapiro faces civil charges from the Securities and Exchange Commission and separate criminal charges from New Jersey’s US attorney’s office. – Copyright The Financial Times Limited 2010