Gambling Web Site a Tool in Youth's Investment Scam

8 January 2002

While his classmates worried about finding a date to the prom, getting the coolest stereo and driving the nicest car, 17-year-old Cole A. Bartiromo was busy making nearly $1 million.

One might see the California youth as quite the over achiever, but Bartiromo managed to amass his fortunes by defrauding potential investors. He did so by setting up a Web site through which he asked investors to give him money and promised that he would reinvest the money and return profits of 125 to 2,500 percent. The hefty claims were made even more conspicuous when the system, "Invest Bettor 2001," claimed to return profits in as few as two days.

The Web site enabled investors to deposit money directly into an account through which "guaranteed" and "risk-free" investment opportunities awaited. Among these opportunities was the "2500% Christmas Miracle Program," through which IB2001 guaranteed a supposed 2,500 percent return, beginning Dec. 26, 2001, on funds invested between Nov. 10, 2001 and Dec. 15, 2001.

The boastful claims, which were sent via message boards, caught the ire of federal authorities with the Securities and Exchange Commission in mid-November.

An investigation wasn't launched until after the teenager managed to dupe more than 1,000 people into investing in his scheme and amassing close to $900,000. The SEC was able to get the Web site shut down in mid-December.

Through a settlement also announced Monday, Bartiromo agreed to turn over approximately $900,000 he obtained from investors though the scheme and transferred to an account he controls at an unidentified Internet casino in Costa Rica.

He also agreed to a court order requiring him to account for all money raised throughout the scheme. The settlement called for him to repatriate all assets outside the United States and deposit them into an account for the U.S. District Court for the Southern District of New York. it also called for the freezing of his and IB2001's assets.

Litigation is ongoing, but SEC officials are pleased with the progress they've made in a short amount of time. They're confident the issue will be resolved and all those who Bartiromo ripped off will be paid back.

Bartiromo's attorney, David Bayless of Morrison & Foerster in San Francisco, was not immediately available for comment.

Stephen M. Cutler, director of the enforcement division for the SEC, said the case is a text book example of how the commission has managed to keep up with high-tech fraudsters.

"This case illustrates the commission's commitment to real-time enforcement," he said. "It also demonstrates that just about anyone--even a 17-year-old high school student--can mastermind a securities fraud over the Internet."

Wayne M. Carlin, director of the commission's Northeast Regional Office, explained how the process moved so quickly.

"We filed this action on Dec. 13, 2001, shortly after discovering the fraudulent offering on Web pages and while not knowing the identity of the fraudsters," he said "That same day, the court granted our request for expedited discovery. During the course of the last few weeks, we followed a trail that unveiled Bartiromo as the perpetrator and located $900,000 of ill-gotten gains."

Barry Rashkover, one of the New York-area attorneys working on the case for the SEC, said the case should send clear messages to both future fraudsters and potential investors.

"This case shows to people who are prospective fraudsters that the agency can act very fast," he said. "In very short order we filed an enforcement action to halt the fraud, we quickly determined who was behind and we found a significant amount of stolen funds.

"For an investor who wants to learn more about a case like this, hopefully it shows them that investors need to be careful whenever they read about an investment on a message board," he added. "They should be extremely cautious and hesitate if they see an investment that promises both exorbitant returns and investment safety."

Alexander Vasilescu, the other attorney working the case with Rashkover, said there are still steps the teenager must complete to fully comply with the court order.

"From all sources outside of the U.S. he has 48 hours to deposit those funds into the court's account," he said. "He then has 20 days to provide a detailed account of all money raised by him and Invest Bettor 2001."

Rashkover said the system won't be lenient on Bartiromo.

"Security fraud in general is frightening," he said. "It is out there and it is something that concerns us a great deal. Whether it is someone who is using the Internet or a boiler-room brokerage firm that is using the telephone we have to look at it in the same light."

Vasilescu doesn't consider Internet gambling to be the problem.

"We have seen fraud committed in various different forms and various different devices," he said. "We know fraudsters are always creative in how they commit their fraud so we have seen all sorts of things. This is one area, and there will be others in the future."

If local law enforcement officials choose to press charges he could face incarceration.

No Stranger to the Big Stage

In an interesting side note to the Bartiromo case, this isn't the first time the youngster's moneymaking practices have earned him national media exposure.

On Aug.12, 2001, the teen and his father, John Bartiromo, were featured in an ESPN show about the value of golfer Tiger Woods' trading cards.

The pair told the reporter how valuable the cards can be and how careful they are when deciding whether or not to open the packages the cards come in.

"You could leave it in the magazine … and get $1,000 or $2,000. Or you can risk it and take it out," said Bartiromo. "You might damage it, or you can get huge rewards … so I decided to risk it."

The risk paid off when the family collected a mid-six-figure sum for the cards in an auction, after two of the country's top trading card grading services rated his cards perfect or near-perfect.

"I wouldn't have thought that they would have gone for that … even in my wildest dreams," exclaimed Bartiromo's father at the time.