Manhattan District Attorney Robert M. Morgenthau announced today the indictment and arrest of twin brothers for stealing over $2 million from more than 30 victims in a securities scheme.

MAKARA NKHEREANYE and TSELE NKHEREANYE, both 38, have been indicted on multiple charges of grand larceny, securities fraud, forgery and scheme to defraud. The crimes charged in the indictment occurred between January 1, 2005 and June 4, 2009.

The investigation leading to today’s indictment and arrests revealed that the defendants stole money from their victims by misrepresenting themselves as traders who had been successfully trading in the stock market for years, when in reality they had been netting losses for a decade. MAKARA NKHEREANYE, a Princeton University graduate, and TSELE NKHEREANYE, who attended Stanford University, began trading in an account held by MAKARA NKHEREANYE and their mother at Fidelity Investments in April 1999. They told a friend who gave them money to invest that they were paying his bills with his profits when in fact they suffered losses through trading and used the principal he had given them to make his bill payments. The NKHEREANYE brothers then used this false story as proof of their ability to earn profits, thereby convincing other people who knew this friend to invest. The NKHEREANYE brothers, who were both unemployed at least by 2003, convinced over 30 investors, who largely heard about the brothers’ “success” by word of mouth, that they were trading profitably. As with the initial victim, they were able to convince other victims that they were paying their bills with profits.

The brothers in fact claimed to earn profits of 10-15 percent per month through their stock trading. In almost every case, they guaranteed to their victims that they would not lose their principal investment, in some cases in a written agreement. The written agreements, although following a familiar format, would vary, and in some cases even listed the percentage profit the brothers guaranteed. They boasted to several of their victims that they could outperform any interest rate at a bank, any return on a retirement plan, or any return on an investment portfolio.  By and large their victims had little familiarity with the stock market. They included firefighters, construction workers, a plumber, a chef, a postal worker, a grocery store manager, and property managers.  To those victims, the NKHEREANYE brothers said that they were investing in low value stocks and led them to believe that these were safer stocks. In reality, the NKHEREANYE brothers conducted trades primarily in “penny stocks,” a highly volatile type of stock investment. The NKHEREANYE brothers failed to disclose to these victims the risks posed by these stocks. In cases where their victims had some familiarity with the stock market, the NKHEREANYE brothers misrepresented the types of stocks in which they invested or simply purported to have a secret, profitable system of trading. When one of their victims requested an account statement from them showing that he in fact had money in a trading account, they forged a Fidelity statement falsely showing that his investments were yielding profits.

Further, the NKHEREANYE brothers had netted trading losses every year with the exception of 2004, when they made a total of just over $5,000 for the year.  For every other year from April 1999, they suffered losses in ever increasing amounts. Despite these losses, the NKHEREANYE brothers consistently maintained to their victims that they were earning profits. Some investors were sufficiently taken in by what they believed to be monthly profits from their investment that they invested additional amounts, some even taking out loans to make their investments. But in reality what they received was either their own principal or principal from another victim. E-mail reports from the brothers would list profits as high as 23 percent for a month. Some victims received the reports monthly while others received them less frequently, but none of the reports ever showed the true state of the investor’s funds. 

In February 2009, Fidelity detected that the trading in the NKHEREANYE brothers’ account was not consistent with the usual trading in which their customers engage, and closed the account. The NKHEREANYE brothers merely opened a new account at TD Ameritrade and continued their fraud. However, by that point, their scheme was beginning to collapse as they were increasingly unable to continue to pay phony returns to their victims. So, in March 2009, they began to convince some of their victims that they had a new opportunity to invest in gold which would generate profits that would produce approximately a 100 percent return. This led to additional investments from some of their victims and at least one new victim brought on by an existing victim.

In addition to losing their victims’ money through trading and by using it to pay other victims, the NKHEREANYE brothers used the money to pay their personal expenses, including rent, phone bills, and cable bills.

MAKARA NKHEREANYE and TSELE NKHEREANYE have been indicted on one count of Grand Larceny in the First Degree, a class B felony; 8 counts of Grand Larceny in the Second Degree, a class C felony; 20 counts of Grand Larceny in the Third Degree, a class D felony; two counts of Grand Larceny in the Fourth Degree, a class E felony; 31 counts of Securities Fraud, a class E felony; one count of Forgery in the Second Degree, a class D felony; and one count of Scheme to Defraud in the First Degree, a class E felony. A class B felony is punishable by up to 8⅓ to 25 years, a class C felony is punishable by up to 5 to 15 years, a class D felony is punishable by up to 2⅓ to 7 years, and a class E felony is punishable by up to 1⅓ to 4 years, in prison.

The defendants are scheduled to be arraigned today in State Supreme Court, Part 1.

Assistant District Attorney Kim Han presented the case to the grand jury under the supervision of Frauds Bureau Chief Michael Kitsis and Deputy Chiefs Jeannette Molina and Micki Shulman.  Investigator Santiago Batista led the investigation with the assistance of Investigator Michael Wigdor, under the supervision of Supervising Investigator Stephen McCallion and Joseph Pennisi and Terrence Mulderrig, Chief and Deputy Chief respectively of the District Attorney’s Investigation Bureau.  Financial Investigator Chun Ho conducted the forensic accounting under the supervision of Frank Puma, Chief of the Financial Crimes Bureau.  Trial Preparation Assistants Diana Rosa and Grant Damon assisted in the preparation of the case. 

Defendant Information:

MAKARA NKHEREANYE, 8/15/1971
83 Second Avenue
New York, New York

TSELE NKHEREANYE, 8/15/1971
83 Second Avenue
New York, New York

 

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