Red Bank Broker Faces 7-Year Prison Sentence for $9M Ponzi Scheme

A Red Bank-based financial adviser and broker has been sentenced to seven years in prison and three subsequent years of supervised release for his role in a ponzi scheme that defrauded investors out of more than $9 million, U.S. Attorney Paul J. Fishman announced on Wednesday.

Prior to Wednesday's sentencing in federal court by U.S. District Judge Mary L. Cooper, Maxwell B. Smith, 73, had pleaded guilty to five counts of mail fraud in connection with the creation of a phony investment fund called Health Care Financial Partners (HCFP).

Smith, at his plea hearing, admitted that he falsely represented HCFP to investors as a lucrative investment fund with more than $300 million in assets managed through loans to healthcare facilities such as nursing homes, a release from the U.S. Attorney's Office said.

Smith sold "securities" in the form of sham $25,000 to $300,000 bond offerings as investments in the fake company, it added.

Smith admitted at his plea hearing that rather than investing the money, he misappropriated it, using $9 million of it to cover a personal expense tab for dining, gambling, entertainment and international travel. 

In addition to recruiting investors by creating a false investment prospectus that outlined the false $300 million value of HCFP's holdings, Smith, the U.S. Attorney's Office charged, also falsely claimed that investors’ money would earn yearly dividend interest of between 7.5 and 9 percent with tax-free returns. To earn clients' trust, he also sent them worthless bank checks, according to the U.S. Attorney's records, as evidence of purported investment earnings.

Restitution will be determined at another hearing, the release said.

Smith is being represented by Robert A. Weir, Jr., Esq., of Red Bank.