Union County Man Charged In $294 Million Securities Fraud, Conspiracy Case

SUMMIT, NJ — A 58-year-old man from Summit is charged with misleading dozens of victims as the CEO and co-founder of Prophecy Asset Management LP.

Jeffrey Spotts is charged with one count of conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, and securities fraud. He, along with multiple co-conspirators, is accused of stealing $294 million from customers looking to trade on the stock market.

In an announcement on Sept. 29, the U.S. Attorney's Office District of New Jersey says Spotts and his co-founder, John Hughes, falsely represented a "first-loss" trading strategy to secure customers' funds from January 2015 to March 2020. The men allegedly told victims that their money was being allotted to a diverse array of traders, or sub-advisors, who were required to submit cash collateral in order to access the funds.

This, they said, would put a backstop security net on any potential losses.

In addition, the two men told victims that if a sub-advisor started to lose an amount of money that came close to their cash collateral, the company would contact the sub-advisor to raise or replenish the collateral funds.

This, Hughes and Spotts said, could also lead to suspended allocations and trading, or ending relationships with certain sub-advisors if the losses were large enough. This false sense of security led victims to see Prophecy as a low-risk, transparent, and diversified option to place their money in, the Attorney's Office says.

The funds were actually moved to just one sub-advisor without any required cash collateral. No suspensions or terminations occurred, even though the account lost around $290 million.

Spotts and Hughes hid this from the victims using fake transactions and documents. The sub-advisor also helped Prophecy hide its losses from an auditor by providing monetary and written resources.

Both Spotts and Hughes are also being targeted by the U.S. Securities and Exchange Commission (SEC) with civil complaints based on their actions.

Each charge against Spotts for conspiracy to commit wire fraud, wire fraud, and securities fraud comes with a maximum of 20 years in prison and a $250,000 fine. Conspiracy to commit securities fraud carries a maximum of five years in prison and a $250,000 fine.

Hughes, 58 of Mahwah, has pleaded guilty to securities fraud charges and will be sentenced on March 10, 2026.

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