by Majda Muhic, Spring 2017 Student Intern
On January 27, 2017, the Securities and Exchange Commission charged Joseph Meli and Matthew Harriton, two New York City men, with fraud for running a Ponzi scheme involving the alleged purchase and resale of tickets to high-demand shows – including the Broadway musical Hamilton and Adele concerts. The two men allegedly convinced at least 125 unknowing investors in thirteen different states that their money would be used to purchase blocks of show tickets, which would then be resold at a big profit. The scheme promised high returns on investment within only eight months.
For this purpose, according to the SEC’s complaint, the two men created four purported ticket reselling businesses – Advance Entertainment, Advance Entertainment II, 875 Holdings, and 127 Holdings – and used these to solicit investor funds. Meli and Harriton went so far to fabricate an agreement with the producer of Hamilton to buy a block of 35,000 tickets to the musical. The men collected a total of $81 million from unsuspecting investors.
However, according to the SEC, none of the money was actually used for its promised goal – no tickets to Adele or Hamilton were ever bought. Instead, Meli and Harriton used the money to make Ponzi payments to old investors. They also used nearly $2 million for personal expenses, including private school and camp tuition, jewelry purchases, and casino payments. According to Paul G. Levenson, Director of the SEC’s Boston Regional Office, under the pretense of high-demand ticket sales and a promise of high returns, the two men moved “investor money in a circle” and created merely “a mirage of profitability.”
Meli and Harriton could have had it all until an SEC investigation and complaint and a parallel criminal proceeding by the U.S. Attorney’s Office for the Southern District of New York halted their scheme. The SEC is asking not only for the return of all illegally acquired money and interest but also for penalties.