Investors lost $6 million in fraudulent scheme.
Valencia resident Keith Gilabert, 36, was sentenced to five years in federal prison Monday by U.S. District Judge Stephen Wilson for lying to investors about his fraudulent operation that resulted in approximately $6 million in losses to investors.
Gilabert, who operated an investment company called Capital Management Group, pleaded guilty in June 2006 to conspiracy to commit mail, wire and securities fraud related to his operation of a fraudulent hedge fund called GLT Venture Fund. In addition to the prison term, Wilson ordered Gilabert to pay victims $1,003,572 in restitution.
“The defendant committed a dastardly fraud that caused a lot of havoc and unhappiness to a lot of people,” Judge Wilson said at the sentencing hearing.
Gilabert operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund. Specifically, from September 2000 through January 2005, CMG purported to offer investments in GLT and collected more than $6 million from more than 40 investor-clients.
Even though he claimed average annual returns of 27 percent, from at least 2002 Gilabert concealed the fact that he had lost most of the investors’ funds and that he had misappropriated investors’ funds throughout most of GLT’ s operation.
Gilabert conspired with a Studio
City man Justin Paperny to mislead CMG investors with regard to, among other things, the performance history of the GLT fund, the risk associated with investing in CMG, and the oversight of CMG by the major brokerage firm. Gilabert paid off Paperny in exchange for his assistance in the fraudulent scheme.
Paperny was sentenced to 18 months in prison for his conspiracy with Gilabert. Judge Wilson ordered Paperny to pay $510,378 in restitution.