A42 BUsINess India Abroad September 25, 2015
Ajudge last week threw the book at stock broker Sunil Sharma, 68, of Carlsbad, California, for destroying
countless lives by stealing more than $6 million from elderly investors in a long-running
Ponzi scheme while he enjoyed the good life
at their expense. He was immediately
remanded into custody to begin serving a
Sharma was sentenced in federal court by
United States District Court Judge John A
Houston for falsely claiming funds of the
elderly investors were safely placed in conservative investments when, in reality, he
was pursuing a risky day trading strategy
that ultimately turned into a Ponzi scheme.
‘You have not only destroyed the lives of
the people who appeared in court today, but
the lives of hundreds of others who make up
their extended family,’ Judge Houston told
Sharma during the sentencing hearing.
As detailed by the prosecution led by
United States Attorney for the Southern
District of California laura E Duffy, Sharma
covered up his massive trading losses by continuing to falsely tell investors that their
investments were doing well.
Among other things, the court documents
detailed, he would send investors monthly or
quarterly statements that falsely reflected
that their investments were generating the
Sharma admitted that even while reassuring investors, he diverted about $2.5 million
in investor funds for his personal use,
including, approximately $700,000 towards
the down payment of a $2 million home off
Artesian Road in San Diego, approximately
$12,000 for a cruise in the Mediterranean,
and for leasing a Mercedes Sl and a BMW.
As revealed in these documents, Sharma was a Series 7 licensed broker, who had
worked for Merrill lynch, AG Edwards, and
as an independent broker for Raymond
James. In 2000, he moved to San Diego
where he continued to practice as an independent broker.
Due to the market crash that followed
September 11, 2001, Sharma and his clients
lost a substantial amount of money. As a
result, Sharma gave up his license to act as a
securities broker and began to work in the
In 2002, he sold insurance from his business in Rancho Bernardo. He also began
teaching seminars, highlighting various
types of insurance and annuities that his
clients could purchase.
In 2007, he set up Gold Coast Holding,
llC as a vehicle to trade options and initial-ly funded the company with approximately
$50,000 of his own money.
After experiencing a bit of ‘beginners luck,’
he began telling his insurance clients that
they could make better returns if he could
‘day trade’ their money. Recognizing that his
customers would not give him money for
risky options trading, he lied to them and
falsely stated that Gold Coast was an
extremely safe way to earn a monthly retire-
ment income because their money was to be:
(1) part of a diversified portfolio,
(2) pooled with many other investors,
(3) used to buy bonds from emerging mar-
kets in Brazil, Russia, India, and China
(BRIC countries), and
(4) managed by Goldman Sachs.
Sharma guaranteed investors a rate of
return — typically between 6 percent to 7
percent for two to three years — and urged
his clients to liquidate their retirement
accounts and annuities based upon the safety of his investment scheme.
From the outset, Gold Coast — and later a
second company he established, Safe Harbor
Tax lien Acquisitions — exclusively used the
money for day trading options.
Between January 2008 and November
2014, Sharma raised $8.36 million from 32
different clients using these two companies.
To attract new investors, Sharma paid
$2.12 million in ‘returns’ to old clients from
funds generally derived from the contribution of later investors.
For example, of the approximately $3.5
million he raised from investors in the first
two years of day trading, Sharma was left
with only about $250,000 by the end of
2009. As a result, he turned Gold Coast into
a classic Ponzi scheme, paying earlier
investors their guaranteed rates of return
with approximately $5 million in new funds
solicited from later investors.
Prior to the investment scheme collapsing
completely, Sharma stopped trading option
spreads and switched over to purchasing
straight ‘call’ and ‘put’ options. It was his
hope that this new strategy would allow him
to recoup all of his investment losses.
Once again, however, his strategy proved
disastrous. Although he was able to make his
December 2014 monthly payout to investors, he ran out of funds in January 2015.
Duffy acknowledged that this Ponzi scheme was a bit harder to detect han usual as Sharma did not promise his investors outlandish returns. Nevertheless, she warned all investors to ensure
that individuals soliciting money have
appropriate licenses and audited financial
‘All investors—especially when they are
dealing with their retirement savings—must
exercise due caution before turning over
money even to long-time friends or else what
appears to be a safe harbor might turn into a
ship wreck,’ she said.
Federal Bureau Investigation Special
Agent in Charge Eric S Birnbaum, who led
the investigation, said, ‘Sharma engaged in
an elaborate Ponzi scheme to steal millions
of dollars from people who trusted him with
their life savings. The sentencing makes it
clear that the FBI and US Attorney’s Office
will work together to identify, disrupt and
hold accountable those individuals that are
involved in sophisticated financial fraud
schemes that steal money from the
“That’s an issue we raise often with the Indians, because
we know that a strong IPR regime is absolutely critical to a
competitive economy — it’s what underpins our economic
success and, while our system isn’t perfect, it does attract
some of the best companies from all over the world.”
“India will soon transition from being a net user of
technology to a net producer,” Biswal said, adding, “To
innovate, attract investment, and compete, the Indian
firms creating those new technologies will need strong
“There are several other steps India should take, but
today I’d like to focus on one very important opportunity —
a US-India Bilateral Investment Treaty,” she said.
“If India could complete a BIT with the United States it
would become India’s highest-standard investment agreement,” she added.
“It would demonstrate to international investors — espe-
cially those from the United States — that India is open for
“And it will attract much-needed capital for a variety of
sectors, including infrastructure, energy, health, education,
and many more.”
“A high standard BIT with the United States would lock-
in reforms for the long-term, it would give investors the
confidence they need to make the long-term investments
that India needs” Biswal said.
“What’s more, by signing a BIT with the United States,
India would show that it is willing and able to join other
high-standard investment agreements, making it even
more competitive and integrated into the global economy.”
“India has already completed bilateral deals, like the
investment chapter of their economic partnership agree-
ment with Japan, that provide strong investor protections,”
Biswal pointed out.
“If India were to commit to those same standards with
the United States, our two countries could greatly acceler-
ate the negotiation of a BIT,” she said.
“It would require a lot of hard work, but it would unlock
huge dividends,” she added.
“The bottom line is that we want more Indian firms to
invest in the United States, and US companies want to
build on their almost $28 billion investments in India,” she
“We want to see the expansion of sectors like the digital
economy, renewable energy, and especially manufacturing,
which could help integrate India more deeply into global
supply chains and markets.”
“The United States knows well that few can match the
innovative and entrepreneurial spirit of the Indians —
some 15 per cent of start-ups in Silicon Valley have been
founded by Indians and Indian Americans — a community
that makes up just 1 per cent of the US population.”
“To take full advantage of that demographic dividend,
India needs to create about one million jobs every month
for the next 20 years — and provide skills training for a 400
million-strong workforce,” Biswal said.
The Indian government’s ambitious ‘Make in India’ initiative is to create millions of new jobs in the manufacturing sector, she said, adding, this will require the Indian
economy to be better integrated into global supply chains,
markets and trade.
‘Few can match the Indian entrepreneurial spirit’
nisha Desai Biswal
Sunil Sharma gets
33 months in prison
for Ponzi scheme