A Greenport man was among three suspects indicted this week in connection with an alleged $5 million investment scheme, Suffolk County District Attorney Thomas Spota announced Tuesday.
Timothy Mueller, 54, was arraigned before Judge Fernando Camacho in Suffolk County Criminal Court in Central Islip Tuesday. He and two other men are accused of claiming to have created “the next big social media platform,” bilking potential investors out of millions of dollars. The men claimed their project was sponsored by the office supply company Staples and the social media site Myspace, the DA said.
“By using high-pressure sales tactics, including claims that ‘short-term funding’ was desperately needed to complete the project or it would fall apart, these defendants were successful in pressuring their victims into giving in excess of $5 million dollars,” Mr. Spota said in a statement.
The indictment charges Mr. Mueller, Kenneth Martino, 52, of Huntington and Jared Widman, 32, of Harvey’s Lake, Penn. with multiple charges of grand larceny in the first, second and third degrees and two counts of scheme to defraud in the first degree.
The court set cash bail for Mr. Mueller and Mr. Widman, who each pleaded not guilty, at $250,000 or $750,000 bond, according to the DA’s office. Mr. Martino will be arraigned Wednesday.
“None of the money went to business-related expenses the defendants claimed the investment money was needed for,” the DA’s office said in a press releases. “And the defendants’ relationship with Staples and Myspace was fictitious. The investigation determined the defendants used investors’ money to pay for luxury vehicles, golf club fees, tickets for sports events, gambling expenses and credit card bills.”
One alleged victim who spoke on the condition of anonymity said several victims in the scheme are North Fork residents, including former classmates of Mr. Mueller, who the victim said was president of his class at Greenport High School.
In an interview, Mr. Mueller’s attorney, Joseph Ryan of Melville, said his client was also a victim in the scheme, losing more than $200,000. He said Mr. Mueller was working with investigators for two years and was blindsided by the indictment.
“He gave [the DA investigator] 105 emails, 27 documents and proved he was out of money because he invested $228,000 in this venture,” Mr. Ryan said, adding that his client asked for a speedy trial to prove his innocence.
Mr. Ryan said his client is struggling to post bail because he “cannot afford it.”
He said Mr. Mueller is an expert in website construction, who was “used to raise funds for the venture.”
“We’re going to prove Mr. Mueller didn’t get any of these benefits,” Mr. Ryan said.
A New Jersey couple filed a federal civil suit against the three men in Southern District Court of New York in 2013, according to online court records. Mr. Mueller settled his end of the suit a year later, records show. The couple was awarded a nearly $4 million judgement against the other two defendants in November 2014.
Another alleged victim who spoke to The Suffolk Times said he became caught up in the scheme in 2011. The victim, who lives in Nassau County and requested anonymity, said he lost $46,000.
“In my case, most of it was borrowed on a home equity loan, so I’ve been in the process of paying myself back,” the victim said. “I would like to retire and I had to put that off for a few years.”
The victim said he was approached by one of the suspects arrested to make a short-term loan for an IT project that was intended to revamp Myspace. The project was originally supposed to go live in January 2011 but needed additional changes that required the short-term loan. Investors were told they would make their money back once it went live, the victim said.
“Toward the end of 2011, I began to suspect this wasn’t on the up-and-up,” the victim said. “Nobody’s recovered any money.”
In 2011, Justin Timberlake jointly purchased Myspace with Specific Media Group and the victim said it seemed like at the time that the social media site would be replaced by a social events website.
“It actually seemed like it could be legit,” the victim said.
Caption: (From left) Kenneth Martino, Timothy Mueller and Jared Widman.