Los Angeles man sentenced to 20 years in federal prison for $650 million Ponzi scheme that falsely claimed to license foreign film rights | USAO-CDCA
LOS ANGELES – A Los Angeles man was sentenced today to 240 months in federal prison for operating a Ponzi scheme that raised at least $650 million with false allegations that investors’ money was used to acquire licensing rights to films that HBO and Netflix allegedly agreed to distribute overseas.
Zachary Joseph Horwitz, 35, of Beverlywood, Los Angeles, was sentenced by U.S. District Judge Mark C. Scarsi, who also ordered Horwitz to pay $230,361,884 in restitution to his victims. Horwitz pleaded guilty in October 2021 to one count of securities fraud.
“Defendant Zachary Horwitz presented himself as a Hollywood success story,” prosecutors explained in a sentencing memorandum. “He presented himself as an industry player who, through his company … leveraged his relationships with online streaming platforms like HBO and Netflix to sell them foreign film distribution rights to a regular price… But, as his victims learned, [Horwitz] was not a successful businessman or Hollywood insider. He just played one in real life.
For more than five years, Horwitz raised millions of dollars from investors, many of whom were personal friends, based on false claims that their money would be used to acquire film distribution rights, which would then be licensed. cost-effectively to online platforms such as Netflix and HBO.
But the whole thing was a lie. In reality, Horwitz’s company has neither acquired any movie rights nor entered into any distribution deals with HBO or Netflix. The alleged copies of film licensing agreements and distribution agreements were fake.
Instead of using the funds to acquire films and arrange distribution deals, Horwitz operated 1inMM Capital as a Ponzi scheme, using victims’ money to pay off previous investors and finance his own lavish lifestyle, including including buying his $6 million Beverlywood residence, luxury cars, and traveling by private jet, according to the government’s sentencing memorandum.
Horwitz defrauded five major groups of private investors, but he knew that these entities were taking funds from individual investors. Throughout the program, Horwitz has raised at least $650 million from more than 250 people who have invested directly or indirectly in 1inMM Capital. At the end of 2019, 1inMM Capital started defaulting on all of its outstanding promissory notes. To date, Horwitz, through 1inMM Capital, remains in default to investors in aggregate outstanding principal of approximately $230 million and his scheme has caused significant financial hardship for dozens of investors.
Horwitz’s scheme began in 2014 and lasted until the FBI arrested him in April 2021. During that time, Horwitz, through his company, 1inMM Capital, made hundreds of tickets to six and 12 month order with investors. The funds provided under each ticket were supposed to provide money for 1inMM Capital to acquire the rights to a specific movie, and each ticket was supposed to be repaid using the profits from licensing those movie rights to Netflix or HBO. The promissory notes guaranteed repayment on a specified maturity date, as well as the amount to be paid at maturity, which included investment yields ranging from 25% to 45%.
To give investors a sense of security, Horwitz provided them with purported movie licensing deals between 1inMM Capital and sales agents for production companies, as well as purported distribution deals with Netflix and HBO.
Investors started complaining after 1inMM Capital started defaulting on the notes in 2019. In response, Horwitz falsely reassured investors that any missed payments on the promissory notes were caused by streaming platforms and that the payment on the Notes would resume. To back up these bogus excuses, Horwitz sent investors fabricated emails and text messages using the identities of actual HBO and Netflix employees.
The FBI investigated this case. The United States Securities and Exchange Commission provided substantial assistance.
Assistant United States Attorneys Alexander B. Schwab and David H. Chao of the Major Fraud Section prosecuted the case.