'Brooklyn Madoff' Ponzi Schemer Sentenced to 20 Years

A New York man convicted of running a $45 million Ponzi Scheme over three decades was sentenced to twenty years in federal prison on Friday, June 17th, 2011.  Philip Barry faced up to 34 years under federal sentencing guidelines.  According to prosecutors, the scheme is believed to be the longest in history. 

Philip Barry began soliciting investors in 1978 to invest in the Leverage Group, which he claimed focused on stock options.  Over the course of the next thirty years, more than 800 investors entrusted $45 million to Barry.  The scheme functioned by 'promising' a guaranteed rate of return to investors each December ranging from 12.55 to 16 percent.  At least some of the money was diverted to purchasing property that Barry planned to develop but could not later obtain permits.  Barry used funds from new investors to pay distributions to older investors, the classic hallmark of a Ponzi Scheme.

It was Barry himself who voluntarily approached authorities in 2008 to inform them he owed investors $50 million.  He would later that year declare bankruptcy, and would be formally charged in late 2009.  Barry settled a related SEC proceeding by agreeing to pay disgorgement of ill-gotten gains, a penalty, and pre-judgment interest.  

Barry's sentence is more severe than those Ponzi Schemers sentenced in similar situations, which may be the result of several factors.  First, Barry elected to go to trial rather than seek a plea deal, and was subsequently convicted of thirty-four federal charges.  Second, Barry's scheme spanned over three decades, making it the longest known Ponzi Scheme - including Madoff.  As part of his sentence, Barry is barred from seeking employment in the financial sector when he is released.