DETROIT – A 30-year-old Detroit man who was once considered a “child prodigy” convinced at least 100 investors to spend millions of dollars on a fraudulent company and hid the fact that it was experiencing “catastrophic losses,” officials said.
Andrew H. Middlebrooks, 30, was named in a court document filed Oct. 11.
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Fraud scheme
Officials said from May 2017 through May 2022, Middlebrooks ran a scheme to trick people into investing money into a fund he created.
Middlebrooks created “EIA” in May 2017 and marketed it as a private, pooled investment fund. He said it used a unique and proprietary investment system that made it more likely to yield unusually high rates of return.
Investors quickly began purchasing limited partnerships in the company, and Middlebrooks used their money to trade in various global equity markets, according to authorities.
“From the beginning of the scheme, Middlebrooks’s investments failed to produce the returns investors anticipated, resulting in catastrophic losses,” court records say. “Rather than admitting that EIA’s fund was losing money, Middlebrooks, with intent to defraud, continued to solicit money and lied to investors about EIA’s investment performance.”
Hiding results from investors
Officials said Middlebrooks used “an elaborate web of false and fraudulent material representations and promises” to hide the company’s losses from investors until the spring of 2022.
Investors were given access to an internet portal to track the performance of their investments through EIA. But Middlebrooks created false information to be included in monthly statements that were uploaded to the individual investment accounts.
“Middlebrooks knew that if investors were given truthful information about their investments they would take their money out of EIA’s fund,” court records say. “This would not only deplete the money Middlebrooks had access to, but it would also make it difficult for him to obtain new investors.”
As a result, investors were “lulled into believing they were making money.” That often led to them investing even more into the company, officials said.
Even though EIA suffered significant losses every year, Middlebrooks created documents claiming the company’s performance was exceptional, according to authorities.
For example, one document created in the fall of 2019 claimed EIA’s track record included a return of 476.81%, with 81.82% of monthly trading showing a profit.
Middlebrooks also created false monthly performance sheets that claimed EIA had positive returns, court records show. The goal was to solicit new investors and keep existing investors in the dark about the money they were losing, officials said.
For example, in February 2021, Middlebrooks reported positive returns of 135.74% in 2020, even though EIA had lost more than $13 million.
Middlebrooks told investors that their money would be used exclusively for trading. Money used for fees and expenses would be disclosed in accordance with an investment agreement, Middlebrooks claimed.
In reality, he took money from the fund for living expenses and transferred money to his wife’s business, according to court documents.
Officials said Middlebrooks even paid more than $9 million back to investors, claiming the money represented returns from EIA trades. That money had actually come from new investors, authorities said.
“By the spring of 2022, Middlebrooks’s scheme to defraud began unraveling, and EIA’s fund collapsed,” court records say. “Losses to at least 100 investors exceeded $27 million.”
Charge
Middlebrooks is facing a charge of wire fraud, according to the information document.
If convicted, he will have to forfeit any property derived from the scheme. Any proceeds that can’t be seized by the court will be forfeited in the form of substitute property, officials say.