“Fake it until you make it” only works if eventually you make it. That is not, apparently, what happened for actor Zach Avery and his alleged attempt to become a film distribution mogul.
As we know from court documents unsealed earlier this week, the 34-year-old, whose legal name is Zachary J. Horwitz, stands accused of orchestrating a Ponzi scheme in which he promised investors he would use their money and his connections to acquire move rights and sell them to Netflix and HBO.
Of course, as the story goes, Horwitz’ mouth wrote checks his “connections,” if they did in fact exist, could not actually cash. All told, he took in $690 million worth of checks over five years, allegedly. But without actually being able to buy movies, such as documentary Active Measures, Canadian film Blood Quantum, or Italian comedy Lucia’s Grace, and sell them to the entertainment firms as promised, Horwitz instead used the classic tactic of using new investor money to pay old investors, along with pocketing a good-sized chunk for himself, according to federal authorities.
Horwitz, who starred in last year’s noir thriller Last Moment of Clarity and horror flick You’re Not Alone, was arrested by federal law enforcement in California on Tuesday. He was also sued by the U.S. Securities and Exchange Commission. A federal judge approved the freezing of his assets, which included $3,297 in a personal checking account, $3,229 in two business checking accounts, and a $6.5 million Los Angeles home, mortgaged for $4 million.
According to the SEC's complaint, Horwitz also dipped into investor funds for “lavish personal spending,” such as $124,582 for trips to Las Vegas, $1.8 million for credit card payments, $691,800 for a celebrity interior decorator, $165,408 for automobiles, $137,072 for private jets and $54,600 for a “luxury watch subscription service.”
The trouble is that even if he did blow all that cash on a mansion, private jet rides and fancy watches, the total doesn’t add up to anything close to the amount of money still missing. The government alleges that of the $690 million that investors sunk into the scheme, $227 million remains unaccounted for. If history is any guide, tracking it down and getting it back won’t be a quick or easy task.
Most of the big Ponzi schemes dating back to the 2008 financial crisis were still being unwound as of June 2019, with many victims still left in the lurch, according to an analysis by the Wall Street Journal. People who run such frauds usually entice investors with the prospect of juicy returns in a business deal, but instead shuffle money from one batch of investors to another. Getting money back to victims may involve clawing back some of the funds that early investors were paid.
The namesake of the type of scheme, Charles Ponzi, was Italian swindler in the 1920s who promised clients fat profits by investing in discounted postal coupons, but simply paid off old investors with new investments.
Investors who lose money when broker-dealers collapse may be able to get help from nonprofit membership agency the Securities Investor Protection Corporation, but many Ponzi schemes, being outside the traditional brokerage industry, do not qualify for the group’s assistance. Often victims are usually left with whatever a court-appointed trustee can recover, or what criminal courts can obtain from defendants as restitution, although usually that is very little.
Victims of Bernie Madoff’s epic $65 billion Ponzi scheme are estimated to have ultimately lost about $20 billion in the fraud. As of this year, about 80 percent of those funds have finally been recovered through efforts by the Justice Department and a trustee.
Horwitz is alleged to have gone to great lengths to persuade deep-pocketed investors that he was a legitimate middle-man between film producers and Netflix and HBO, relying on fabricated emails and contracts to make his case. The actor allegedly told investors that the entertainment companies were eager to fork over money because of ever-pressing demands for new content on their streaming services. (His lawyer did not respond to a request for comment.)
Through his company 1inMM Capital LLC, he sold promissory notes to investors, and claimed he could pay them back with a 35 percent return, according to the government. The scheme started to unravel, however, soon after Netflix got wind of the bogus business relationship claims, and sent a cease-and-desist letter to Horwitz in February, according to court filings.
As late as March 12, with investigators digging into him, Horwitz desperately tried to reassure his biggest investor that all was well, federal officials said. However, he acknowledged in an email that “Netflix is a real problem at the moment.”
We can assume this is all going to make for a pretty interesting movie one day.
