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Philip Barry, 52, a New York money manager has been arrested and charged with running a $40 million Ponzi scheme over three decades, diverting some investor money to a pornography mail-order business. The government filed fraud charges on Tuesday over a scheme that is accused of falsely promising investors “guaranteed” positive returns as high as 21% annually through his firms Leverage Option Management Co, Leverage Group and North American Financial Services.

Flaming Homo Douchbag

Philip Barry’s reported ending balance of more than $45,000,000 “far exceeded” assets on hand, leading to “substantial losses” for his victims.

Barry filed for Chapter 11 bankruptcy protection last October, after the Ponzi scheme had begun to unravel in 2007.

“He ran these investment schemes for relatively small, unsophisticated investors,” said Alan Nisselson, the court-appointed trustee for Barry’s bankruptcy estate, in an interview. “Unfortunately, they were duped.”

According to the FBI and the U.S. attorney’s office in Brooklyn, Barry attracted money from 1978 until early 2009 by guaranteeing returns that were in fact “made up”, issuing account statements that showed growing balances, representing that his investments were safe, and promising easy fund withdrawals.

In 2006 Mr. Barry(douchebag) distributed a letter saying the Leverage Group had “produced annual returns ranging from the recent 12.55 percent to a high of 21 percent back in 1979.”

The U.S. Securities and Exchange Commission said Barry stopped investing funds in 1999 and instead used new investor cash to repay earlier investors or for other uses. AKA a Ponzi Scheme.

The SEC said Philip Barry used some of the funds to buy real estate, pay expenses of a mail-order porn business, and support his lavish lifestyle.

Barry faces up to 20 years in prison on the criminal charge. The SEC said Barry has settled its claims without admitting wrongdoing, and agreed to a civil fine in an amount to be determined later.

According to an October 2008 bankruptcy filing, Barry had between $1 million and $10 million in assets, between $10 million and $50 million of debts, and between 200 and 1,000 creditors.

The criminal case is U.S. v. Barry, U.S. District Court, Eastern District of New York (Brooklyn), No. 09-0876. The civil case is SEC v. Barry et al, U.S. District Court, Eastern District of New York (Brooklyn), No. 09-3860. The bankruptcy case is In re Barry, U.S. Bankruptcy Court, Eastern District of New York (Brooklyn), No. 08-47352.

(NEW YORK (Reuters) Reporting by Jonathan Stempel; Additional reporting by Grant McCool; Editing by Gerald E. McCormick, Further Editing by ME mofoquers)