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Eastonite Admits Running $10M Fraud Scheme

EASTON, Conn. – Gregory P. Loles, 51, pleaded guilty Tuesday to mail fraud, wire fraud, securities fraud and money-laundering offenses, according to the U.S. attorney in Connecticut.

Loles, an Easton resident, pleaded guilty in New Haven before U.S. District Judge Mark R. Kravitz for the offenses that stemmed from a scheme to defraud investors, including a Connecticut church, of millions of dollars.

Loles admitted that he falsely represented to many victim investors, including friends and fellow parishioners of a church in Orange, that he would act as their investment adviser and invest their funds through Apeiron Capital Management Inc. Apeiron's registration with the U.S. Securities and Exchange Commission was canceled in 1998. Loles also was selected to serve on the board of the church's endowment fund and was entrusted to manage the church's investment funds, including the endowment fund and building fund, by investing in, among other things, Arbitrage Bonds. However, Arbitrage Bonds did not exist.

Loles led many victim investors to invest more than $10 million with him and Apeiron. Loles failed to invest the money as represented, and instead diverted investors' funds for his own personal use and benefit, including to pay personal expenses such as credit card bills, and to distribute a large amount of funds to Farnbacher Loles, of which he was the majority owner and managing member. Farnbacher Loles was engaged in the business of professional race team operations and servicing high-performance automobiles.

Some of the individual investors provided Loles with funds that had previously been invested in IRAs, 401(k)s or were proceeds of life insurance payments. As part of the scheme to defraud, Loles provided investors with fraudulent account statements and also made periodic "lulling" payments to certain investors using a portion of other victim investors' funds.

Loles also defrauded clients of Farnbacher Loles.

The government estimates that victims lost at least $8.7 million as a result of this scheme.

Loles pleaded guilty to one count of mail fraud, one count of wire fraud, one count of securities fraud and one count of money laundering. Kravitz scheduled sentencing for Oct. 14. Loles faces a maximum of 20 years in prison on each count as well as restitution.

Loles has been detained since his arrest by the FBI on Dec. 15, 2009.

This case was investigated by the FBI, with the assistance of the U.S. Securities and Exchange Commission. It was prosecuted by Assistant U.S. Attorney Michael S. McGarry and law student intern Ewelina Chrzan.

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