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Zachary Horwitz dreamed of making it big in Hollywood, but his most convincing role would be that of a real-life business man as he swindled his closest friends.
Horwitz ran Hollywood’s largest Ponzi scheme, raising at least $650 million with bogus claims that investors were buying licensing rights to films that would later be sold to streaming giants like Netflix and HBO.
In reality, his company never acquired any film rights and didn’t have distribution agreements with either company. Instead, prosecutors say Horwitz used the money to fund his own lavish lifestyle and pay returns to other investors to keep up the mirage.
“This one is tragic, because it started off as imaginary, continued as imaginary and then grew so large,” Alexander Loftus, a civil attorney with Loftus & Eisenberg, LTD told CNBC's “American Greed” in an episode airing Tuesday, of the numerous victims of the scheme.
Horwitz was sentenced to 20 years behind bars in February and ordered to pay more than $230 million in restitution to his victims after pleading guilty in October of 2021 to one count of securities fraud, according to a statement from the Department of Justice.
“Defendant Zachary Horwitz portrayed himself as a Hollywood success story,” prosecutors wrote in a sentencing memorandum. “He branded himself as an industry player, who, through his company … leveraged his relationships with online streaming platforms like HBO and Netflix to sell them foreign film distribution rights at a steady premium. … But, as his victims came to learn, [Horwitz] was not a successful businessman or Hollywood insider. He just played one in real life.”
Before he made his way to Hollywood, Horwitz grew up living a comfortable life in Fort Wayne, Indiana.
“They certainly weren’t struggling,” high school friend Chris Krebs told “American Greed.” “They had a really nice lake house in addition to their main residence.”
Horwitz was charismatic even then, as a popular high school athlete.
“He was a fun guy to be around,” Krebs recalled.
After high school, while many of his friends were earning business degrees, Horwitz got a degree in psychology from Indiana University and opened a short-lived restaurant in Chicago before making his way to Hollywood to become an actor.
“It was incredibly surprising,” Krebs said. “He had never talked about acting before and all of a sudden to be involved and trying to make himself be an actor was just, it was kind of weird.”
Horwitz secured some minor roles, including in thriller films such as "Last Moment of Clarity," using the stage name Zach Avery. He started the company 1inMM Capital, which he pitched to his friends as a film acquisition and distribution company that would capitalize on the constant need streaming services have to provide viewers with new material.
As FBI Special Agent John Verrastro explained, Horwitz told his investors that their money would be used to buy the film rights from a content provider or their sales agent and then he would use his connections to sell the rights to Netflix or HBO.
He claimed the movies — which prosecutors said were often low-budget B- or C-list movies — were being shown exclusively in Latin America, a carefully crafted lie that prosecutors say likely kept the scheme going for years.
“It would be more difficult in some ways for a victim to fact-check for example whether in a particular country in Latin America Netflix is streaming this movie that they invested in,” Assistant U.S. Attorney David Chao said.
Many of his first investors were his own college friends, many of whom had gone on to develop careers in finance. Rather than sell equity in the company, Horwitz was raising money through promissory notes which he told investors he used to purchase the film rights. After a deal was allegedly made with Netflix, Horwitz told his investors the note was paid off and the investors would benefit from any additional profit from the deal, which he insisted can include returns of up to 45%.
To keep the scheme going, Horwitz used money from new investors to pay returns to older investors, making it appear like a legitimate and profitable business.
“Frankly, many of them were skeptical at first, but when they gave him the money they didn’t just get a return back on a piece of paper, they were actually receiving payments into their bank accounts,” Assistant U.S. Attorney Alexander Schwab said.
Four college friends of Horwitz were so excited about the company, they left their own jobs in finance to create JJMT, a firm designed to recruit new investors. JJMT would later become one of five “major groups of private investors” that prosecutors say Horwitz defrauded with the scheme.
“Zach Horwitz was perfectly situated in order to make this work,” Schwab said. “His friends knew that he had some involvement in Hollywood, albeit a small one, and those friends themselves had a role in finance in their own sector and as a result, he was able to tap into their investment, their money.”
As the scheme grew, Horwitz talked his friends’ parents, grandparents and others into investing. Over a six-year period, Chao said Horwitz raised over $650 million.
While some of it went to pay back investors, Horwitz also used the money to fund his own lavish lifestyle, which included a $6.5 million home, treks on private jets, parties and events, and leases for high-end cars.
“It was great,” Krebs recalled of visiting his friend. “It was always a good time with him, similar to college. Like, you go out, he’s buying all the drinks, he’s got the good places to go.”
While Krebs never invested with his friend, there were plenty of others who did. Economy professor Terry Crandall estimates that he lost over $100,000 by investing with JJMT—but it could have been worse. Right before Horwitz’s arrest in April of 2021, he had been considering pulling $400,000 in equity from his own home but never pulled the trigger.
“We had at least enough sense not to do that,” Crandall said.
The scheme finally came to light after Horwitz ran out of money to pay off the promissory notes and his investors.
“No matter how successful you are at operating a Ponzi scheme, eventually there’s a limit to how much new money you can recruit, how much new money you can bring into the scheme, and that’s what happened to Zach Horwitz,” Schwab said.
He was taken into custody at his home in April of 2021. Federal prosecutors said Horwitz still owes an estimated $230 million.
“Unfortunately, in this case, a lot of the money has been squirreled away or already spent but where that money is now exactly is hard to say,” Chao said.
He’s currently serving his 20-year sentence in California’s low-security federal correctional institute Terminal Island, according to prison records.
“I would just love to know what his end game was with this and does he feel any remorse?” college friend Derek McKerr told “American Greed.” He is now left wondering, “Is there any remorse for this?”
To learn more about this case, watch "American Greed," Tuesdays at 10 p.m. ET on CNBC.
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