Long Island Business News
January 23, 2009

LI investment firm halts payouts, under investigation

By David Winzelberg

New York and federal officials are investigating a Hauppauge investment firm that has indefinitely halted payouts to clients, citing setbacks on commercial real estate loans.

The firm, Agape World, specializes in short-term, high-yield loans to developers and builders, offering investors returns of as much as 14 percent in as little as 72 days.

The firm’s founder, Nicholas Cosmo, told investors on a 1 p.m. conference call on Friday that three borrowers had defaulted on loans, forcing the halt in payments. Cosmo told more than 150 investors on the call that he had hired a law firm to foreclose on the projects and recoup investments, but that the process could take as long as one year.

“My job is to make sure that principal is paid back in total,” Cosmo said on the call.

Cosmo did not immediately respond to e-mails seeking comment. Attempts to reach him by phone were also unsuccessful.

Agape clients invested between $5,000 and $3 million each to fund what are known as bridge loans that usually lasted 10 to 12 weeks, but which could extend for several months.

Some investors said they have spent months trying to get their money back, but the rush to pull out intensified significantly in the wake of allegations that Wall Street fund manager Bernard Madoff bilked investors out of $50 billion in a classic Ponzi scheme.

Mike Kessler, president of Port Jefferson-based private investigation firm Kessler International, said he was hired last summer to help recover nearly $3 million for a New Jersey businessman who had invested with Agape.

“Based upon what we learned about Agape World, it exhibited numerous red flags indicative of a Ponzi scheme, which were promptly reported to law enforcement authorities for further investigation,” Kessler told LIBN.

The Suffolk County District Attorney’s office confirmed that it has been flooded with calls from nervous Agape investors and that it was in contact with the Federal Bureau of Investigation regarding the firm.

The FBI declined comment.

In 1999, Cosmo was sentenced to 21 months in federal prison and ordered to pay $177,000 in restitution for his role in defrauding investors of a Long Island securities dealer. The court also ordered him to undergo gambling therapy as part of his sentence.

Cosmo founded Agape World soon after his release from prison in August 2000 with money from family and friends.

Entrepreneur Magazine last year named Agape one of America’s fastest-growing companies.