The 2017 film "Bitter Harvest" would not be considered a success by many definitions.
“It's a bad sign if even the prayers in this movie are worthless,” commented one reviewer, who contributed to the film 15 percent critic on Rotten Tomatoes.
It pulled in less than that $ 600,000 in the United States. But that didn't mean it still didn't have the money to make money abroad. All investors had to do was help buy the rights to distribute it and a number of other movies in Latin America, Africa, and New Zealand. Major distribution deals with HBO and Netflix were about to be formalized, they were told. Once those fell into place, investors would get a return of at least 35 percent.
That's the gist of what the Securities and Exchange Commission and federal prosecutors call a Ponzi scheme run by Zachary J. Horwitz, a not particularly famous actor with a quite extravagant House. Mr. Horwitz, who went by the stage name Zach Avery, was arrested on Tuesday on charges of wire fraud. He is accused of defrauding investors of at least $ 227 million and concocting his company's business relationship with HBO and Netflix.
“ We claim Horwitz has promised extremely high returns and made them plausible by calling out the names of two well-known entertainment companies and manufacturing documents, '' said Michele Wein Layne, director of the regional office of the SEC in Los Angeles. press release on Tuesday
Prosecutors said the correspondence Mr. Horwitz forwarded to clients, with HBO and Netflix email addresses, was as fictitious as the subject of his most recent film, the horror movie & # 39;The Devil BelowRotten Tomatoes critic score: 0 percent). According to Thom Mrozek, a spokesman for the US law firm in Los Angeles, Mr. Horwitz did not star in any of the 50 or so films he promised would bring in millions of investors.
Mr. Horwitz was in prison on Wednesday, Mr. Mrozek. Attempts to reach other employees of One in a Million Productions, whose website carries the slogan "When Odds Are One in a Million. Be the One," were unsuccessful. (The site was removed later Wednesday afternoon.)
Mr. Horwitz's attorney, Anthony Pacheco, did not respond to a request for comment.
The Ponzi scheme began to unravel as an investor wanted to get money back in 2019 and couldn't get it, Mr Mrozek said.
According to the S.E.C. 1inMM, as the company calls its name, has been finding ways to pay investors for years. Court documents do not list all of the films investors believed to have helped buy rights, but the complaint contains an image from 1inMM's "library"; the 1989 Jean-Claude Van Damme film “The KickboxerAnd the 2013 romantic comedy “The Spectacular Now” are included.
The way money can be made in the movie distribution world is to say, "I'll give you $ 100,000 for Latin American rights," said Mr. Mrozek, for example, adding, "I'm going to HBO or whoever and say: "Give me $ 200,000 to show the movie. & # 39; & # 39;
It is possible that the company has managed to purchase international distribution rights for a handful of films or it may have even started with good intentions, said Mr Mrozek. But what it didn't have was the relationship with HBO and Netflix that Mr. Horwitz told investors. It was that relationship he said essentially guaranteed returns of 35 percent or more in six months or a year.
"I believed that if HBO was involved, my investment was safe," an investor told the S.E.C.
Initially, Mr. Horwitz was able to keep his promises. Under the typical Ponzi scheme, previous investors got money from newer investors, Mr Mrozek said. His customers could continue to believe that investing in viewings of "The Kickboxer" in New Zealand and Latin America was smart.
But at one point, not enough money poured in to keep the illusion going – even with the help of the Johnny Walker Blue Label scotch Mr. Horwitz who was sent to clients, according to F.B.I. agent John Verrastro, who outlined the scheme in a complaint. Mr. Horwitz also falsely used investor money for a $ 5.7 million home and $ 700,000 in fees for a famous interior designer, according to the S.E.C
According to court documents, 1inMM has defaulted on more than 160 payments since December 2019. A Chicago investor who owed more than $ 160 million in principal and $ 59 million in profit wanted his returns and couldn't get them, Mr. Mrozek said. That investor contacted the authorities.