How the Indiana College Brothers Fired a Hollywood Actor’s $ 690 Million Ponzi Program
On a cold day in late 2017, Jacob “Jake” Wunderlin, co-founder of JJMT Capital, appeared for a meeting at a diner in Chicago’s Gold Coast neighborhood. His lunch companion, Adam Ferrari, was a petroleum engineer who had started investing at Wunderlin and wanted to ask a few questions. Through JJMT Capital, Ferrari had bought promissory notes issued by a Los Angeles company, 1inMM, that licensed films and sold them for huge profits to HBO and Netflix NFLX.
“Why don’t HBO and Netflix do this alone,” asked Ferrari. He also wanted to make sure that Wunderlin was putting his own money into the deals. Wunderlin carefully answered Ferrari’s questions, assuring him that the 1-in-MM notes presented an incredible opportunity. Ferrari would end up investing about $ 250,000 in nine of the 1-inMM notes (one in a million) that promised to pay him 25% interest.
On Tuesday, federal agents in Los Angeles arrested Zachary Horwitz, the 34-year-old little actor behind 1inMM, and charged him with running a Ponzi program that totaled $ 690 million, according to securities regulators. The film licenses and the contracts with HBO and Netflix were fake, the federal prosecutor said, adding that “by far the largest source of investor money” that flowed into the Ponzi program came from JJMT.
Jake Wundrelin knew Horwitz well. The two had become quick friends when both were college students at Indiana University Bloomington. It was there that Wunderlin became a good friend of two brothers of the Beta Theta Pi fraternity, Joe deAlteris and Matthew Schweinzger. All four men were closely related. After graduating from college in 2010, Horwitz went to Hollywood and tried to become an actor under the name Zach Avery, while the other three young men went to Chicago and New York to try their hand at finance.
In Chicago, Wunderlin and deAlteris began working together as financial analysts at JPMorgan JPM before moving to other financial firms. Schweinzger worked for Morgan Stanley MS in New York. These were low-level entry-level jobs with long hours and grunt work, but Horwitz soon found a way out of the rat-climbing Wall Street rat race.
Back in Hollywood, Horwitz founded 1inMM and made a proposal that was safe. He announced to his friends at Indiana University that he would be buying regional distribution rights for films and licensing them for more than what he paid to online platforms like HBO and Netflix for distribution outside the United States. DeAlteris invested in one of these deals back in 2014 and made money.
In the summer of 2015 Horwitz Wunderlin, deAlteris and Schweinzger sent an annual report in which 1inMM was touted to have acquired and distributed 49 films “without suffering a single loss”. He said HBO and Netflix are hungry for content. For a personal touch, Horwitz also sent his college friends a bottle of Johnny Walker Blue Label Scotch with the annual report.
Wunderlin, deAltris and Schwinzger founded JJMT Capital in a 1,100 square meter apartment in Chicago and raised money for the deals. They were joined by Tyler Crookston, who graduated from Indiana University in 2007. JJMT stood for the first initials of the founders Jake, Joe, Matthew and Tyler. Wunderlin and deAltris quit their jobs, but the other two did not, and Crookston left the group within two years.
The JJMT crew went out and found dozens of investors for Horwitz’s promissory notes. They sold the notes to their family, friends, and professional contacts. The notes ran for between 6 and 12 months and were each linked to a specific film such as “Blood Quantum” and “La Melodie”. In total, JJMT raised around $ 216 million alone, according to securities filings, and received 500 promissory notes. They would cut the interest rates promised by Horwitz from 30% to 40%.
For years Horwitz paid steadily on the banknotes. He also lived an extravagant life. Horwitz bought a $ 5.7 million home in the Beverlywood neighborhood of Los Angeles and spent $ 124,000 on trips to Las Vegas and $ 2.5 million on a celebrity interior designer. Horwitz also used $ 137,000 on charter jets and $ 54,600 on a luxury watch subscription service.
However, as of December 2019, Horwitz suspended payments for 160 bonds sold through JJMT and ultimately missed more than $ 160 million in capital and another $ 59 million in returns on the bonds JJMT sold. When JJMT was confronted with Horwitz, he conjured up fake emails between him and Netflix and HBO employees to keep JJMT at bay, prosecutors claim. Eventually, the JJMT informed law enforcement agencies that something was wrong. It found that securities regulators claimed Horwitz was using money from new investors all along to offset payments due on early debt securities and using investor money to fund his lavish lifestyle.
JJMT declined to comment. Anthony Pacheco, Horwitz’s attorney, did not respond to requests for comment.
“They thought this was their golden goose. I had no idea how big that was, ”said Adam Ferrari, the petroleum engineer who had invested in nine von Horwitz ‘banknotes through JJMT. He lost approximately $ 100,000 and has filed a lawsuit against JJMT. “My frustration with the JJMT group is that they had a fiduciary duty to investigate this guy in LA and they didn’t.”