Head of Downing venture capital funds gets prison sentence
David Wagner was sentenced in Manhattan federal court to 72 months in prison for securities fraud and wire fraud in connection with his operation of a number of corporate entities (collectively referred to as “Downing”) as a Ponzi-like scheme.
Wagner solicited almost $10 million from approximately Downing investors through materially false and misleading statements and misappropriated a significant portion of those funds. He used them for, inter alia, the payment of management fees, the repayment of prior investors, and personal expenses.
Wagner had previously pleaded guilty to two counts of securities fraud and one count of wire fraud, which each carry a maximum sentence of 20 years in prison. In addition to the prison term, Judge Hellerstein today ordered Wagner to serve three years of supervised release, and to pay forfeiture in the amount of $549,000 and restitution in the amount of at least $7,850,000 to victims of his criminal conduct.
From at least in or about December 2013 through at least in or about 2017, Wagner, the Chief Executive Officer of Downing, and co-defendant Marc Lawrence, the President of several Downing entities, solicited investments in Downing, a purported venture capital firm that would invest in healthcare start-ups referred to as “portfolio companies” and provide sales, operations, and management expertise to the portfolio companies in order to bring their products to market and generate returns for Downing investors, who also worked for Downing.
Wagner and Lawrence, and others acting at their direction, solicited almost $10 million in investments in Downing from employee-investors located across the United States.
After making the required investment of between $150,000 and $250,000 in Downing and starting their employment at Downing, employee-investors soon learned that Downing did not have access to millions of dollars in funding, often could not make payroll, and had virtually no products to sell. Employee-investors also learned that Wagner and Lawrence had misrepresented the companies in Downing’s portfolio, their product readiness, and ability to generate revenue. Wagner also misappropriated a significant portion of investor funds by using them for, among other things, personal expenses, including the purchase of a Porsche.
Wagner’s co-defendant, Marc Lawrence, is scheduled to be sentenced before Judge Hellerstein on February 1, 2021 at 2:30 p.m.