A Beverlywood man was arrested Tuesday on a federal charge alleging that victims put $227 million into a suspected Ponzi scheme based on false claims their money would be used to acquire licensing rights to films that HBO and Netflix had agreed to distribute abroad, particularly in Latin America.
Zachary Joseph Horwitz, 34, who also used the name “Zach Avery,” was taken into custody by special agents with the FBI. The criminal complaint was unsealed during Horwitz’s initial appearance in Los Angeles federal court, according to the U.S. Attorney’s Office.
During that court appearance Tuesday, a magistrate judge set Horwitz’s bond at $1 million, but he will not be released from custody until the bond is approved. An arraignment was scheduled for May 13.
The criminal complaint filed Monday charges Horwitz with one federal count of wire fraud, a crime that carries a penalty of up to 20 years in prison.
According to the affidavit, over the course of about five years, Horwitz solicited investors to invest in his company — 1inMM Capital LLC — which he claimed would use the funds to purchase regional distribution rights to films and then license the rights to online platforms such as Netflix and HBO.
Horwitz provided promotional materials to investors that claimed 1inMM Capital offered “safe” investments because “we receive confirmation from each of our outputs indicating their desire to acquire the rights to any title we purchase prior to us releasing funds for the film,” according to the affidavit.
However, instead of using the funds to acquire films and forge distribution deals, Horwitz operated 1inMM Capital as a Ponzi scheme, using victims’ money to repay earlier investors and to fund his own lifestyle, including the purchase of his $6 million Beverlywood residence, federal prosecutors allege.
The scheme allegedly began in 2015, when investment firms began entering into a series of 6-month or 12-month promissory notes with 1inMM Capital based on Horwitz’s statements. The funds supplied under each note were supposed to provide money for 1inMM Capital to acquire the rights to a specific film, according to court papers.
To convince investors he was legitimate, the affidavit states, Horwitz provided investors with fake license agreements, as well as fake distribution agreements with Netflix and HBO, all of which allegedly contained forged or fictional signatures. Despite Horwitz’s claim of “solid relationships” with online platforms, representatives for Netflix and HBO have denied that their companies engaged in any business with Horwitz or 1inMM Capital, the affidavit states.
Investors started to complain after 1inMM Capital began defaulting on notes at various times in 2019, according to the affidavit. To prolong the scheme in the wake of mounting defaults, Horwitz provided excuses that were purportedly given by Netflix and HBO, forwarding to investors false correspondence with Netflix and HBO in which Horwitz again fraudulently used the identities of Netflix or HBO employees, prosecutors say.
According to the affidavit, private investment firms have transferred about $227 million to 1inMM Capital pursuant to promissory notes since late 2018. Horwitz, through 1inMM Capital, allegedly has defaulted on all these underlying notes.