It’s not easy to make your name among the Ivan Boeskys and Mike Milkens and the other Wall Street white-collar-crime Hall of Famers—but Angelo Haligiannis is doing his best. Few have risen so far so fast: He was a college dropout with one year of experience on Wall Street who built an $80 million hedge fund out of nothing in just four years. Few conducted their schemes quite as audaciously: Angelo must be the only con man to have taken money from his sister, his in-laws, and the widow of a firefighter who died on 9/11. And once his fund proved to be nothing more than a glorified Ponzi scheme, Angelo joined an even more rarefied club: the select few who, shortly before sentencing, pull a vanishing act. Wherever he is now—and the manhunt continues—the federal marshals assigned to his case believe he has enough money stowed away to stay there for some time. What no one knows is what turned a bright kid from Queens into one of Wall Street’s most notorious grifters. And why, when he got busted, he risked even more and ran.
Success in the hedge-fund world came easily to Angelo—perhaps too easily. Born and raised in Flushing’s Greek-immigrant community, he went to Catholic school, bused tables at a neighborhood restaurant, and had a passion for souping up the engine of his Mustang GTS. He left NYU in his junior year, telling people that he had graduated early (in fact, he had dropped out), and took a job at Merrill Lynch as a broker’s assistant. Friends say he was instantly smitten with the perks of high finance—“the lifestyle, getting the limo ride home at night, all that,” says one. Angelo stayed at Merrill just thirteen months—enough time, he decided, to take what he’d learned and strike out on his own. Hanging his own shingle didn’t surprise those who knew him. “Even as a waiter, he was a total salesman,” says a friend. “If there was ten bottles of wine sold in a night, he probably sold eight of them. He had that charm, that charisma. It was like a little power trip for him.”
Living out the fantasy of nearly every 23-year-old Wall Street grunt, Angelo registered his hedge fund, Sterling Watters Group, in Delaware at the end of 1995. He opened three brokerage accounts (at Banc of America Securities and Chase in the States, HSBC in the Cayman Islands) and rented a desk at Worldco, a day-trading company at 110 Wall Street, where he immediately set about making bold trades in the tech market. This was the coming-out moment for hedge funds—the time they changed from arcane investment tools for billionaires to the must-have portfolio accessory for anyone hoping to outsmart the market. Hedge funds are essentially high-risk, high-reward mutual funds, pooling multiple investors’ money into one enterprise, though compared with mutual funds, hedge funds are almost completely unregulated. The fund manager, who usually works for 20 percent of the winnings, plus a small management fee, is free to dabble in stocks, bonds, derivatives—anything—without having to disclose exactly what he does and when he does it. Because of the additional risk, hedge funds are usually open only to investors with a net worth of at least $1 million.
Angelo found his own niche—friends and family. About half of Sterling Watters’s 80 investors met Angelo through the Greek-American social network in Queens. Who better to make the market seem safe to these people than a kid who was one of them—especially a kid like Angelo, with the apparent smarts of a Wall Street insider and the hunger and grit of an outsider? Angelo understood that even working stiffs in his old neighborhood, if they owned a home, were sitting on a net worth of at least a million dollars. At first, he advertised a minimum buy-in of $500,000, but he soon started bending the rules for people he knew, like his old boss at a restaurant in Queens, his childhood friends who’d grown up to become lawyers and doctors, and family members, too, like his sister, Evelyn. Angelo tapped another pool of clients from Michael Capul, a tall, portly broker whom he’d worked for at Merrill and who went on to work at Chase Investment Services.
Angelo’s marketing approach was a blend of technical Wall Street–speak and no-frills, just-us-guys approachability: In his first brochure, he described the fund as “a top-down aggressive capital appreciation fund” that combined “macroeconomic analysis” and “exhaustive quantitative proprietary modeling.” With his neighborhood contacts, Angelo employed an aloof, cocky version of the soft sell—never exactly coming out and asking for money, just going on in dizzying detail about how well he was doing. With interest rates diving, Angelo’s investors would take out second mortgages and dump the money into Sterling Watters. When Jerry Drenis, another contact from the Greek social network, started refinancing his family’s real-estate holdings to invest in Sterling Watters, Angelo offered to find him an attorney to assess the tax consequences of selling. They had a warm phone relationship that blossomed when they turned up at the same parties.