An entrepreneur who used ties to prominent academics to raise nearly $27 million for a cluster of startups ran what U.S. regulators described as an “IP-rich” and “Ponzi-like” scheme that recycled new investor money to repay earlier backers while funding a lavish personal lifestyle, Bloomberg Businessweek reported. 

According to the news agency, Faiz Chowdhury persuaded investors to put money into Disruptive Technology Innovations and related ventures by touting purported breakthroughs in electric vehicles, cancer detection, nanotechnology, and high-speed transport, while highlighting links to researchers from institutions including MIT, UC Irvine, and Rice University. 

The SEC later alleged that Chowdhury spread the funds across more than 40 accounts and used the businesses as a “personal piggy bank” for cars, wine, jewelry, flights, hotels, and gambling, the report said. 

The alleged scam worked by using small sponsored-research payments and patent option deals with universities to market DTI as rich in valuable intellectual property, giving investors the impression the company was commercializing elite academic science. Investor decks projected blockbuster revenue from products such as fast-charging EV batteries, cancer-screening devices, and wearable nanotechnology, even though some ventures generated negligible revenue or amounted to far more modest products, according to the report. 

When cash ran short, Bloomberg reported, Chowdhury raised money from new investors and used some of it to pay off existing ones demanding repayment, a pattern the SEC cited as evidence of “Ponzi-like payments.” In one instance, after an investor sought the return of a $250,000 investment, total cash across DTI’s accounts stood at just $9,148.93, but Chowdhury raised another quarter-million dollars within 30 days and repaid the investor, the report said. 

Among the warning signs that Chowdhury might not be all that he claimed: he’d told associates that he held degrees from Harvard, Johns Hopkins, and MIT, and had done pioneering research at Caltech, NASA, and the Oak Ridge National Laboratory, according to the report. He also claimed to have advised President George W. Bush and Senator John McCain, and been behind the invention of the Flashpod, in addition to estimating astronomical earnings via DTI. 

Chowdhury denied wrongdoing in court filings, Bloomberg reported, but recently consented to a judgment that will determine monetary penalties without admitting or denying the SEC’s allegations. A final hearing on penalties is scheduled for March 27, according to the report. 

Read more at Bloomberg Businessweek