Founder of Rye investment firm charged with bank and bank fraud

(PHOTO: Hanratty operates his firm Ebury Street Capital from 16 School Street in downtown Rye. On December 18, 2023, he was indicted by federal authorities on bank and wire fraud charges and faces up to 30 years in prison on each count. )
(PHOTO: Hanratty operates his firm Ebury Street Capital from 16 School Street in downtown Rye. On December 18, 2023, he was indicted by federal authorities on bank and wire fraud charges and faces up to 30 years in prison on each count. )

The founder of a Rye investment firm has been charged by federal authorities with wire and wire fraud and faces up to 30 years in prison on each charge. John Arthur Hanratty, 49, was arrested and charged in connection with a fraudulent scheme to steal money from a Federal Deposit Insurance Corporation (“FDIC”) insured bank through lines of credit totaling $20 million extended to Ebury Street Capital, his municipal tax lien investment firm.

Hanratty lived in Paradise until or around 2019, according to authorities. Records show Hanratty and his wife Emma purchased a home at 26 Halsted Place in May 2011 and sold the property in August 2020. Ebury Street Capital was located at 16 School Street in downtown Rye and may have also operated from 56 Locust Avenue for time. Hanratty moved to San Juan, Puerto Rico after leaving Paradise.

“John Arthur Hanratty, a New York-licensed attorney and founder of a multimillion-dollar municipal tax lien investment firm, allegedly stole money from a bank to obtain lines of credit totaling $20 million, which he embezzled by has paid off investors who sued his firm,” said Damien Williams, U.S. Attorney for the Southern District of New York. “Thanks to this office’s teamwork with the FBI, Hanratty now faces serious criminal charges for his alleged fraud.”

Hanratty was arrested on Monday, December 18 and arraigned before a US Magistrate in the District of Puerto Rico.

FBI Assistant Director James Smith said: “Scammers are very good at what they do. They are extremely persuasive and will jump at any opportunity to scam a new group of potential victims. John Hanratty is said to have prioritized his own greed over decency and respect for the laws of our country. The FBI and our law enforcement partners remain dedicated to investigating and holding accountable those who flagrantly flout our laws by seeking to enrich themselves at the expense of their victims.

According to the allegations in the complaint, unsealed Dec. 18 in Manhattan Federal Court:

  • HANRATY was the founder and managing director of Ebury Street Capital, LLC (“Ebury Street Capital”), an investment firm with a portfolio consisting primarily of municipal tax liens. At all relevant times, HANRATTY served as the Managing Director and Principal of Ebury Street Capital, which managed two different funds known as Ebury Fund 1 and Ebury Fund 2. HANRATTY is an attorney licensed to practice law in the State of New York since 2002 and previously held legal and compliance positions at prominent investment firms and financial institutions, including as Chief Compliance Officer and Chief Advisor to a Broker-Dealer for Trading.
  • Between 2017 and 2021, HANRATTY engaged in a fraudulent scheme to steal money from an FDIC-insured bank (“Victim Bank-1”) by withdrawing $20 million in commercial lines of credit that were extended to Ebury Street Capital. Specifically, HANRATTY made materially false statements in spreadsheets (known as “base loan certificates”) sent to Victim Bank-1 summarizing the value of municipal tax liens that Ebury Street Capital offered as collateral for its commercial line of credit. As a result of these false statements in Ebury Street Capital’s loan basis certificates, Victim Bank-1 paid Ebury Street Capital large sums of money to which it was not entitled. The misrepresentations in Ebury Street Capital’s borrowing base certificates included, among other things, listing large amounts of municipal tax liens on the borrowing base certificates that Ebury Street Capital did not actually hold, and double-counting municipal tax liens by listing some and the same rights to multiple borrowing of underlying certificates.
  • Additionally, although Ebury Street Capital was contractually obligated to use money from Victim Bank-1 either to purchase municipal tax liens or for ordinary business expenses, HANRATTY actually used portions of the money received from Victim Bank-1 to repay the Ebury Street Capital investors who threatened to sue and who actually ended up suing Ebury Street Capital and HANRATTY after Ebury Street Capital failed to pay investors who wanted to withdraw their investments from the fund.
  • Ebury Street Capital’s commercial line of credit is now fully exhausted and the company owes over $20 million in principal and interest to Victim Bank-1.

Hanratty is charged with one count of wire fraud involving a financial institution and one count of wire fraud, each of which carries a maximum sentence of 30 years in prison. Maximum potential sentences are prescribed by Congress and are provided for informational purposes only, as each defendant’s sentence will be determined by the judge.

This case is being handled by the Office’s Complex Fraud and Cybercrime Unit. Assistant U.S. Attorneys Andrew K. Chan and Nicholas Ciucciolo are prosecuting. The United States Attorney’s Office reminds readers that the charges contained in the indictment are merely allegations and the defendant is presumed innocent unless and until proven guilty.

Read the (un)sealed complaint.

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