A federal judge in Manhattan is about to wave the green starting flag on a fraud trial mixing NASCAR, a former hedge funder, and a Nvidia-backed tech stock that proved to be a come-from-behind winner.
Jury selection is scheduled for Monday in the trial, in which racing superfan and car collector, Andrew Franzone, 48, will fight securities and wire fraud charges.
Federal prosecutors say Franzone tricked more than 100 victims — including fellow drivers and racing fans — into investing a total of $40 million in his Miami hedge fund.
NASCAR is central to the case. Prosecutors say Franzone found his victims and spent his money at its speedways and vintage car shows.
“Franzone committed his crime by exploiting the networks and connections in the NASCAR community,” from coast to coast and in England, prosecutors wrote last month.
Prosecutors say Franzone’s victims include racing legend and 1995 NASCAR truck series champion Mike “The Gunslinger” Skinner. And they say Franzone used the fund to finance a flashy, high-octane racing lifestyle.
In 2015, Franzone illegally spent $565,000 in fund assets to purchase an airplane hangar just outside Daytona Beach, prosecutors say.
The hangar housed Franzone’s prized vintage race car collection, including Skinner’s series-winning Chevy truck and the Ford Galaxie that Fred “Golden Boy” Lorenzen drove to victory in the 1965 Daytona 500, according to a 2016 profile in the Wall Street Journal.
“It was the coolest sound I’d ever heard,” Franzone told the Journal, describing being in his 20s and hearing the engine roar of “an old 1960s big block stock car” for the first time.
Prosecutors say the hangar was also home to Franzone’s racing team, ATF & Gunslinger. Skinner was a celebrity driver for the team. So was five-time pro-wrestling world champion Bill Goldberg.
ATF & Gunslinger proved a success, winning races in the US and UK. In 2017, Hard Rock International, the global café and hotel chain, signed on as a sponsor.
Then, in 2019, investors became jittery, questioning Franzone’s alleged lies about his fund’s liquidity and performance, and — in the words of prosecutors — his “house of cards” collapsed.
From stock cars to stock fraud
Now a criminal defendant — who used the New York City subway to travel to his most recent court date — Franzone has fought, without luck, to keep any reference to NASCAR and race cars out of his trial.
At Franzone’s last day in court, on April 7, defense attorney Joseph R. Corozzo argued that references to his client’s spending on his racing hobby would be “unduly prejudicial.”
It would be like telling jurors, “His spending is on race cars, so you should be offended,” Corozzo argued.
In a ruling Thursday, US District Judge Vernon Broderick disagreed. The judge wrote that evidence of Franzone’s spending and lifestyle “is probative of his motive to commit the fraud,” and therefore fair game for jurors to hear about.
A “romantic partner” and luxury vehicles
Franzone was so obsessed with maintaining his NASCAR lifestyle that even after his fund went bankrupt in 2019, he pocketed a $200,000 investment from one of his closest racing buddies, prosecutors allege.
He immediately spent $50,000 of the money on “luxury vehicles,” prosecutors say.
Another $15,000 was allegedly diverted to “a romantic partner—” a Manhattan woman who, according to court filings, was “purportedly engaged in the business of delivering luxury pet gift baskets.”
Franzone wired the now-former girlfriend $289,000 in fund assets between 2017 and 2019, prosecutors say.
It wasn’t until nearly two years later when he was arrested, in 2021, at a palm-tree-shaded beachfront Westin in Fort Lauderdale where he’d been living for the previous year. His mother would end up paying his overdue $2,270 hotel bill, using his father’s credit card, according to court documents.
Soon after his arrest, the hedge fund — which Franzone had been fighting for two years to keep afloat amid investor mutinees, bankruptcy proceedings, an SEC investigation, and a sea of litigation — was liquidated without Franzone’s approval, by the bankruptcy trustee.
A twist in the track
There’s a twist in the track of this story, though, involving the NASCAR-worthy comeback of one of Franzone’s investments.
Just why Franzone’s “FF Fund” filed for bankruptcy in 2019 remains in dispute.
Prosecutors say it was because Franzone realized he couldn’t pay back his investors — the vast majority of his fund’s assets were risky, failing, or “illiquid” investments that could not quickly converted into cash. The defense says Franzone had hoped bankruptcy would protect the still-viable fund from a litigious former investor who was trying to dissolve it entirely.
Either way, a little over a year ago, the bankruptcy trustee liquidated — sold off — one of its investments and hit the jackpot.
Franzone had purchased 250,000 shares of a Nvidia-backed cloud computing company called CoreWeave for $250,000 in 2019.
The shares liquidated by the trustee sold for over $55 million.
“The investors will get more than their investments back,” Franzone’s Miami bankruptcy attorney told the judge in that case last year.
“The fund seems not to be insolvent. To the contrary, it’s done amazing because of the investment that was made in the company CoreWeave.”
In Franzone’s defense, his lawyers argue that investors were warned in writing that any investment comes with risk. They were also told the fund would use any investment techniques Franzone felt were appropriate.
And in the case of CoreWeave, all of the investors who stuck with the fund — instead of writing their investment off on their taxes as a capital loss — have made money. And that includes Franzone and his own parents and brother, who remain investors, according to court records.
Prosecutors countered in a filing last month that it matters not a whit if CoreWeave did well.
“Whether those investors ultimately recouped their losses years later, and only after FF Fund filed for bankruptcy, does not alter the fact that Franzone lied to them, deceived them, and misused their funds as part of his scheme,” prosecutors wrote the judge.
Franzone had hoped to argue that the success of his investment in CoreWeave proves that he never intended to defraud anyone and that investors will ultimately recoup any losses.
On Thursday, the judge sided with prosecutors and barred the defense from making this argument.
An attorney for Franzone and a spokesperson for the US Attorney’s Office did not respond to requests for comment left Friday afternoon.
The trial is expected to last three weeks. If convicted, Franzone faces a maximum sentence of 20 years in prison.
The post Drivers, start your evidence: NY jury to hear roaring tale of a NASCAR superfan and his allegedly crooked hedge fund appeared first on Business Insider.
