Prospect Heights man charged with running 22-year Ponzi scheme

A businessman from Prospect Heights was released Friday on a $100,000 unsecured bond after being charged with operating a Ponzi scheme that raked in tens of millions of dollars over two decades.

Frank A. Castaldi, 55, appeared before U.S. District Court Judge Nan Nolan Friday after being charged with mail fraud for allegedly running the scheme that attracted around 300 investors.

The court ordered Castaldi to provide an accounting of all of his assets within 10 days to the U.S. attorney's office and he was ordered not to spend any assets without court permission.

Castaldi was released to his wife Gilma Castaldi as custodian and he remains under electronic monitoring and home detention, said U.S. Attorney spokesman Randall Samborn.

Castaldi's attorney, Barry A. Spevack of Chicago, was unavailable for comment.

The complaint said Castaldi, his father and a business partner started two businesses, CZ Travel and CZ Realty, in the 1980s. They later purchased First State Travel Service Inc., Parkway Towers Insurance Agency Inc., and Cumberland Realty Inc., which later became known as Remax Cumberland Realty, all at 4501 N. Cumberland, Norridge.

Around 1986, Castaldi allegedly began selling promissory notes to around 300 investors, whose principal has not yet been returned.

One investor paid $50,000 while another paid $118,100, FBI special agent Daniel J. Hemmersmeier said in an affidavit.

Castaldi allegedly told investors they could get an annualized interest rate between 10 percent and 15 percent, Hemmersmeier said in the affidavit.

"At various times, Castaldi also informed investors that he would generate their interest payments by investing their principal in the various businesses he operated, or by investing the principal with financial institutions," said Hemmersmeier. "In reality, Castaldi used the vast majority of the new investors' funds to pay returns to other investors as part of a Ponzi scheme, all of which he intentionally concealed from investors and prospective investors."

In 2008, Castaldi allegedly renewed or issued promissory notes for about $69 million, in many instances representing the face value of investors' initial notes plus the investors' accumulated interest which had been rolled back into the notes.

A conviction of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine.