The former owner of Playgirl magazine has been charged with fraudulently raising $287 million for a cash-advance business that actually served as a source of cash for his other companies and his own lavish lifestyle.

The U.S. Securities and Exchange Commission said Carl Ruderman perpetrated a four-year-long securities offering fraud involving 1 Global Capital that victimized more than 3,400 retail investors, many of whom used their retirement savings to invest in the company.

Investors were promised profits from 1 Global’s loans to small and medium-sized businesses, the SEC said in a civil complaint, but in reality, the company “used a substantial amount of investors’ funds for purposes other than making [merchant cash advances].”

Ruderman allegedly diverted $28 million to fund personal expenses such as a luxury vacation to Greece and monthly payments for his Mercedes as well as several companies in which he or his family members had a direct interest.

By June 30, 2018, 1 Global’s financial records showed approximately $50 million in missing investor funds, the SEC said. The company filed bankruptcy last month.

“We allege that 1 Global’s business model was a sham because instead of using investor funds as promised, 1 Global and Ruderman diverted significant funds, including to Ruderman himself for his personal benefit,” Eric I. Bustillo, director of the SEC’s Miami Regional Office, said in a news release.

Ruderman founded 1 Global in 2013, funding the business almost entirely with money from investors who were recruited by a sales network that allegedly included barred brokers.

Through April 2018, 1 Global and sister company 1 West Capital made about $348 million in loans. But according to the SEC, marketing materials misrepresented the quality of the loans and investors were given account statements that falsely represented their portfolio balances, rates of return, and the amount of their cash 1 Global had in the bank to fund loans.

Ruderman’s other companies include Digi South, which was used to own Playgirl and other adult magazines. The SEC said it received approximately $805,000 in investor funds from 1 Global “for no consideration or legitimate services.”

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One response to “Ex-Playgirl Owner Accused of $287M Fraud”

  1. This is not the first fraud Carl Ruderman was involved with. I wrote about him in my book “Beaver Street: A History of Modern Pornography”: Carl Ruderman , anonymous publisher of High Society magazine, wanted to get out of ‘adult entertainment’ in the aftermath of Traci Lords. It was, he felt, just too dangerous to be associated with any business that stood accused of creating ‘child pornography’—even the bogus Lords brand. But since he knew of no other way to make that much money, Ruderman instead spent the next seven years putting together a scheme to completely insulate himself from porn yet still reap its profits. In 1993…. Ruderman began circulating rumors that he’d sold High Society and its sister magazines, which included Cheri, Live, and Hawk, to his top executive, Bruce Chew. Chew changed the company’s name to Crescent but continued to operate out of the same offices at 801 Second Avenue. Though Ruderman also remained in the building, he told people that he no longer had anything to do with High Society, that he was now chairman of Universal Media, a publisher of upscale magazines, like Unique Homes, and trade journals, like Travel Agent. In fact, little at High Society had changed except the corporate name. ‘New management’ continued to publish the magazine just as Ruderman had published it—until the availability of free online pornography reduced its monthly circulation of 400,000 to about 150,000. Then High Society, like every other skin book, set up their own website, charging their customers a monthly fee to access a vast archive of erotica and participate in interactive online video chat rooms. When the website didn’t come close to making up for lost publishing revenue, management tried something a bit more unorthodox—they went into business with the Mafia, and between 1995 and 2000, they swindled over a million readers out of approximately $730 million. When a customer logged on to the High Society website for a “free tour,” he was asked to give his credit card number, supposedly to verify his age—and was then automatically billed $60 per month. When a customer called an 800 number advertised in the magazine as giving free samples of phone sex, he was charged an automatically recurring $40 monthly fee. High Society management, now apparently under Mafia control, believed that people would be too ashamed to complain about these illegal charges to their credit card companies or to their phone companies. But when tens of thousands of outraged customers did complain, and loudly, the Federal Trade Commission (FTC) and New York State sued High Society for credit card fraud, in August 2000, and federal prosecutors charged the “X-Rated Mobsters” (as the tabloids called them) who were running the scam with conspiracy to commit mail and wire fraud, extortion, and money laundering. Some of the mobsters went to jail and were forced to forfeit millions of dollars of illegal profits. The following year, High Society agreed to pay their customers $30 million in damages, which left the company on the verge of bankruptcy, barely able to hang on to the remnants of their business. Because Ruderman was able to convince prosecutors and the FTC that he was a silent partner, having nothing to do with the company’s day-to-day operations, they didn’t hold him responsible for the fraud. He was also, for the most part, able to keep his name out of the papers in connection with it. Yet in his schizophrenic passion for fame and anonymity—in his desire to be recognized for his accomplishments even though his company had been exposed as a tentacle of an organized crime syndicate—Ruderman had a life-size bust of himself, labeled ‘The Founder,’ installed in the High Society reception area. The receptionist, however, was not at liberty to tell visitors who ‘The Founder’ was.

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