Five employees of Staten Island's Gryphon Holdings Inc. were arrested yesterday on federal fraud charges for allegedly cheating investors out of $17.5 million. The firm apparently pressured their mainly elderly investors into buying investment packages, touting their credentials all the while. They bragged of $1.4 billion in holdings and that two of their "traders," Michael Warren and Kenneth Maseka, had graduated from the Wharton School of Business and had worked at places like Lehman Brothers and Goldman Sachs. In fact, Warren and Maseka didn't even exist.

According to the US Attorney's office, Gryphon's website was filled with misrepresentations. Gryphon claimed to be run from offices on Wall Street and in London, when it was really being run out of a strip mall in Staten Island, and they claimed financier George Soros described them as "incredible...unstoppable" when he never did. Along with the fraud charges, the SEC has brought separate civil charges against Gryphon, and a Brooklyn judge has agreed to freeze the assets of the firm and the five individuals. "Fair capital markets depend on the protection of the small investor and we will vigorously investigate and prosecute operators of fraudulent investment advisory schemes that seek to prey on their clients," said U.S. Attorney Benton Campbell.

Gryphon president Kenneth Marsh is planning to plead not guilty to the charges. The five men are being arraigned today at the Brooklyn Federal Court, and face up to 20 years in prison each if convicted.