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00:00:08,008 --> 00:00:10,377
Narrator: In this episode
of "American Greed,"
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00:00:10,410 --> 00:00:13,079
a struggling actor,
with a side hustle
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00:00:13,113 --> 00:00:14,681
worth millions.
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00:00:14,714 --> 00:00:17,317
This one is tragic because
it started off as imaginary
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00:00:17,350 --> 00:00:20,086
and continued imaginary
and then grew so large.
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00:00:20,120 --> 00:00:23,790
Zach Horwitz moves
from Indiana to Hollywood...
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I'm good enough.
I can do this.
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Takes the stage name
Zach Avery...
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00:00:29,662 --> 00:00:32,332
and dazzles his friends
back home.
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00:00:32,365 --> 00:00:36,670
You believed that he was
a big-time player in L.A.
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Krebs: He was great.
Like, you'd go out.
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He's buying all the drinks,
he's got the good places to go.
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Narrator: There's a phrase,
"Acting is like lying."
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But for Horwitz,
lying is like acting.
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As an actor, I feel like,
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00:00:50,817 --> 00:00:54,487
you don't want people to know
who Zach is as a person.
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Because Horwitz' most
convincing performance
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00:00:57,891 --> 00:01:00,827
isn't on-screen,
it's in real life...
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Scamming his longtime friends.
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I would just love to know
what his endgame was with this
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and does he feel any remorse.
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Narrator:
His pretentious podcasts
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play different now.
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Playing that dynamic between
the good guy and the bad guy
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and how I can work through
those nuances was really fun.
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Narrator: It's Hollywood's
biggest Ponzi scheme,
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with a warning:
"Be careful who you trust."
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McKerr: These are his
alleged best friends
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and he just took
all their money,
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and I just was...
I couldn't believe it.
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♪♪
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Narrator: In 2019,
the relatively unknown actor
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00:01:57,217 --> 00:02:00,353
Zach Avery
is finally getting somewhere.
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00:02:00,387 --> 00:02:03,356
He's landed a starring role
with Olivia Munn
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in a film called "The Gateway."
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Oh!
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In the movie, Avery...
Real name Zach Horwitz...
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Plays a hardened criminal.
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Ironically, at the very moment
he shoots this scene,
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walking a cellblock in a jail,
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Horwitz is a real-life
criminal mastermind,
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running an investment scheme
built on 100% lies.
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Chao: It was clear
from the beginning
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00:02:26,579 --> 00:02:29,058
that it was just fake
from the get-go.
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Narrator:
Zach Horwitz has talent.
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He's a world-class liar,
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with charm that he lays on thick
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for anyone with
a microphone and camera.
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Knowing what you know now,
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what would you tell
your 14-year-old self?
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Oh, that's a tough one.
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I would tell him
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that everything happens
for a reason,
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that you're gonna go through
trials and tribulations,
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but they will all teach you
something along the way
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that you'll use in the future.
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And you'll be alright, kid.
Don't worry about it.
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[ Chuckles ]
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00:03:04,617 --> 00:03:07,153
♪♪
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Narrator:
Like many Hollywood stories,
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this one begins
in the heartland...
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In this case,
Fort Wayne, Indiana.
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It's modest, humble,
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00:03:17,664 --> 00:03:22,702
and the resting place of
American icon Johnny Appleseed.
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You couldn't get more
all-American if you tried.
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Zach and I lived
in a nice neighborhood.
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He lived in the very nice part,
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like, probably
a fairly brand-new house.
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Narrator: Derek McKerr is
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00:03:36,116 --> 00:03:38,752
one of Zach Horwitz'
high school friends.
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Horwitz moves to Fort Wayne
for his sophomore year,
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00:03:41,988 --> 00:03:44,424
after a childhood
spent in Florida.
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McKerr: We met at football,
our sophomore year,
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00:03:46,860 --> 00:03:49,329
and almost instantly
became friends.
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Narrator: Chris Krebs is
another high school friend.
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He and others say
Zach's family is well-off.
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His stepfather is an executive
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at a computer-components
factory.
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Krebs: They certainly
weren't struggling.
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They had a really nice
lake house
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00:04:02,642 --> 00:04:04,411
in addition
to their main residence.
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Narrator:
According to friends,
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Zach Horwitz is
a popular student
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at Fort Wayne
Carroll High School.
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He was athletic, played sports.
Girls liked him quite a bit.
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He was just a good guy...
A fun guy to be around.
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Narrator:
In his senior yearbook,
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Zach is nominated
for homecoming king,
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00:04:22,395 --> 00:04:24,040
awarded Best Body,
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00:04:24,064 --> 00:04:27,367
and is a member of the school's
Academy of Finance.
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00:04:27,400 --> 00:04:29,336
The yearbook page of the club,
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00:04:29,369 --> 00:04:31,771
in a "you can't make this up"
twist,
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is titled
"Fun with Future Finances."
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McKerr: It's just surreal.
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How did this guy
from Fort Wayne, Indiana,
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00:04:40,714 --> 00:04:43,149
run a $690 million Ponzi scheme
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with zero financial background?
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♪♪
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Narrator: After graduating
high school in 2005,
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Zach attends Indiana University
in downstate Bloomington.
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While most of his friends attend
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I.U.'s acclaimed
Kelley School of Business.
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Zach goes a different route
and majors in psychology.
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Friends say Horwitz is
a great guy to be pals with,
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especially on spring break.
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McKerr:
You know, the classic,
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00:05:13,780 --> 00:05:15,191
like, you throw a football
in the sand
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and it bounces
toward some girls,
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you would want Zach
to go get that ball.
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And all of a sudden,
those girls would be coming back
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and hanging out with us
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00:05:21,788 --> 00:05:23,523
for, like,
the rest of the spring break.
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Narrator: After Horwitz
graduates from Indiana,
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00:05:26,960 --> 00:05:31,131
friends say he intends to pursue
a graduate degree in psychology.
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Instead, he opens a restaurant
on the North Side of Chicago
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in the summer of 2011.
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Friends say the shop
is funded by inheritance money
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Horwitz receives after
his stepfather passes away.
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Krebs:
Zach tells a group of us,
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00:05:46,880 --> 00:05:50,183
"Hey, I'd like you guys
to join in with me on this
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and take on various roles, and
we'll, hopefully, become rich
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off of this restaurant
that I'm gonna start up."
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00:05:57,957 --> 00:06:01,795
Narrator: The name
of the restaurant is Fuel.
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00:06:01,828 --> 00:06:05,565
Horwitz claims the joint
will combine healthy food
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00:06:05,598 --> 00:06:07,167
with a healthy lifestyle,
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00:06:07,200 --> 00:06:09,936
including
an on-site nutritionist.
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While Chris Krebs
doesn't invest,
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00:06:12,272 --> 00:06:14,574
he says Horwitz
wants him on board.
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00:06:14,607 --> 00:06:16,419
Krebs: Zach's like, "Hey,
I want to bring you on,
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00:06:16,443 --> 00:06:18,645
do some marketing things,
whether it's social
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or trying to drum up business
or whatever that looks like."
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Narrator:
Horwitz tells Krebs and others
that Howard Schultz...
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00:06:25,485 --> 00:06:28,154
Yes, Howard Schultz
of Starbucks fame...
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Is interested in his concept.
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Krebs: At one point in time,
Zach said,
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00:06:32,058 --> 00:06:34,094
"Look, Howard Schultz
has this investment group.
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00:06:34,127 --> 00:06:35,495
It's called Maveron,
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00:06:35,528 --> 00:06:36,939
and they're interested
in what we're doing
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00:06:36,963 --> 00:06:39,265
and they think there's potential
to expand upon it."
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That was incredibly enticing.
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00:06:40,934 --> 00:06:43,770
I mean, you're counting millions
in your head at that point.
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Narrator:
After only a few months,
the restaurant closes down.
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00:06:48,508 --> 00:06:51,811
Krebs says Zach Horwitz
has an interesting excuse
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00:06:51,845 --> 00:06:53,847
for the restaurant's shuttering.
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00:06:53,880 --> 00:06:56,649
At the time, he takes it
at face value,
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00:06:56,683 --> 00:06:59,619
but it now seems prophetic.
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Krebs: He said
that his money manager,
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00:07:01,554 --> 00:07:03,656
who's helping manage his money,
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00:07:03,690 --> 00:07:05,558
was involved in a Ponzi scheme.
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Yeah, a little...
Little foreshadowing.
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[ Chuckles ]
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♪♪
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Narrator: According
to Zach's narrative,
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00:07:17,771 --> 00:07:21,641
on January 1, 2012,
he and his girlfriend,
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00:07:21,675 --> 00:07:24,678
pack up their car
and abandon the Midwest.
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They're heading to California,
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where Zach can pursue
his dreams of being an actor.
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To his old friends,
it's apparently a new dream.
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00:07:34,054 --> 00:07:36,589
They say Zach has
no acting experience
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00:07:36,623 --> 00:07:38,825
and has never even mentioned it.
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00:07:38,858 --> 00:07:41,761
Krebs: It was
incredibly surprising.
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00:07:41,795 --> 00:07:43,663
He had never talked
about acting before.
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And all of a sudden,
to be involved in,
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00:07:45,699 --> 00:07:47,667
and trying to make himself
an actor
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was just...
It was kind of weird.
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[ Crowd cheers ]
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McKerr: He loved "Entourage."
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00:07:52,839 --> 00:07:55,642
Like, was a very huge fan
of "Entourage."
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00:07:55,675 --> 00:07:56,910
And when he moved to L.A.,
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that's kind of
what I always thought,
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was, like, he wants to
kind of live that life.
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But he was never, like, an...
Like wanted to be an actor.
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Narrator: Upon arrival
in California,
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00:08:09,389 --> 00:08:13,159
Zach begins auditioning
for various TV and film roles.
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00:08:13,193 --> 00:08:17,130
In the next few years,
Zach gets a few nibbles...
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00:08:17,163 --> 00:08:19,666
Roles like Demon #3 and
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00:08:19,699 --> 00:08:22,235
Unnamed Basketball Player.
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Weiner: You can be what
they call atmosphere.
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00:08:24,904 --> 00:08:28,174
You can be extras in a film
by just signing up.
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And then you get to go on set.
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There's not a real
background check on that.
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Narrator:
But as the saying goes,
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"There are no small roles,
only small actors."
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Horwitz hypes his film
appearances to any website,
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00:08:43,256 --> 00:08:46,192
podcast, or YouTube channel
that will have him.
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00:08:46,226 --> 00:08:49,629
And in each interview,
his legend grows.
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One of his favorite stories is
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how an injury dashed his dreams
of playing in the NFL.
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Went to Indiana University,
started playing,
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00:08:57,203 --> 00:08:59,606
and basically it was
before even the first season
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00:08:59,639 --> 00:09:01,107
is when I got injured,
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00:09:01,141 --> 00:09:03,209
is when we were in the training
process before that.
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00:09:03,243 --> 00:09:06,913
That was the longest-running
joke in our group.
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00:09:07,013 --> 00:09:10,283
It's like this guy
never played football at I.U.
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00:09:10,316 --> 00:09:13,520
He did tear his ACL
playing football at I.U.,
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00:09:13,553 --> 00:09:14,997
but it was intramural football.
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00:09:15,021 --> 00:09:16,790
Krebs: "I was gonna be
a football player,
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00:09:16,823 --> 00:09:18,601
but I had this injury that
happened during intramurals,"
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00:09:18,625 --> 00:09:19,859
but he kind of played it off
200
00:09:19,893 --> 00:09:23,163
like it was
a real football injury.
201
00:09:23,196 --> 00:09:25,665
Narrator: In 2013,
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00:09:25,699 --> 00:09:27,867
he tells his friends
he's landed a plum role
203
00:09:27,901 --> 00:09:31,438
in Brad Pitt's World War II
tank drama "Fury."
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00:09:31,471 --> 00:09:32,939
Krebs: Yeah, it was amazing.
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00:09:33,039 --> 00:09:35,017
Some of the actors and actresses
that he worked with,
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00:09:35,041 --> 00:09:36,419
like, he would send,
"Oh, I'm working
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00:09:36,443 --> 00:09:37,744
on this movie
with this person."
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00:09:37,777 --> 00:09:39,179
And we're like, "Really?"
209
00:09:39,212 --> 00:09:41,848
Narrator: Just like
his alleged football career,
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00:09:41,881 --> 00:09:45,552
this role is constantly
attached to Horwitz' name.
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00:09:45,585 --> 00:09:47,821
Emmanuel Noisette
is a film critic
212
00:09:47,854 --> 00:09:51,124
who writes for
themovieblog.com.
213
00:09:51,157 --> 00:09:53,960
Alright, so, if we keep
our eyes on the screen here,
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00:09:54,060 --> 00:09:57,039
Zach should be
coming up very soon.
215
00:09:57,063 --> 00:09:58,798
Wait, wait, wait,
there he... there he is.
216
00:09:58,832 --> 00:10:01,468
Okay, there, and it's gone.
217
00:10:01,501 --> 00:10:05,905
Yep, that's... that's all for...
That's all for Zach.
218
00:10:05,939 --> 00:10:09,642
Narrator: Horwitz'
penchant for exaggeration,
219
00:10:09,676 --> 00:10:12,712
on-screen and off,
helps raise his profile.
220
00:10:12,746 --> 00:10:14,848
Weiner: Everybody has a story.
It's critical.
221
00:10:14,881 --> 00:10:17,984
It's kind of funny, actually,
because nobody checks it.
222
00:10:18,018 --> 00:10:20,854
Nobody really cares,
but they like to know
223
00:10:20,887 --> 00:10:22,856
that you have
some sort of a background
224
00:10:22,889 --> 00:10:24,357
and it's interesting.
225
00:10:24,391 --> 00:10:26,192
♪♪
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00:10:26,226 --> 00:10:27,894
Narrator:
Next on "American Greed,"
227
00:10:27,927 --> 00:10:29,896
Zach's little white lies
228
00:10:29,929 --> 00:10:32,832
eventually become
great big whoppers,
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00:10:32,866 --> 00:10:34,300
when he claims he strikes a deal
230
00:10:34,334 --> 00:10:37,303
with one of the biggest names
in Hollywood.
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00:10:37,337 --> 00:10:39,439
Schwab:
Working white-collar cases,
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00:10:39,472 --> 00:10:44,244
you tend to see the gamut
of what deceit can cause.
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00:10:44,277 --> 00:10:46,880
This one, in terms
of its brazenness,
234
00:10:46,913 --> 00:10:49,382
in terms of
the size of the scheme,
235
00:10:49,416 --> 00:10:51,518
really takes the cake.
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00:10:51,551 --> 00:10:56,956
♪♪
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00:10:59,282 --> 00:11:07,282
♪♪
238
00:11:09,726 --> 00:11:12,228
Narrator: Shortly
after arriving in California,
239
00:11:12,262 --> 00:11:14,464
Zach Horwitz strikes up
a friendship
240
00:11:14,497 --> 00:11:16,900
with a pair of
aspiring filmmakers,
241
00:11:16,933 --> 00:11:19,569
Diego and Julio Hallivis.
242
00:11:19,602 --> 00:11:23,506
Horwitz partners with Julio
and founds a company in 2013
243
00:11:23,540 --> 00:11:28,678
that they call
1inMM Productions LLC.
244
00:11:28,712 --> 00:11:32,115
The name comes from one of
Horwitz' favorite sayings,
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00:11:32,148 --> 00:11:36,920
"When the odds are one
in a million, be that one."
246
00:11:36,953 --> 00:11:38,722
♪♪
247
00:11:38,755 --> 00:11:40,290
Schwab:
He was going to be
248
00:11:40,323 --> 00:11:42,559
in the business
of producing films,
249
00:11:42,592 --> 00:11:45,729
perhaps with the idea
that he was going to have
250
00:11:45,762 --> 00:11:49,566
an acting role in some of
these movies, as well.
251
00:11:49,599 --> 00:11:52,135
Narrator:
The partners strike gold...
252
00:11:52,168 --> 00:11:54,471
24-karat nerd gold...
253
00:11:54,504 --> 00:11:56,139
When they make
their first movie,
254
00:11:56,172 --> 00:11:58,641
a Batman-related fan film.
255
00:11:58,675 --> 00:12:02,512
The film is a 20-minute short
called "The Laughing Man,"
256
00:12:02,545 --> 00:12:06,483
based on a DC
comic book storyline.
257
00:12:06,516 --> 00:12:08,918
Zach plays the title character,
258
00:12:08,952 --> 00:12:11,588
who is locked
in an insane asylum.
259
00:12:11,621 --> 00:12:14,157
Mommy always said
I was different.
260
00:12:14,190 --> 00:12:17,527
Noisette: So, the basic premise
is the Laughing Man
261
00:12:17,560 --> 00:12:21,598
is extracting revenge
or getting his kicks
262
00:12:21,631 --> 00:12:27,537
out of murdering one of the
doctors in the film.
263
00:12:27,570 --> 00:12:32,175
The Laughing Man also proceeds
to cut off his own face.
264
00:12:32,208 --> 00:12:35,545
So, this is probably one of
the most disturbing scenes
265
00:12:35,578 --> 00:12:37,056
in "The Laughing Man."
266
00:12:37,080 --> 00:12:41,451
But don't take my word for it.
Let's check it out.
267
00:12:41,484 --> 00:12:44,487
Aaah! Aaah!
268
00:12:44,521 --> 00:12:48,491
It looked like he felt like
he was crushing it.
269
00:12:48,525 --> 00:12:49,793
You are the best.
270
00:12:49,826 --> 00:12:51,995
I didn't get that impression,
271
00:12:52,095 --> 00:12:55,332
but I think he felt like
he was in the zone.
272
00:12:55,365 --> 00:12:59,836
Narrator: Horwitz is ready
to crush it off-screen, too.
273
00:12:59,869 --> 00:13:02,706
During his time in Los Angeles,
the film industry
274
00:13:02,739 --> 00:13:05,208
is undergoing
a major transition.
275
00:13:05,241 --> 00:13:07,644
Streaming services
are gaining steam
276
00:13:07,677 --> 00:13:10,947
and changing the way
Hollywood conducts its business.
277
00:13:11,047 --> 00:13:14,884
Netflix is arguably
the biggest name in the game.
278
00:13:14,918 --> 00:13:18,221
Bottom line... Netflix is adding
customers faster than expected.
279
00:13:18,254 --> 00:13:21,491
Reporting more than 50 million
streaming subscribers
280
00:13:21,524 --> 00:13:23,035
for the first time.
281
00:13:23,059 --> 00:13:26,038
Narrator: The streaming service
is constantly on the hunt
282
00:13:26,062 --> 00:13:28,665
for new movies
to keep viewers hooked.
283
00:13:28,698 --> 00:13:31,468
Horwitz spies an opening
and devises a plan
284
00:13:31,501 --> 00:13:33,803
to get a piece of the action.
285
00:13:33,837 --> 00:13:37,240
In late 2013,
he starts another business,
286
00:13:37,273 --> 00:13:40,076
1inMM Capital.
287
00:13:40,110 --> 00:13:41,945
Schwab: It's well-known
288
00:13:41,978 --> 00:13:46,249
that streaming platforms,
like HBO and Netflix,
289
00:13:46,282 --> 00:13:48,518
are oftentimes
looking for content,
290
00:13:48,551 --> 00:13:51,063
and that content
comes from third parties.
291
00:13:51,087 --> 00:13:55,859
And so 1inMM Capital
was playing into just that idea.
292
00:13:55,892 --> 00:13:58,628
Narrator: Horwitz says
1inMM Capital
293
00:13:58,662 --> 00:14:00,697
is not in film production,
294
00:14:00,730 --> 00:14:03,266
but rather
the film-distribution business.
295
00:14:03,299 --> 00:14:07,170
Its purpose is to collect movies
to feed the streamers.
296
00:14:07,203 --> 00:14:12,075
At the time, Netflix is
a $23 billion-a-year juggernaut.
297
00:14:12,108 --> 00:14:15,679
And Horwitz says
he's struck a deal with them.
298
00:14:15,712 --> 00:14:17,681
Weiner: We know it's coming,
299
00:14:17,714 --> 00:14:19,649
and Netflix
is making tons of money,
300
00:14:19,683 --> 00:14:21,051
and it's in all the articles.
301
00:14:21,084 --> 00:14:23,086
So yeah, I can see
how everybody thought,
302
00:14:23,119 --> 00:14:24,788
"Wow.
He has a deal with Netflix?
303
00:14:24,821 --> 00:14:27,457
This guy's got to be
rolling in it."
304
00:14:27,490 --> 00:14:30,560
Narrator: Horwitz
tells potential investors
305
00:14:30,593 --> 00:14:32,962
that 1inMM Capital
is looking to purchase
306
00:14:33,063 --> 00:14:37,233
the rights to dozens
of low-budget movies.
307
00:14:37,267 --> 00:14:39,769
FBI special agent John Verrastro
308
00:14:39,803 --> 00:14:42,605
is the lead investigator
on the case.
309
00:14:42,639 --> 00:14:44,774
Verrastro: So, what Zach Horwitz
told the investors
310
00:14:44,808 --> 00:14:47,510
was that the money
that they provide him,
311
00:14:47,544 --> 00:14:50,847
he goes and he buys
the actual film rights
312
00:14:50,880 --> 00:14:53,316
from the content provider
or their sales agent.
313
00:14:53,350 --> 00:14:57,287
And then he told investors,
"I have existing relationships."
314
00:14:57,320 --> 00:15:01,257
And then he sells the content
to HBO and Netflix
315
00:15:01,291 --> 00:15:03,002
for a 36-month period.
316
00:15:03,026 --> 00:15:06,663
Narrator: Assistant
U.S. Attorney David Chao says
317
00:15:06,696 --> 00:15:09,265
the films
are not blockbusters...
318
00:15:09,299 --> 00:15:10,800
Far from it.
319
00:15:10,834 --> 00:15:13,737
Chao: They seem to be
American-based,
320
00:15:13,770 --> 00:15:16,506
with kind of, you might expect,
321
00:15:16,539 --> 00:15:20,343
B- or C-list type movies.
322
00:15:20,377 --> 00:15:24,948
Narrator:
Horwitz displays the movies
in a glossy package.
323
00:15:25,048 --> 00:15:27,050
He says that the rights
to each film
324
00:15:27,083 --> 00:15:29,486
cost anywhere from
a few hundred thousand
325
00:15:29,519 --> 00:15:31,621
to over one million dollars.
326
00:15:31,654 --> 00:15:36,359
He also claims they'll be shown
exclusively in Latin America.
327
00:15:36,393 --> 00:15:39,362
Schwab: And maybe that actually
helped assist the scheme,
328
00:15:39,396 --> 00:15:43,366
because these weren't
well-known movies
329
00:15:43,400 --> 00:15:45,869
like a "Star Wars"
or a Marvel film,
330
00:15:45,902 --> 00:15:48,738
but rather more
like an indie film.
331
00:15:48,772 --> 00:15:51,908
So, it would be more difficult,
in some ways,
332
00:15:51,941 --> 00:15:54,778
for a victim to fact-check,
for example,
333
00:15:54,811 --> 00:15:58,748
whether in a particular country
in Latin America,
334
00:15:58,782 --> 00:16:00,550
Netflix is happening
to be streaming
335
00:16:00,583 --> 00:16:04,154
this movie
that they invested in.
336
00:16:04,187 --> 00:16:07,791
Narrator: But in order to buy
the rights to these films,
337
00:16:07,824 --> 00:16:11,161
1inMM Capital needs capital.
338
00:16:11,194 --> 00:16:13,396
To find the funding,
339
00:16:13,430 --> 00:16:16,166
Zach Horwitz
hits up some old pals.
340
00:16:16,199 --> 00:16:18,568
McKerr: And, yeah, it was,
like, all of Zach's friends
341
00:16:18,601 --> 00:16:20,236
And then they
would go after the parents
342
00:16:20,270 --> 00:16:22,572
and try to get the parents
to invest, as well.
343
00:16:22,605 --> 00:16:24,607
♪♪
344
00:16:24,641 --> 00:16:26,142
Narrator:
Next on "American Greed,"
345
00:16:26,176 --> 00:16:29,512
this Golden State transplant
hits the mother lode,
346
00:16:29,546 --> 00:16:31,514
back in the Hoosier State.
347
00:16:31,548 --> 00:16:34,150
Schwab: Horwitz not only
represented himself
348
00:16:34,184 --> 00:16:37,220
to be a successful
Hollywood insider,
349
00:16:37,253 --> 00:16:41,424
he also spent money as though
he actually were one.
350
00:16:41,458 --> 00:16:46,930
♪♪
351
00:16:49,299 --> 00:16:55,739
♪♪
352
00:16:55,772 --> 00:16:58,975
Narrator: For a Midwest boy
from Fort Wayne,
353
00:16:59,075 --> 00:17:00,443
Zach Horwitz appears to be
354
00:17:00,477 --> 00:17:02,846
that one-in-a-million
success story.
355
00:17:02,879 --> 00:17:05,515
He has a few movie roles
under his belt,
356
00:17:05,548 --> 00:17:09,085
and he claims to be the CEO
of a new venture
357
00:17:09,119 --> 00:17:11,721
with Netflix and HBO.
358
00:17:11,755 --> 00:17:16,059
His friends back in Indiana
think he's killing it.
359
00:17:16,092 --> 00:17:19,629
Well, the portrait that Zach
portrayed on social media
360
00:17:19,663 --> 00:17:21,097
was, like, private jets
361
00:17:21,131 --> 00:17:23,566
and, like, jetting
all these places,
362
00:17:23,600 --> 00:17:25,902
like, film festivals,
and doing all this.
363
00:17:25,935 --> 00:17:28,071
I was like, "He must
be doing well."
364
00:17:28,104 --> 00:17:29,839
Krebs: I would ask him
what he was doing,
365
00:17:29,873 --> 00:17:30,874
and he said, "Oh,
366
00:17:30,907 --> 00:17:33,510
distributing films
to Latin and South America.
367
00:17:33,543 --> 00:17:35,545
We've got HBO.
We've got Netflix."
368
00:17:35,578 --> 00:17:37,547
And it kind of explained
the lifestyle
369
00:17:37,580 --> 00:17:39,215
that he was living.
370
00:17:39,249 --> 00:17:43,353
Narrator: Horwitz takes
advantage of his star status
371
00:17:43,386 --> 00:17:44,721
back home in the Midwest,
372
00:17:44,754 --> 00:17:47,123
according to
prosecutor David Chao.
373
00:17:47,157 --> 00:17:51,094
Chao: So, his first investors
were his friends...
374
00:17:51,127 --> 00:17:54,431
Friends that he knew
from college in Indiana.
375
00:17:54,464 --> 00:17:57,400
Narrator:
While at Indiana University,
376
00:17:57,434 --> 00:17:59,979
most of Zach's friends
are business majors.
377
00:18:00,003 --> 00:18:02,772
Since graduation,
they've established themselves
378
00:18:02,806 --> 00:18:06,609
at major investment firms
like JPMorgan in Chicago
379
00:18:06,643 --> 00:18:09,546
and Morgan Stanley in New York.
380
00:18:09,579 --> 00:18:11,881
Loftus: They're brokers
with 7 Series licenses.
381
00:18:11,915 --> 00:18:15,185
These are top-flight
financial professionals.
382
00:18:15,218 --> 00:18:18,788
I mean, they're young,
but they're the best.
383
00:18:18,822 --> 00:18:21,791
Narrator: According
to federal prosecutors,
384
00:18:21,825 --> 00:18:24,794
Horwitz tells his friends
that they can make returns
385
00:18:24,828 --> 00:18:28,865
of up to 45%
in this emerging market.
386
00:18:28,898 --> 00:18:31,501
Zach Horwitz
wasn't selling equity.
387
00:18:31,534 --> 00:18:34,170
He wasn't selling shares
in his own company.
388
00:18:34,204 --> 00:18:35,872
Rather, what he was doing
389
00:18:35,905 --> 00:18:38,808
was raising money
through promissory notes.
390
00:18:38,842 --> 00:18:41,020
The way
that the agreements worked,
391
00:18:41,044 --> 00:18:43,022
they were whole-dollar-amount
agreements.
392
00:18:43,046 --> 00:18:45,715
So just using
a hypothetical example,
393
00:18:45,749 --> 00:18:47,026
he would say like, "Oh,
394
00:18:47,050 --> 00:18:49,319
I'm buying it
for a million dollars."
395
00:18:49,352 --> 00:18:52,455
Narrator: After purchasing
the rights to the film,
396
00:18:52,489 --> 00:18:54,658
Horwitz then says
he turns around
397
00:18:54,691 --> 00:18:58,628
and makes a distribution deal
with Netflix or HBO.
398
00:18:58,662 --> 00:19:02,975
Verrastro: "And then we'll
get back like $1,450,000.
399
00:19:02,999 --> 00:19:07,203
And then that $450,000
would be the 45% return
400
00:19:07,237 --> 00:19:09,673
to the investors."
401
00:19:09,706 --> 00:19:12,876
Narrator: Investigators say
Horwitz makes sure
402
00:19:12,909 --> 00:19:15,645
that his early investors
get paid.
403
00:19:15,679 --> 00:19:19,449
And frankly, many of them
were skeptical at first,
404
00:19:19,482 --> 00:19:21,051
but when they gave him
the money,
405
00:19:21,084 --> 00:19:23,996
they didn't just get a return
back on a piece of paper.
406
00:19:24,020 --> 00:19:25,689
They were actually
receiving payments
407
00:19:25,722 --> 00:19:27,057
into their bank accounts.
408
00:19:27,090 --> 00:19:28,525
Verrastro: Like, oftentimes,
409
00:19:28,558 --> 00:19:30,036
the investors
don't ask for their money back.
410
00:19:30,060 --> 00:19:32,038
They just tell you to roll it
into the next investment.
411
00:19:32,062 --> 00:19:35,165
But in this case,
every six months, every year,
412
00:19:35,198 --> 00:19:37,400
you know, depending on
when the notes matured,
413
00:19:37,434 --> 00:19:39,369
monies were moving
back and forth
414
00:19:39,402 --> 00:19:41,871
between
the 1inMM Capital account
415
00:19:41,905 --> 00:19:44,374
and the victim investor's
accounts.
416
00:19:44,407 --> 00:19:47,243
Narrator:
In the summer of 2015,
417
00:19:47,277 --> 00:19:51,147
Horwitz sends an annual report
to his college friends.
418
00:19:51,181 --> 00:19:54,517
In the report, Horwitz says
he has already
419
00:19:54,551 --> 00:19:58,254
"acquired and successfully
distributed 49 films
420
00:19:58,288 --> 00:20:00,023
through the 1inMM Capital banner
421
00:20:00,056 --> 00:20:03,693
without incurring a single loss
in the process."
422
00:20:03,727 --> 00:20:05,628
Chao: Number one,
touts the success...
423
00:20:05,662 --> 00:20:07,464
The prior success that he's had.
424
00:20:07,497 --> 00:20:11,234
It projects these glossy posters
of the movies
425
00:20:11,267 --> 00:20:14,437
that he supposedly
has acquired and distributed.
426
00:20:14,471 --> 00:20:17,140
♪♪
427
00:20:17,173 --> 00:20:19,843
Narrator: Investigators say
Horwitz wants his friends
428
00:20:19,876 --> 00:20:22,679
to help him take the business
to a new level.
429
00:20:22,712 --> 00:20:25,782
Some have already made
small investments with him,
430
00:20:25,815 --> 00:20:28,885
but Horwitz wants them
to go all-in.
431
00:20:28,918 --> 00:20:33,923
To entice his college buddies,
he gives them a special gift.
432
00:20:33,957 --> 00:20:39,129
He sent his friends
a bottle of Johnnie Walker Blue.
433
00:20:39,162 --> 00:20:42,666
Purporting, you know,
as, like, a gift for the success
434
00:20:42,699 --> 00:20:45,135
that they were having
with the business.
435
00:20:45,168 --> 00:20:47,303
McKerr: I had friends
who started investing
436
00:20:47,337 --> 00:20:48,772
very early with him,
437
00:20:48,805 --> 00:20:52,008
and it didn't totally
make sense to me,
438
00:20:52,042 --> 00:20:56,046
but, again, like, I didn't have
the minimum to invest,
439
00:20:56,079 --> 00:20:59,549
and I'm in law school or
paying back loans at that point.
440
00:20:59,582 --> 00:21:01,651
♪♪
441
00:21:01,685 --> 00:21:02,952
Narrator:
Four of Zach's friends
442
00:21:03,053 --> 00:21:04,954
are ready to take the plunge
443
00:21:05,055 --> 00:21:08,224
and start a new company
to capitalize on the venture.
444
00:21:08,258 --> 00:21:11,695
The startup is called JJMT,
445
00:21:11,728 --> 00:21:13,797
after the first names
of the founders...
446
00:21:13,830 --> 00:21:17,133
Jake Wunderlin, Joe deAlteris,
447
00:21:17,167 --> 00:21:21,047
Matthew Schweinzger,
and Tyler Crookston.
448
00:21:21,071 --> 00:21:25,051
Schwab: So, JJMT...
They initially
449
00:21:25,075 --> 00:21:28,912
were investing informally
in 1inMM Capital.
450
00:21:28,945 --> 00:21:31,214
After seeing
those early returns,
451
00:21:31,247 --> 00:21:33,850
they left their normal jobs.
452
00:21:33,883 --> 00:21:35,452
♪♪
453
00:21:35,485 --> 00:21:39,489
Narrator: JJMT establishes
an office in downtown Chicago,
454
00:21:39,522 --> 00:21:41,624
just off the Magnificent Mile.
455
00:21:41,658 --> 00:21:45,128
Over the next couple of years,
JJMT invests
456
00:21:45,161 --> 00:21:47,797
hundreds of thousands
of dollars with Horwitz
457
00:21:47,831 --> 00:21:49,833
and hits up
other friends and family
458
00:21:49,866 --> 00:21:52,502
back in Indiana to join in.
459
00:21:52,535 --> 00:21:54,771
Schwab: Zach Horwitz was
perfectly situated
460
00:21:54,804 --> 00:21:57,207
in order to make this work.
461
00:21:57,240 --> 00:22:01,211
His friends knew that he had
some involvement in Hollywood,
462
00:22:01,244 --> 00:22:02,645
albeit a small one.
463
00:22:02,679 --> 00:22:06,025
And those friends themselves
had a role
464
00:22:06,049 --> 00:22:09,185
in finance in their own sector.
465
00:22:09,219 --> 00:22:13,523
And as a result, he was able
to tap in to their investment
466
00:22:13,556 --> 00:22:15,125
and their money.
467
00:22:15,158 --> 00:22:17,394
Everybody that I knew
that was invested loved it.
468
00:22:17,427 --> 00:22:20,096
I mean, it was the easiest money
they've ever made.
469
00:22:20,130 --> 00:22:23,867
Narrator: After witnessing
Horwitz' restaurant debacle
470
00:22:23,900 --> 00:22:26,202
a few years earlier,
Chris Krebs,
471
00:22:26,236 --> 00:22:30,273
with the support of his wife,
declines to invest.
472
00:22:30,306 --> 00:22:31,641
Krebs: Absolutely tempted.
473
00:22:31,675 --> 00:22:33,419
I mean, it's hard to pass up
the kind of money
474
00:22:33,443 --> 00:22:35,145
that you're seeing people make.
475
00:22:35,178 --> 00:22:37,423
But after the Fuel experience,
we just decided, at that point,
476
00:22:37,447 --> 00:22:39,916
we're not going to mix
friends and business anymore.
477
00:22:39,949 --> 00:22:42,919
Narrator: But Krebs says
plenty of others
478
00:22:42,952 --> 00:22:44,754
want in on the action.
479
00:22:44,788 --> 00:22:46,823
Krebs: I know of parents
that were involved,
480
00:22:46,856 --> 00:22:48,325
that put their retirement
into it.
481
00:22:48,358 --> 00:22:50,327
I know grandparents,
brothers, and sisters,
482
00:22:50,360 --> 00:22:52,395
and people that were involved,
483
00:22:52,429 --> 00:22:53,897
and large groups
of friends, too.
484
00:22:53,930 --> 00:22:56,366
Narrator: Those friends
tell their friends,
485
00:22:56,399 --> 00:22:59,736
who tell their parents
and their neighbors.
486
00:22:59,769 --> 00:23:02,072
But no one ever bothers
to actually confirm
487
00:23:02,105 --> 00:23:05,075
the legitimacy
of Horwitz' business.
488
00:23:05,108 --> 00:23:09,312
His reputed Hollywood success
is all the info they need.
489
00:23:09,346 --> 00:23:11,948
And they're happy to write
a check to the hometown boy
490
00:23:12,048 --> 00:23:14,617
through his successful
finance friends.
491
00:23:14,651 --> 00:23:16,186
Verrastro:
So, there were some people
492
00:23:16,219 --> 00:23:18,955
who were not really
sophisticated investors at all,
493
00:23:19,055 --> 00:23:21,458
but were relying on, like,
their family member
494
00:23:21,491 --> 00:23:24,260
that, you know, had told them
that this was a good investment.
495
00:23:24,294 --> 00:23:27,330
Narrator:
The word-of-mouth advertising
496
00:23:27,364 --> 00:23:29,432
sparks exponential growth.
497
00:23:29,466 --> 00:23:34,170
Between 2015 and 2019,
court filings show,
498
00:23:34,204 --> 00:23:38,050
1inMM Capital issues
hundreds of promissory notes
499
00:23:38,074 --> 00:23:39,943
to JJMT clients,
500
00:23:39,976 --> 00:23:45,982
in exchange for a mind-blowing
$485 million.
501
00:23:46,082 --> 00:23:47,751
Schwab:
Certainly, the demand here
502
00:23:47,784 --> 00:23:50,487
was extremely high
for individuals
503
00:23:50,520 --> 00:23:53,790
to invest their money
with Zach Horwitz' enterprise,
504
00:23:53,823 --> 00:23:55,792
with 1inMM Capital.
505
00:23:55,825 --> 00:23:58,962
Narrator: And just like that,
the company...
506
00:23:58,995 --> 00:24:03,009
And Zach Horwitz...
Is swimming in cash.
507
00:24:03,033 --> 00:24:05,335
♪♪
508
00:24:05,368 --> 00:24:07,704
Next on "American Greed"...
509
00:24:07,737 --> 00:24:10,507
eager investors
take extreme steps
510
00:24:10,540 --> 00:24:12,642
to get in on the action.
511
00:24:12,676 --> 00:24:14,086
Crandall: We were
really excited about it.
512
00:24:14,110 --> 00:24:16,246
Hence, we almost took $400,000
worth of equity
513
00:24:16,279 --> 00:24:18,081
out of our house.
We thought we were
514
00:24:18,114 --> 00:24:20,517
the people
who finally had the leg up,
515
00:24:20,550 --> 00:24:22,519
you know, had the inside track.
516
00:24:22,552 --> 00:24:30,552
♪♪
517
00:24:34,957 --> 00:24:37,193
Narrator:
In just a few short years,
518
00:24:37,226 --> 00:24:39,729
Zach Horwitz'
film-distribution business
519
00:24:39,762 --> 00:24:41,864
has gone from starting up...
520
00:24:41,898 --> 00:24:43,366
to blowing up.
521
00:24:43,399 --> 00:24:45,868
As word of its alleged
success spreads,
522
00:24:45,902 --> 00:24:49,072
he picks up hundreds of
investors across the country.
523
00:24:49,105 --> 00:24:52,275
In Orange County, California,
Terry Crandall
524
00:24:52,308 --> 00:24:55,445
is a local economics professor
and entrepreneur
525
00:24:55,478 --> 00:24:58,581
who runs a nonprofit
voting website.
526
00:24:58,614 --> 00:25:00,383
Crandall:
When it comes to investing,
527
00:25:00,416 --> 00:25:04,320
I take a relatively
long-term approach.
528
00:25:04,354 --> 00:25:08,758
As an economist,
I have a lot of hubris, right?
529
00:25:08,791 --> 00:25:10,259
That's sort of taught into us.
530
00:25:10,293 --> 00:25:11,527
But, really, there are times
531
00:25:11,561 --> 00:25:13,329
that I can see
patterns in the market
532
00:25:13,363 --> 00:25:16,265
and say, "Okay, I think
the market's gonna turn."
533
00:25:16,299 --> 00:25:19,435
Narrator: While Crandall says
his investment philosophy
534
00:25:19,469 --> 00:25:22,638
is usually conservative,
he can't help but be curious
535
00:25:22,672 --> 00:25:26,476
when his neighbor says
he's making serious bank.
536
00:25:26,509 --> 00:25:28,287
Crandall: He said, "You know,
it's pretty aggressive.
537
00:25:28,311 --> 00:25:31,547
It's probably outside of
your normal sort of investment."
538
00:25:31,581 --> 00:25:33,216
And he was right.
539
00:25:33,249 --> 00:25:35,451
But, you know, I watched him,
540
00:25:35,485 --> 00:25:37,220
and I asked him
a lot of questions.
541
00:25:37,253 --> 00:25:39,031
Narrator: Crandall
says his neighbor
542
00:25:39,055 --> 00:25:41,290
is making
hundreds of thousands of dollars
543
00:25:41,324 --> 00:25:43,760
investing with 1inMM.
544
00:25:43,793 --> 00:25:46,629
He's also the point man
for a local group
545
00:25:46,663 --> 00:25:49,666
of JJMT sub-investors.
546
00:25:49,699 --> 00:25:51,601
Crandall wants in,
547
00:25:51,634 --> 00:25:55,304
and ponies up $10,000
to join the group.
548
00:25:55,338 --> 00:25:58,641
After seeing a 12% return
on his first investment,
549
00:25:58,675 --> 00:26:02,178
he bumps up the dollar amount
the next time around.
550
00:26:02,211 --> 00:26:05,148
So, like, this one,
as you can see,
551
00:26:05,181 --> 00:26:11,487
is from July of 2017,
where we invested $15,000.
552
00:26:11,521 --> 00:26:16,001
And I apparently invested
in movies called "Redcon-1,"
553
00:26:16,025 --> 00:26:17,593
"The Forgiven,"
554
00:26:17,627 --> 00:26:20,496
"Origin Unknown,"
and "Drop-Off."
555
00:26:20,530 --> 00:26:25,010
The agreement was for them
to pay me back my $15,000
556
00:26:25,034 --> 00:26:31,441
and then pay me $1,125
in interest.
557
00:26:31,474 --> 00:26:33,343
Narrator:
The group includes
558
00:26:33,376 --> 00:26:36,679
approximately three dozen
other sub-investors.
559
00:26:36,713 --> 00:26:38,815
But they aren't
the only ones raising fund
560
00:26:38,848 --> 00:26:41,517
for Zach Horwitz and 1inMM.
561
00:26:41,551 --> 00:26:44,029
Verrastro: There was, total,
like five big groups...
562
00:26:44,053 --> 00:26:45,388
Investment groups...
That all had,
563
00:26:45,421 --> 00:26:47,690
like, sub-investors
underneath them.
564
00:26:47,724 --> 00:26:51,861
So JJMT was
the largest investor, for sure.
565
00:26:51,894 --> 00:26:54,497
Narrator: The feds say
the other groups are
566
00:26:54,530 --> 00:26:56,566
The movie Fund, Vausse Films,
567
00:26:56,599 --> 00:27:00,203
Pure Health Enterprises,
and SAC.
568
00:27:00,236 --> 00:27:02,705
All of the investment groups
569
00:27:02,739 --> 00:27:04,874
are based outside
of Hollywood...
570
00:27:04,907 --> 00:27:07,243
An important detail,
according to Hollywood-based
571
00:27:07,276 --> 00:27:10,613
investigative journalist
Allison Hope Weiner.
572
00:27:10,646 --> 00:27:13,383
If he tells people
that he's involved in
573
00:27:13,416 --> 00:27:15,218
all these projects in Hollywood,
574
00:27:15,251 --> 00:27:16,886
and they're not from Hollywood,
575
00:27:16,919 --> 00:27:19,064
I mean, they don't know how the
entertainment industry works,
576
00:27:19,088 --> 00:27:22,258
so it'd be easier to talk
to people not in the business
577
00:27:22,291 --> 00:27:25,094
and kind of fudge what you...
578
00:27:25,128 --> 00:27:27,764
What you're actually doing
in the business.
579
00:27:27,797 --> 00:27:32,802
Narrator: HBO and Netflix are
multi-billion-dollar businesses.
580
00:27:32,835 --> 00:27:35,638
Weiner stresses that they
wouldn't be working with
581
00:27:35,672 --> 00:27:40,743
a low-level actor like Horwitz,
no matter how suave he may seem.
582
00:27:40,777 --> 00:27:42,245
Weiner:
If you talk to somebody
583
00:27:42,278 --> 00:27:43,913
who's an attorney
in the movie business
584
00:27:43,946 --> 00:27:45,481
or in the streaming business,
585
00:27:45,515 --> 00:27:47,850
they're gonna know that
nothing he's saying is true.
586
00:27:47,884 --> 00:27:49,919
Right away.
587
00:27:49,952 --> 00:27:54,424
Narrator: But his investors'
ignorance is Horwitz' gain.
588
00:27:54,457 --> 00:27:56,459
He's raising hundreds
of millions of dollars
589
00:27:56,492 --> 00:27:59,762
and enjoying every minute of it.
590
00:27:59,796 --> 00:28:04,834
He purchased an opulent house
on the West Side of Los Angeles.
591
00:28:04,867 --> 00:28:09,138
He had a full wine cellar,
a home movie theater.
592
00:28:09,172 --> 00:28:13,443
He spent it on private jets
and private yachts and so forth.
593
00:28:13,476 --> 00:28:16,112
Schwab: He spent hundreds of
thousands of dollars
594
00:28:16,145 --> 00:28:17,990
on events like birthday parties
595
00:28:18,014 --> 00:28:23,619
and spent all kinds of money
taking junkets to Las Vegas.
596
00:28:23,653 --> 00:28:25,488
Chao:
He spent the investor funds
597
00:28:25,521 --> 00:28:29,792
on Amex bills
north of $6 million;
598
00:28:29,826 --> 00:28:33,429
party consultants
ranging in the six figures.
599
00:28:33,463 --> 00:28:35,698
He spent, I think it was
north of $500,000
600
00:28:35,732 --> 00:28:39,869
on leases for, like,
Audis and Mercedes.
601
00:28:39,902 --> 00:28:43,306
Narrator: Horwitz marries
his college sweetheart
602
00:28:43,339 --> 00:28:46,018
at the Four Seasons
in Beverly Hills.
603
00:28:46,042 --> 00:28:48,478
He acts like a real Angelino
604
00:28:48,511 --> 00:28:51,881
and buys courtside seats
to Lakers games.
605
00:28:51,914 --> 00:28:53,116
Krebs: It was great.
606
00:28:53,149 --> 00:28:54,550
It was always a good time
with him,
607
00:28:54,584 --> 00:28:56,028
kind of similar to college.
Like you'd go out,
608
00:28:56,052 --> 00:28:57,253
he's buying all the drinks,
609
00:28:57,286 --> 00:28:59,155
he's got the good places to go.
610
00:28:59,188 --> 00:29:01,658
Narrator:
For more than five years,
611
00:29:01,691 --> 00:29:04,627
Horwitz lives
the Hollywood high life.
612
00:29:04,661 --> 00:29:07,797
But, eventually, his insatiable
613
00:29:07,830 --> 00:29:10,466
spending habits
catch up with him.
614
00:29:10,500 --> 00:29:13,169
Next on "American Greed"...
615
00:29:13,202 --> 00:29:16,339
Horwitz' fantasy
comes crashing down,
616
00:29:16,372 --> 00:29:20,243
and his investors must face
the cruel reality.
617
00:29:20,276 --> 00:29:21,611
Loftus:
This one is tragic,
618
00:29:21,644 --> 00:29:23,379
because it started off
as imaginary
619
00:29:23,413 --> 00:29:26,349
and continued imaginary
and then grew so large.
620
00:29:26,382 --> 00:29:28,318
Narrator: Want more "Greed"?
621
00:29:28,351 --> 00:29:31,354
Follow us on Instagram,
connect on Facebook,
622
00:29:31,387 --> 00:29:33,656
and listen to
the "American Greed" podcast
623
00:29:33,690 --> 00:29:36,192
wherever you get your podcasts.
624
00:29:36,225 --> 00:29:37,760
We'll be right back.
625
00:29:40,363 --> 00:29:45,702
♪♪
626
00:29:45,735 --> 00:29:49,238
Narrator: One unusual thing
about Zach Horwitz' business
627
00:29:49,272 --> 00:29:52,408
is, other than his JJMT pals,
628
00:29:52,442 --> 00:29:56,079
few individual investors
have ever met him in person.
629
00:29:56,112 --> 00:29:59,615
Investigators say Horwitz
generally works directly
630
00:29:59,649 --> 00:30:02,352
with the principals
of his main investor groups.
631
00:30:02,385 --> 00:30:04,487
He does a very good job
of finding people
632
00:30:04,520 --> 00:30:06,255
that, you know, believe in him
633
00:30:06,289 --> 00:30:09,692
and then kind of provide
credibility to him.
634
00:30:09,726 --> 00:30:12,095
Loftus: No investor
is dealing with Horwitz.
635
00:30:12,128 --> 00:30:15,098
They are dealing with
their buddy
636
00:30:15,131 --> 00:30:17,467
who brought them in
at the aggregator level,
637
00:30:17,500 --> 00:30:20,136
who then deals
with the guys at JJMT or SAC.
638
00:30:20,169 --> 00:30:23,406
Narrator: In Orange County,
Terry Crandall
639
00:30:23,439 --> 00:30:25,508
has been investing
through his neighbor,
640
00:30:25,541 --> 00:30:28,745
who then forwards the money
to JJMT.
641
00:30:28,778 --> 00:30:31,547
I never met the J's
or the M's or the T's.
642
00:30:31,581 --> 00:30:33,316
I never met Horwitz.
643
00:30:33,349 --> 00:30:34,584
Narrator: In two years,
644
00:30:34,617 --> 00:30:38,254
he's made
nearly $30,000 in profits.
645
00:30:38,287 --> 00:30:39,756
Things are going so well,
646
00:30:39,789 --> 00:30:41,758
Crandall says he starts
borrowing money
647
00:30:41,791 --> 00:30:45,428
against his assets
for more investment funds.
648
00:30:45,461 --> 00:30:46,929
Crandall:
We had done the math.
649
00:30:46,963 --> 00:30:49,132
Sort of like taking equity
out of our cars, right?
650
00:30:49,165 --> 00:30:51,334
We could pay for our cars
651
00:30:51,367 --> 00:30:55,571
with the interest-rate gains
for the year.
652
00:30:55,605 --> 00:30:58,207
Narrator: While his wife
has a stable career,
653
00:30:58,241 --> 00:31:01,644
Crandall says he plans
to quit his teaching job
654
00:31:01,678 --> 00:31:02,645
to pursue his dream
655
00:31:02,679 --> 00:31:05,682
of starting the Voting Smarter
app and website.
656
00:31:05,715 --> 00:31:10,219
Crandall says he's ready to take
$400,000 in equity
657
00:31:10,253 --> 00:31:12,355
out of his home, invest it,
658
00:31:12,388 --> 00:31:14,390
and live off the interest.
659
00:31:14,424 --> 00:31:16,159
Crandall:
If, at around 20% to 25%,
660
00:31:16,192 --> 00:31:19,462
if I could put in $400,000
into this investment,
661
00:31:19,495 --> 00:31:23,800
I could make $100,000 a year,
662
00:31:23,833 --> 00:31:26,803
which is what I was making
as a professor.
663
00:31:26,836 --> 00:31:30,206
Narrator: He says
he knows it's a crazy idea,
664
00:31:30,239 --> 00:31:32,675
but the thought
of making easy money
665
00:31:32,709 --> 00:31:35,178
is too hard to resist.
666
00:31:35,211 --> 00:31:36,813
Crandall: No matter
how cautious you are,
667
00:31:36,846 --> 00:31:40,416
no matter how thoughtful you are
or how smart you think you are,
668
00:31:40,450 --> 00:31:46,656
there'll be a moment
where the greed can get to you.
669
00:31:46,689 --> 00:31:47,623
Bells would go off,
670
00:31:47,657 --> 00:31:51,070
and the little greed monster
in your brain
671
00:31:51,094 --> 00:31:53,496
silences the bells.
672
00:31:53,529 --> 00:31:56,165
Narrator:
In December 2019,
673
00:31:56,199 --> 00:31:58,634
Crandall is expecting
his latest windfall,
674
00:31:58,668 --> 00:32:02,405
as his six-month note
is just about due.
675
00:32:02,438 --> 00:32:05,375
Crandall: Yeah, I mean,
we were waiting for $105,000
676
00:32:05,408 --> 00:32:07,543
worth of principal back,
as well as,
677
00:32:07,577 --> 00:32:11,581
you know,
another $18,700 of interest.
678
00:32:11,614 --> 00:32:16,753
Narrator: But, he soon learns
that the money isn't coming.
679
00:32:16,786 --> 00:32:18,464
Crandall: We got an e-mail
saying, "Hey, look,
680
00:32:18,488 --> 00:32:20,156
the Netflix deals are on hold.
681
00:32:20,189 --> 00:32:22,291
They're auditing everything."
682
00:32:22,325 --> 00:32:24,827
Narrator: He frantically calls
his neighbor,
683
00:32:24,861 --> 00:32:28,164
who tries to reassure him
that nothing is wrong.
684
00:32:28,197 --> 00:32:30,433
Crandall: I said,
"My bells are going off."
685
00:32:30,466 --> 00:32:32,869
He's like, "No, this is legit."
686
00:32:32,902 --> 00:32:34,370
I was like, "Okay."
687
00:32:34,404 --> 00:32:36,873
And then another month,
another delay.
688
00:32:36,906 --> 00:32:40,052
Narrator: What Terry Crandall
and his neighbor don't know
689
00:32:40,076 --> 00:32:44,447
is that Zach Horwitz isn't some
whip-smart, young entrepreneur.
690
00:32:44,480 --> 00:32:47,617
He's a con man
running a Ponzi scheme.
691
00:32:47,650 --> 00:32:49,886
His entire business is fake.
692
00:32:49,919 --> 00:32:52,488
There's never been
any film distribution,
693
00:32:52,522 --> 00:32:57,160
no selling off film rights
to Netflix or HBO.
694
00:32:57,193 --> 00:32:59,329
He's just an actor
695
00:32:59,362 --> 00:33:02,365
playing the role
of a real-life villain.
696
00:33:02,398 --> 00:33:03,800
Like, no matter what,
697
00:33:03,833 --> 00:33:06,202
every new project you go into,
you're nervous
698
00:33:06,235 --> 00:33:07,713
'cause you have
that impostor syndrome,
699
00:33:07,737 --> 00:33:09,572
where it's like,
"Am I supposed to be here?
700
00:33:09,605 --> 00:33:12,308
Are they gonna find out that
I'm this fraud the whole time?"
701
00:33:12,342 --> 00:33:14,243
Chao: It was clear
from the beginning
702
00:33:14,277 --> 00:33:16,412
that it was just fake
from the get-go.
703
00:33:16,446 --> 00:33:19,415
This one is tragic because
it started off as imaginary
704
00:33:19,449 --> 00:33:22,485
and continued imaginary
and then grew so large.
705
00:33:22,518 --> 00:33:26,889
Narrator: By late 2019,
the inevitable arrives...
706
00:33:26,923 --> 00:33:29,292
Horwitz is out of cash.
707
00:33:29,325 --> 00:33:32,295
Schwab: He stopped being able
to make payments
708
00:33:32,328 --> 00:33:34,397
on the promissory notes.
709
00:33:34,430 --> 00:33:37,333
There was
outstanding obligations
710
00:33:37,367 --> 00:33:40,937
of over $230 million
at that point.
711
00:33:40,970 --> 00:33:43,306
Narrator:
Ponzi schemes require
712
00:33:43,339 --> 00:33:45,608
a constant infusion
of new investors
713
00:33:45,641 --> 00:33:48,711
and new cash
to pay off old investors.
714
00:33:48,745 --> 00:33:52,882
Without fresh victims,
the schemes always collapse.
715
00:33:52,915 --> 00:33:55,451
It's impossible for
a Ponzi scheme to end well.
716
00:33:55,485 --> 00:33:57,754
It's mathematically impossible.
717
00:33:57,787 --> 00:34:01,324
No matter how successful you are
at operating a Ponzi scheme,
718
00:34:01,357 --> 00:34:03,393
eventually there's a limit
719
00:34:03,426 --> 00:34:05,762
to how much new money
you can recruit,
720
00:34:05,795 --> 00:34:08,598
how much new money
you can bring into the scheme,
721
00:34:08,631 --> 00:34:11,010
and that's what happened
to Zach Horwitz.
722
00:34:11,034 --> 00:34:13,670
Narrator: Ironically,
723
00:34:13,703 --> 00:34:15,938
just when his
film-distribution business
724
00:34:16,039 --> 00:34:17,373
is hitting the skids,
725
00:34:17,407 --> 00:34:20,910
Zach Horwitz' acting career
seems to be on the rise.
726
00:34:20,943 --> 00:34:24,480
He appears in "The White Crow"
with Ralph Fiennes
727
00:34:24,514 --> 00:34:27,717
and "Last Moment of Clarity"
with Brian Cox.
728
00:34:27,750 --> 00:34:30,553
And in a bit of
"art imitating life,"
729
00:34:30,586 --> 00:34:35,034
Zach is cast as a criminal
in the film, "The Gateway."
730
00:34:35,058 --> 00:34:39,796
Noisette: One thing that Zach
likes to do is intense scenes.
731
00:34:39,829 --> 00:34:42,365
This was a good fit for him,
you know?
732
00:34:42,398 --> 00:34:44,400
Like, he had his moments
733
00:34:44,434 --> 00:34:46,536
of just being
really, really aggressive,
734
00:34:46,569 --> 00:34:48,371
which I'm sure he picked up
735
00:34:48,404 --> 00:34:51,374
from his
intramural football days.
736
00:34:51,407 --> 00:34:54,677
Narrator:
Next on "American Greed"...
737
00:34:54,711 --> 00:34:57,714
Horwitz learns to play
the strong, silent type
738
00:34:57,747 --> 00:35:01,250
when the feds
finally catch up with him.
739
00:35:01,284 --> 00:35:03,419
He didn't ask why
he was being arrested.
740
00:35:03,453 --> 00:35:06,656
He didn't seem surprised
that we were there.
741
00:35:06,689 --> 00:35:14,689
♪♪
742
00:35:19,202 --> 00:35:22,839
Narrator: In early 2020,
it appears Zach Horwitz
743
00:35:22,872 --> 00:35:25,575
is about to face
his day of reckoning.
744
00:35:25,608 --> 00:35:27,076
He's out of money,
745
00:35:27,110 --> 00:35:30,747
and making more excuses
to investors than payments.
746
00:35:30,780 --> 00:35:33,583
But, in the month of March,
747
00:35:33,616 --> 00:35:36,853
an unlikely event
buys him some time.
748
00:35:36,886 --> 00:35:38,187
Crandall:
And then COVID hit.
749
00:35:38,221 --> 00:35:40,032
And it was just like,
"Well, what do we need
750
00:35:40,056 --> 00:35:41,858
the money for, right?
The world's ending."
751
00:35:41,891 --> 00:35:44,961
Verrastro: Everybody started
to lock down in March, April,
752
00:35:45,061 --> 00:35:48,164
and so I think
it created an environment
753
00:35:48,197 --> 00:35:50,900
where it was easier
for him to say,
754
00:35:50,933 --> 00:35:52,735
you know, why there was delays.
755
00:35:52,769 --> 00:35:54,937
Narrator: Horwitz
uses the downtime
756
00:35:54,971 --> 00:35:59,075
to concoct some explanations
for his inability to pay up.
757
00:35:59,108 --> 00:36:03,446
Verrastro: He used the excuse
that Warner was buying HBO,
758
00:36:03,479 --> 00:36:05,782
and as a result
of their acquisition,
759
00:36:05,815 --> 00:36:08,651
they were holding off
on payments to any contracts
760
00:36:08,685 --> 00:36:11,621
and they wanted to renegotiate
all the contracts.
761
00:36:11,654 --> 00:36:13,756
Narrator:
Coincidentally, he says,
762
00:36:13,790 --> 00:36:16,492
Netflix also has issues.
763
00:36:16,526 --> 00:36:19,162
Verrastro: He just claimed that,
"Oh, Netflix was conducting
764
00:36:19,195 --> 00:36:22,198
an audit of all their content
that they were purchasing,"
765
00:36:22,231 --> 00:36:24,600
and until the audit
was complete,
766
00:36:24,634 --> 00:36:26,936
no payments could be made.
767
00:36:27,036 --> 00:36:29,138
Narrator:
To help cover his tracks,
768
00:36:29,172 --> 00:36:31,908
Horwitz types up
some fake correspondence
769
00:36:31,941 --> 00:36:34,610
and presents them
to his investors.
770
00:36:34,644 --> 00:36:37,246
Chao: He would create,
from whole cloth,
771
00:36:37,280 --> 00:36:39,382
fake e-mails or text messages
772
00:36:39,415 --> 00:36:43,853
with supposed employees
of Netflix and HBO.
773
00:36:43,886 --> 00:36:45,888
And these e-mails
look very legitimate...
774
00:36:45,922 --> 00:36:51,461
Again, using real people
that worked at HBO and Netflix.
775
00:36:51,494 --> 00:36:54,430
Narrator: For Terry Crandall,
the sequence of events
776
00:36:54,464 --> 00:36:58,968
prevents him from taking out
a $400,000 mortgage on his home.
777
00:36:59,068 --> 00:37:01,571
Crandall: Luckily, the payments
sort of stopped,
778
00:37:01,604 --> 00:37:04,107
and it was just... it just
wasn't the right thing to do.
779
00:37:04,140 --> 00:37:06,275
We had at least enough sense
not to do that
780
00:37:06,309 --> 00:37:08,511
and lose... you know,
potentially lose our home.
781
00:37:08,544 --> 00:37:12,281
Narrator: Horwitz manages
to drag out the proceedings
782
00:37:12,315 --> 00:37:14,717
for over a year.
783
00:37:14,751 --> 00:37:17,887
Brian Michael is
an L.A.-based attorney
784
00:37:17,920 --> 00:37:21,224
who is representing
three of the men in JJMT.
785
00:37:21,257 --> 00:37:25,294
Tyler Crookston
left the group in 2018.
786
00:37:25,328 --> 00:37:28,665
Zach was able to engage
in a very sophisticated effort
787
00:37:28,698 --> 00:37:32,702
to do what is known as lulling
and to keep the JJMT members
788
00:37:32,735 --> 00:37:35,304
and the sub-noteholders
from suspecting
789
00:37:35,338 --> 00:37:37,473
that there was any fraud.
790
00:37:37,507 --> 00:37:40,843
Narrator: But in early 2021,
791
00:37:40,877 --> 00:37:44,480
many investors, including
Horwitz' college friends,
792
00:37:44,514 --> 00:37:48,918
are fed up with the excuses
and contact the authorities.
793
00:37:48,951 --> 00:37:50,329
Michael: So,
we brought it to the FBI,
794
00:37:50,353 --> 00:37:52,221
we brought it
to the Justice Department,
795
00:37:52,255 --> 00:37:55,658
and in essence said to them,
"We believe we have been victims
796
00:37:55,692 --> 00:37:58,261
of a massive,
sophisticated fraud.
797
00:37:58,294 --> 00:37:59,762
We need your help."
798
00:37:59,796 --> 00:38:01,097
[ Siren chirps ]
799
00:38:01,130 --> 00:38:03,633
Narrator:
In Horwitz' film "The Gateway,"
800
00:38:03,666 --> 00:38:05,802
his character
gets off a good zinger
801
00:38:05,835 --> 00:38:07,337
when he's arrested.
802
00:38:07,370 --> 00:38:08,705
How you doing, Mike?
803
00:38:08,738 --> 00:38:10,573
Same [Bleep],
different toilet, officer.
804
00:38:10,606 --> 00:38:12,208
[ Spits ]
805
00:38:12,241 --> 00:38:16,989
Narrator: But Horwitz isn't
as cocky on April 6, 2021,
806
00:38:17,013 --> 00:38:19,816
when FBI agents
show up at his L.A. home
807
00:38:19,849 --> 00:38:21,851
with an arrest warrant.
808
00:38:21,884 --> 00:38:24,854
Verrastro: One of the unique
things about the arrest
809
00:38:24,887 --> 00:38:27,790
was how calm he was
when he came to the door.
810
00:38:27,824 --> 00:38:29,892
He didn't ask
why he was being arrested.
811
00:38:29,926 --> 00:38:33,296
He didn't seem surprised
that we were there.
812
00:38:33,329 --> 00:38:35,298
♪♪
813
00:38:35,331 --> 00:38:39,502
Narrator: Shortly after,
Horwitz' wife files for divorce.
814
00:38:39,535 --> 00:38:42,071
According
to federal prosecutors,
815
00:38:42,105 --> 00:38:47,043
Horwitz' Ponzi scheme is the
largest in Hollywood history.
816
00:38:47,076 --> 00:38:49,612
Chao: Based on
the evidence we've seen,
817
00:38:49,645 --> 00:38:53,216
Horwitz raised over $650 million
818
00:38:53,249 --> 00:38:55,685
in the course of
this six-year scheme.
819
00:38:55,718 --> 00:38:58,388
Narrator:
One month after his arrest,
820
00:38:58,421 --> 00:38:59,889
Horwitz is indicted
821
00:38:59,989 --> 00:39:01,891
on five counts
of securities fraud,
822
00:39:01,991 --> 00:39:03,826
six counts of wire fraud,
823
00:39:03,860 --> 00:39:07,563
and two counts of
aggravated identity theft.
824
00:39:07,597 --> 00:39:09,632
Chao: It was all a fraud.
825
00:39:09,666 --> 00:39:12,602
He had no relationship
with Netflix.
826
00:39:12,635 --> 00:39:15,238
He had no relationship with HBO.
827
00:39:15,271 --> 00:39:17,983
He had no relationship
with the sales agents
828
00:39:18,007 --> 00:39:19,409
for the production companies
829
00:39:19,442 --> 00:39:21,987
that he said he was getting
these movies from.
830
00:39:22,011 --> 00:39:24,847
Narrator: The feds say Horwitz
still owes investors
831
00:39:24,881 --> 00:39:28,718
an astounding $230 million.
832
00:39:28,751 --> 00:39:30,320
Chao: Unfortunately,
in this case,
833
00:39:30,353 --> 00:39:32,855
a lot of the money
has been squirreled away
834
00:39:32,889 --> 00:39:34,357
or already spent.
835
00:39:34,390 --> 00:39:37,860
But where that money is now,
exactly, is hard to say.
836
00:39:37,894 --> 00:39:40,005
Narrator: In Orange County,
837
00:39:40,029 --> 00:39:43,900
Terry Crandall loses
over $100,000.
838
00:39:43,933 --> 00:39:46,302
His neighbor fares even worse.
839
00:39:46,336 --> 00:39:48,938
Crandall: I mean he lost
millions of dollars.
840
00:39:49,038 --> 00:39:51,274
But I know he's... he's
equally or more broken up
841
00:39:51,307 --> 00:39:53,209
about losing
his investors' money.
842
00:39:53,242 --> 00:39:55,645
And, I... I
just couldn't imagine
843
00:39:55,678 --> 00:39:57,613
if I'd lost my friends' money.
844
00:39:57,647 --> 00:40:01,718
Narrator: Horwitz pleads guilty
to securities fraud
845
00:40:01,751 --> 00:40:03,720
and gets a 20-year sentence.
846
00:40:03,753 --> 00:40:06,122
Verrastro:
I think the sentencing was
so harsh in this case
847
00:40:06,155 --> 00:40:08,224
was 'cause of the dollar amount
to that loss...
848
00:40:08,257 --> 00:40:11,227
The $230 million restitution.
849
00:40:11,260 --> 00:40:14,464
Narrator:
The rest of the charges
against him are dropped.
850
00:40:14,497 --> 00:40:17,667
While Horwitz is the only
person charged in the case,
851
00:40:17,700 --> 00:40:19,168
the question remains,
852
00:40:19,202 --> 00:40:21,771
"What about his friends in JJMT
853
00:40:21,804 --> 00:40:23,639
and the other
investment groups?"
854
00:40:23,673 --> 00:40:27,210
The feds say
Horwitz acted alone.
855
00:40:27,243 --> 00:40:31,347
But Alexander Loftus,
who represents JJMT clients,
856
00:40:31,381 --> 00:40:36,052
says JJMT didn't do
its due diligence.
857
00:40:36,085 --> 00:40:39,055
For example, Horwitz
didn't have an accountant.
858
00:40:39,088 --> 00:40:42,191
There was no audit
of his financial records.
859
00:40:42,225 --> 00:40:45,495
The most simple thing
that didn't happen
860
00:40:45,528 --> 00:40:47,463
until, you know,
right before it collapsed,
861
00:40:47,497 --> 00:40:50,333
is no one picked up the phone
and called Netflix
862
00:40:50,366 --> 00:40:53,369
and said, "Hey,
what's going on here?"
863
00:40:53,403 --> 00:40:56,906
Narrator: The class-action suit
against JJMT
864
00:40:56,939 --> 00:41:01,077
seeks damages
of at least $120 million.
865
00:41:01,110 --> 00:41:02,512
Loftus:
For the civil claims,
866
00:41:02,545 --> 00:41:04,056
we don't need to prove
they knew anything.
867
00:41:04,080 --> 00:41:05,515
We prove it was dumb,
868
00:41:05,548 --> 00:41:07,784
and the basics of the claim
is, "This was dumb,
869
00:41:07,817 --> 00:41:09,452
and you made money
off of being dumb,
870
00:41:09,485 --> 00:41:11,821
and you got to pay it back
'cause it was stupid."
871
00:41:11,854 --> 00:41:13,656
Narrator:
JJMT's attorney says
872
00:41:13,690 --> 00:41:17,694
the men should be viewed
as victims of Horwitz' scheme.
873
00:41:17,727 --> 00:41:19,796
Michael:
They're 100% victims.
874
00:41:19,829 --> 00:41:22,465
The Department of Justice
has recognized them as victims,
875
00:41:22,498 --> 00:41:24,934
and everything about the life
they're living today
876
00:41:24,967 --> 00:41:28,047
is reflective of someone
who has been horribly victimized
877
00:41:28,071 --> 00:41:32,542
and nearly wiped out financially
by the fraud of a friend.
878
00:41:32,575 --> 00:41:36,145
♪♪
879
00:41:36,179 --> 00:41:39,482
Narrator: Zach Horwitz
may have been a middling actor,
880
00:41:39,515 --> 00:41:40,450
but to the film critic,
881
00:41:40,483 --> 00:41:43,553
his strongest performance
was not on-screen.
882
00:41:43,586 --> 00:41:46,823
If you're doing something
of criminal activity
883
00:41:46,856 --> 00:41:48,191
for seven, eight years,
884
00:41:48,224 --> 00:41:50,560
I think, at some point,
you start to believe
885
00:41:50,593 --> 00:41:53,229
that you're not doing
anything wrong at all.
886
00:41:53,262 --> 00:41:58,077
It sounds as though like
he believed his own part.
887
00:41:58,101 --> 00:42:00,103
That was his greatest role,
888
00:42:00,136 --> 00:42:02,572
and he'll never
get an award for it.
889
00:42:02,605 --> 00:42:04,907
♪♪
890
00:42:04,941 --> 00:42:07,276
Narrator: Meanwhile,
Horwitz' victims
891
00:42:07,310 --> 00:42:09,579
are still dealing
with the fallout.
892
00:42:09,612 --> 00:42:14,517
I've tried to just put that
mistake of mine
893
00:42:14,550 --> 00:42:18,521
somewhere hidden in my past,
because I blame me.
894
00:42:18,554 --> 00:42:20,857
Um...
895
00:42:20,890 --> 00:42:23,593
there's plenty of tricksters
and fraudsters out there,
896
00:42:23,626 --> 00:42:25,595
and I should have known better.
897
00:42:25,628 --> 00:42:29,198
Narrator: Investors, family,
and friends can only wonder
898
00:42:29,232 --> 00:42:32,335
how this whole thing happened
in the first place.
899
00:42:32,368 --> 00:42:35,605
I would like to go see him
face-to-face and ask him why.
900
00:42:35,638 --> 00:42:37,616
I don't expect that I'm gonna
get a truthful answer,
901
00:42:37,640 --> 00:42:40,052
but I'd at least like
to have the conversation.
902
00:42:40,076 --> 00:42:42,378
He was a good friend of mine
for half my life.
903
00:42:42,412 --> 00:42:45,615
I would just love to know
what his endgame was with this
904
00:42:45,648 --> 00:42:48,217
and does he feel any remorse.
905
00:42:48,251 --> 00:42:51,621
Is there any remorse at all
for this?
906
00:42:51,654 --> 00:42:54,624
Captions by VITAC...
907
00:42:54,657 --> 00:43:02,657
♪♪