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♪♪
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He was a very popular guy
in high school.
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00:00:06,139 --> 00:00:08,508
Zach Horwitz basically grew up
like a Hollywood star.
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00:00:08,508 --> 00:00:10,143
Goldberg: A Midwest kid
with Hollywood dreams.
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It's a familiar story,
but this one is a blockbuster.
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♪♪
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Right off the bat,
it was apparent
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that there were several
hundreds of million dollars
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that nobody could account for.
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It's not just about a guy who
wants to be behind the camera.
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He wants to be a star.
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Clark:
I was not terribly impressed
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by Zach's acting chops.
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He found another route
to the top.
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Mosley: This was an investor's
dream come true.
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They're all in
big Hollywood business.
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Verrasto:
It's everybody from your mom,
your dad, grandparents.
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And then they lost everything.
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Krebs:
Nobody saw it coming.
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I couldn't fathom
doing that to friends.
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Schwab: A Ponzi scheme
can only grow so large.
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Hackett: He had
a 1,000-bottle wine cellar.
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He flew on private jets.
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He wore $500 T-shirts.
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Krebs:
Zach commanded attention
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regardless of
who the audience was.
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Goldberg: He's got plenty
of attention now,
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but I'm not really sure
he's going to like it.
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Mosley: Zachary and his wife,
Mallory, get a wake-up call.
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It's an FBI raid.
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Clark:
It seemed like something
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that would only happen
in the movies.
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Goldberg: Oh, no, no, honey,
this is happening in real life.
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And it's happening to you.
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♪♪
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I'm Whoopi Goldberg,
and this is "The Con."
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-- Captions by VITAC --
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Welcome to Fort Wayne, Indiana,
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a working-class town
at the crossroads of America,
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the perfect opening scene
for a starry-eyed dreamer
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who's going places.
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To guide us
on this epic journey,
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we've brought in self-professed
scam goddess Laci Mosley,
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who can spot a Hollywood grifter
2,000 miles away.
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Mosley: This is Zach Horwitz,
actor, writer, producer.
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And his story,
like many Hollywood stories,
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began far, far away.
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♪♪
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Krebs: Growing up in Fort Wayne
was not quite a small-town feel,
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but it was very family-oriented.
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♪♪
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It was the type of community
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where if you went to school
with someone in kindergarten,
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chances were you were still
going to be in school with them
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in high school.
[ School bell rings ]
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For the most part, you knew
the majority of the class.
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♪♪
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I met Zach
around sophomore year.
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From there, we became friends.
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Goldberg: Despite being
the new kid in town,
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Zach redefined his role
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as big man on campus
in Fort Wayne.
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He was a very popular guy
in high school.
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♪♪
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Clark: I was classmates
with Zach Horwitz.
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He was a jock
through and through.
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Being an athlete,
playing football
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was really, really
intrinsically tied
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to who Zach Horwitz was
in high school.
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He always looked like
somebody that,
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hey, that's what
a star athlete looks like.
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You know, Zach was that popular
guy in everybody's high school.
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Really good looking, great hair,
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got along with the geeks
and the jocks.
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He was beloved by all.
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He was even voted Best Body.
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Clark: I recall talking to
the yearbook photographer
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who took that photo,
and they remarked
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how he insisted
on taking his shirt off,
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disrobing,
really showing off what he had.
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That is a very weird
yearbook category.
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Why are the kids voting
on each other's bodies? Strange.
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Zach Horwitz basically grew up
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like a Hollywood star
in Fort Wayne, Indiana,
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because everywhere he went,
he turned heads,
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and he thrived off of it.
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Maybe he lived for it.
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Goldberg: That can be
all it takes to get the bug.
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Why hide those talents
under a helmet and pads?
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At some point, he did
get into drama and acting.
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Krebs: Most of us
had to take one theater class
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while in high school.
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He was a really
captivating storyteller.
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My lasting memory of Zach is
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we were in a class once,
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and he regaled the class
with this story
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of how he and his sister were at
this shopping mall in Florida,
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and they were approached
by Derek Jeter,
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and he invited both of them
back to his estate
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to have dinner that night.
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Goldberg:
Yankees legend Derek Jeter?
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'Cause for someone
in high school,
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that's an incredible story.
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I'm not sure that I believe it,
but his classmates seem to.
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It seemed like something that
would only happen in the movies,
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and here it was.
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The guy I'm sitting next to
in class,
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it actually happened to him.
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Krebs: Zach and I
graduated high school together,
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and we both got accepted
to Indiana University.
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We decided that we were going to
room together our freshman year.
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I.U. is kind of
where the cool kids go,
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00:05:05,705 --> 00:05:08,574
so it seemed like
a good fit for Zach.
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Krebs: We had a large group
of friends that would be there.
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The group of guys that we were
hanging out with
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were guys that I expected
to spend our later years in life
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still being friends with.
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Mosley: Zach is the typical
all-American guy.
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He's got these piercing eyes,
and people really like him.
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Krebs:
Our junior year of college,
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Zach met his
girlfriend, Mallory.
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He seemed to really like her
quite a bit.
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He would still go out
to the bars with us.
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He was still doing
all of his classwork,
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but the rest of his free time
was spent primarily with her.
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He got good grades throughout,
graduated on time.
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I knew that,
at the end of the day,
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that he was going to be
a successful guy.
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He's always done well
for himself.
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I figured that he would
land on his feet regardless
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of what the next direction was
that he wanted to go in.
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♪♪
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So, Zach leaves Indiana
and goes to Chicago,
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where he opens up a smoothie bar
called FUL,
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00:06:02,328 --> 00:06:06,632
spelled F-U-L, you know, fuel.
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Goldberg: And for a city that's
knee-deep in melted cheese,
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smoothies and salads
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would certainly
disrupt the market.
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Krebs:
Zach told us he planned to open
a restaurant in July of 2011.
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Zach mentioned to me
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about wanting me to be involved
in it in late September.
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A large group of our friends
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were a part
of this restaurant opening.
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The restaurant was beautiful.
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It appeared to be busy,
but they were going to
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try to build FUL
into a larger national chain.
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My wife and I
went out to Chicago,
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put a down payment
on an apartment out there.
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I put in my two-weeks'
notice at work
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and had planned to move
to Chicago after Thanksgiving.
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FUL was well-received
when it opened.
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But from a financial standpoint,
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it wasn't making a profit
yet at this point.
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It seemed like
one of those things
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where you can get in
at the ground level.
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You can work with your friends
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and hopefully turn it into
something that's really big.
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Goldberg: While his friends
are prepping sandwiches,
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Zach starts preparing
for acting roles.
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He talked openly about wanting
to make it as an actor.
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Goldberg: He takes a few classes
and books some short films.
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It's no red carpet,
but it sure beats green juice.
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The friend group
that he brought in,
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everybody was
kind of working together.
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They had their own
specialized field,
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and everybody at the same time
was still working in the store.
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They were making sandwiches.
They were making smoothies.
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They were managing it
from open to close every day.
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♪♪
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In November of 2011,
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two weeks
after I put the down payment
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on the apartment in Chicago,
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I got an e-mail from Zach
saying that he was basically
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going to close the doors
on the business and disband it.
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♪♪
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Nobody saw it coming.
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00:07:52,939 --> 00:07:55,308
It seemed like
it happened overnight.
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00:07:55,308 --> 00:07:56,809
It felt like betrayal.
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I couldn't fathom
doing that to friends.
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00:08:00,046 --> 00:08:01,948
I was disappointed
with the closing personally,
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00:08:01,948 --> 00:08:04,250
just because that was
a new chapter in my life
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00:08:04,250 --> 00:08:06,252
that I expected to partake in
and didn't happen.
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There were a lot of things
going on at home,
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00:08:08,421 --> 00:08:09,989
and my wife was pregnant,
so it was tough.
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The group of friends we had
were all in Chicago
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00:08:12,825 --> 00:08:15,728
with leases on apartments
or condos,
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00:08:15,728 --> 00:08:19,899
and they needed to find a new
job and a new way of living.
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♪♪
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Goldberg: Seems Zach didn't get
into show biz to make friends,
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00:08:25,104 --> 00:08:28,841
and he might have lost a few
when he left the smoothie biz.
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Mosley: Suddenly, he leaves
his friends in Chicago
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00:08:30,676 --> 00:08:31,344
and decides he's going
to bigger and better things --
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00:08:31,344 --> 00:08:35,081
Hollywood.
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00:08:35,081 --> 00:08:37,583
Goldberg: Dreams aren't going
to chase themselves.
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00:08:37,583 --> 00:08:39,185
And Zach leaves behind
a nightmare
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00:08:39,185 --> 00:08:41,654
for those back in Chicago.
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00:08:41,654 --> 00:08:44,724
♪♪
198
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♪♪
199
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Goldberg: In late 2011,
200
00:08:58,971 --> 00:09:02,174
Zach Horwitz put the Second City
in his rearview mirror,
201
00:09:02,174 --> 00:09:05,211
leaving behind his friends
and the health food business
202
00:09:05,211 --> 00:09:09,448
with a new goal --
to make it big in La La Land
203
00:09:09,448 --> 00:09:11,617
with a shiny, new stage name,
204
00:09:11,617 --> 00:09:15,388
Zach Avery.
205
00:09:15,388 --> 00:09:17,390
Krebs: I don't believe he had
even gotten any roles yet.
206
00:09:17,390 --> 00:09:20,826
He was really just putting video
out there as part of his reel
207
00:09:20,826 --> 00:09:24,397
or whatever for trying
to land an acting job.
208
00:09:24,397 --> 00:09:25,731
And to be honest, they were --
209
00:09:25,731 --> 00:09:29,035
They were hard to watch
at the time.
210
00:09:29,035 --> 00:09:33,839
I'm watching Zachary Horwitz's
acting demo reel.
211
00:09:33,839 --> 00:09:37,043
Let's see what Zach is giving.
212
00:09:37,043 --> 00:09:39,478
I'm the man of the house now.
213
00:09:39,478 --> 00:09:41,347
You know why?
214
00:09:41,347 --> 00:09:43,582
'Cause you're just
a [bleep] child.
215
00:09:43,582 --> 00:09:44,684
Oh.
216
00:09:44,684 --> 00:09:46,585
Wow, this man was terrible.
217
00:09:46,585 --> 00:09:48,688
This was so bad -- I feel --
218
00:09:48,688 --> 00:09:51,090
Zach, you owe me money.
219
00:09:51,090 --> 00:09:53,259
Goldberg:
Zach's first big-screen credit
220
00:09:53,259 --> 00:09:56,362
was in the Brad Pitt
war movie "Fury."
221
00:09:56,362 --> 00:09:58,230
There he is.
222
00:09:58,230 --> 00:10:01,567
Wait. Or is that him?
223
00:10:01,567 --> 00:10:03,869
Well, he's in there somewhere.
224
00:10:03,869 --> 00:10:08,074
And despite landing the
non-speaking role of tank medic,
225
00:10:08,074 --> 00:10:11,444
parts just did not
come rolling in for Zach.
226
00:10:11,444 --> 00:10:13,279
So, whilst Zachary's
acting career
227
00:10:13,279 --> 00:10:16,015
is ascending at a snail's pace,
228
00:10:16,015 --> 00:10:18,751
he decides to create
a production company.
229
00:10:18,751 --> 00:10:21,587
Clark: When the acting work
wasn't coming
230
00:10:21,587 --> 00:10:23,889
as rapidly
as he figured it would,
231
00:10:23,889 --> 00:10:27,426
I think that he found
another route to the top.
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00:10:27,426 --> 00:10:31,197
♪♪
233
00:10:31,197 --> 00:10:34,567
Goldberg: Making it big in
the movie business is not easy.
234
00:10:34,567 --> 00:10:36,369
[ Chuckles ] I should know.
235
00:10:36,369 --> 00:10:39,705
And the only way to make sure
the kid stays in the picture
236
00:10:39,705 --> 00:10:43,209
is to be the one
producing the picture.
237
00:10:43,209 --> 00:10:45,778
My name is Larry Hackett,
ABC News contributor,
238
00:10:45,778 --> 00:10:48,981
and I'm the former editor-in-
chief of People magazine.
239
00:10:48,981 --> 00:10:52,151
In Hollywood, there's
a very low cost to entry.
240
00:10:52,151 --> 00:10:54,720
I mean, anybody can claim
they're a movie producer
241
00:10:54,720 --> 00:10:59,058
and claim they've got a script
or claim they have a new star.
242
00:10:59,058 --> 00:11:01,093
So while Zach Avery
was the actor,
243
00:11:01,093 --> 00:11:05,664
Zach Horwitz was the growing
movie investor/producer
244
00:11:05,664 --> 00:11:07,133
who created a company called
245
00:11:07,133 --> 00:11:09,735
1inMM Productions.
[one in a million]
246
00:11:09,735 --> 00:11:11,170
He loved the idea of this name
247
00:11:11,170 --> 00:11:13,506
'cause it suggested
to potential investors
248
00:11:13,506 --> 00:11:17,276
that the idea of movie success
is one in a million,
249
00:11:17,276 --> 00:11:22,248
and you should be that one
who has that success.
250
00:11:22,248 --> 00:11:24,083
Goldberg:
Production company -- check.
251
00:11:24,083 --> 00:11:26,285
Killer catchphrase --
double check.
252
00:11:26,285 --> 00:11:29,422
A way to make money?
Well, not so much.
253
00:11:29,422 --> 00:11:31,190
Little help here?
254
00:11:31,190 --> 00:11:32,658
My name is Anita Surendran.
255
00:11:32,658 --> 00:11:36,262
I'm an entertainment lawyer
in Beverly Hills.
256
00:11:36,262 --> 00:11:38,364
When you are selling a film
in Hollywood,
257
00:11:38,364 --> 00:11:40,166
there's a few different ways
that you can do it.
258
00:11:40,166 --> 00:11:43,502
One is through the studio route.
They fully finance the budget,
259
00:11:43,502 --> 00:11:45,838
and then they control
the distribution of the film
260
00:11:45,838 --> 00:11:47,673
once it's produced.
261
00:11:47,673 --> 00:11:51,444
The other route is to go through
an independent financing model.
262
00:11:51,444 --> 00:11:54,146
You are putting together
the financing yourself
263
00:11:54,146 --> 00:11:57,817
and then finding ways
to bring it to a distributor.
264
00:11:57,817 --> 00:11:59,819
Goldberg: There's a new way
to watch movies,
265
00:11:59,819 --> 00:12:02,822
and Zach sees a new way
to make money.
266
00:12:02,822 --> 00:12:05,958
He just needs some investors
to buy in.
267
00:12:05,958 --> 00:12:08,527
At this time, the streaming wars
had just begun,
268
00:12:08,527 --> 00:12:11,230
and they're all hungry
for content, and they're looking
269
00:12:11,230 --> 00:12:14,633
for production companies
to provide it.
270
00:12:14,633 --> 00:12:16,402
Surendran: It was a little bit
of the Wild West,
271
00:12:16,402 --> 00:12:19,972
because a lot of these companies
were figuring themselves out.
272
00:12:19,972 --> 00:12:23,075
So they were happy to work
with emerging filmmakers,
273
00:12:23,075 --> 00:12:26,812
and Netflix was kind of
going after a much wider scope.
274
00:12:26,812 --> 00:12:29,148
Hackett: So, what Zach
said to people was,
275
00:12:29,148 --> 00:12:31,817
"These streaming services
exist globally,
276
00:12:31,817 --> 00:12:33,886
and they have different rights
and different projects
277
00:12:33,886 --> 00:12:35,187
in different countries.
278
00:12:35,187 --> 00:12:37,523
What I'm going to do, investor,
279
00:12:37,523 --> 00:12:39,925
is to buy the rights to a movie.
280
00:12:39,925 --> 00:12:42,027
Netflix can then pay for
and broadcast in Latin America,
281
00:12:42,027 --> 00:12:45,397
in Australia, anywhere but in
the United States and Europe."
282
00:12:45,397 --> 00:12:47,666
And people would think,
"Okay, that sounds good."
283
00:12:47,666 --> 00:12:49,535
So the idea is I'm a broker.
284
00:12:49,535 --> 00:12:51,937
I'm a kind of toll plaza,
if you will.
285
00:12:51,937 --> 00:12:54,573
You give me the money.
I buy the movies.
286
00:12:54,573 --> 00:12:57,009
I lease them to Netflix
and other streaming services.
287
00:12:57,009 --> 00:13:00,579
In return, you'll get 35 to 40%
288
00:13:00,579 --> 00:13:03,048
on top of your initial
investment.
289
00:13:03,048 --> 00:13:06,185
Goldberg: A middleman
delivering 40% returns?
290
00:13:06,185 --> 00:13:09,021
There's always been money
in movie magic,
291
00:13:09,021 --> 00:13:13,125
but that is the kind of profit
that parts the Red Sea.
292
00:13:13,125 --> 00:13:14,693
He kind of essentially meant
293
00:13:14,693 --> 00:13:16,896
that it was a guaranteed
investment.
294
00:13:16,896 --> 00:13:18,731
He was going to be
the guy to find it,
295
00:13:18,731 --> 00:13:20,866
bring it to them,
sell it to them.
296
00:13:20,866 --> 00:13:25,104
And you, the investor,
were going to reap the benefits.
297
00:13:25,104 --> 00:13:27,206
Goldberg: Remember
those friends from college?
298
00:13:27,206 --> 00:13:30,409
Yeah, the ones that got mixed up
in the smoothie business?
299
00:13:30,409 --> 00:13:32,244
Well, he's going
to make it up to them
300
00:13:32,244 --> 00:13:35,381
with an offer they can't refuse.
301
00:13:35,381 --> 00:13:37,283
Zach enlisted some
of his college friends,
302
00:13:37,283 --> 00:13:39,952
people who'd gone out
and become financial planners
303
00:13:39,952 --> 00:13:42,087
and investment experts.
304
00:13:42,087 --> 00:13:44,623
Based on their friendship
and based on their history,
305
00:13:44,623 --> 00:13:48,327
he got them
to invest their money.
306
00:13:48,327 --> 00:13:50,129
Surendran: A lot of times,
you see investors
307
00:13:50,129 --> 00:13:51,730
who are not Hollywood people,
308
00:13:51,730 --> 00:13:53,766
who don't know
how the industry works,
309
00:13:53,766 --> 00:13:56,001
and they come to the table
'cause they'd like to get in
310
00:13:56,001 --> 00:13:57,803
because it's a cool business.
311
00:13:57,803 --> 00:14:00,739
Krebs: Once our group of friends
started to get involved,
312
00:14:00,739 --> 00:14:03,842
that's when I really took notice
of what he was doing
313
00:14:03,842 --> 00:14:06,345
from the movie distribution
standpoint.
314
00:14:06,345 --> 00:14:08,447
I certainly asked him questions.
315
00:14:08,447 --> 00:14:10,182
He kind of told me
what he was doing,
316
00:14:10,182 --> 00:14:13,419
and it seemed like
a reasonable explanation,
317
00:14:13,419 --> 00:14:15,854
and that was it.
318
00:14:15,854 --> 00:14:17,957
And so, yeah,
parents got involved,
319
00:14:17,957 --> 00:14:21,594
grandparents got involved,
in-laws, friends.
320
00:14:21,594 --> 00:14:24,330
Hackett: The idea that
if you live in the Midwest,
321
00:14:24,330 --> 00:14:25,998
and you can invest some money,
322
00:14:25,998 --> 00:14:27,800
and you're going to get,
"A," your money back,
323
00:14:27,800 --> 00:14:29,001
and perhaps one day,
you'll be able
324
00:14:29,001 --> 00:14:30,803
to put on a tuxedo
and get an Oscar
325
00:14:30,803 --> 00:14:34,673
'cause you were a producer,
that's very, very attractive.
326
00:14:34,673 --> 00:14:37,977
It was a $20,000
kind of initial commitment
327
00:14:37,977 --> 00:14:39,678
in order to get involved.
328
00:14:39,678 --> 00:14:42,982
And Zach was somebody
that I trusted explicitly.
329
00:14:42,982 --> 00:14:46,018
Hackett: Initial investors
signed a promissory note
330
00:14:46,018 --> 00:14:49,221
and then got back
up to 45% of their investment.
331
00:14:49,221 --> 00:14:51,156
This sounds like a good deal.
332
00:14:51,156 --> 00:14:53,626
Krebs: 2016, 2017
is when we really started
333
00:14:53,626 --> 00:14:55,294
to see people
that were making money
334
00:14:55,294 --> 00:14:58,364
and doing really well
and living a nicer lifestyle.
335
00:14:58,364 --> 00:15:01,333
♪♪
336
00:15:01,333 --> 00:15:03,035
Goldberg: Zach has sold
the Hollywood dream
337
00:15:03,035 --> 00:15:05,037
to his friends in the Midwest,
338
00:15:05,037 --> 00:15:08,741
and everyone is getting
a taste of success.
339
00:15:08,741 --> 00:15:10,075
With that, he's started to make
a name for himself in Hollywood.
340
00:15:10,075 --> 00:15:12,711
People, his friends who he'd
gone to, the financial planners,
341
00:15:12,711 --> 00:15:14,079
told other people.
342
00:15:14,079 --> 00:15:16,815
And soon, money was streaming in
to people.
343
00:15:16,815 --> 00:15:18,751
They believed it was
a smart investment
344
00:15:18,751 --> 00:15:20,853
and that they were
on the bottom floor
345
00:15:20,853 --> 00:15:25,190
of what became this absolutely
voracious streaming mania
346
00:15:25,190 --> 00:15:27,259
throughout the past decade.
347
00:15:27,259 --> 00:15:29,495
This was an investor's
dream come true.
348
00:15:29,495 --> 00:15:32,331
They're seeing returns,
and everybody's over the moon.
349
00:15:32,331 --> 00:15:34,933
They're all in big
Hollywood business.
350
00:15:34,933 --> 00:15:36,902
Goldberg:
Hold onto your seats, darling.
351
00:15:36,902 --> 00:15:39,071
There's going to be
a plot twist.
352
00:15:39,071 --> 00:15:41,240
♪♪
353
00:15:45,778 --> 00:15:48,247
♪♪
354
00:15:48,247 --> 00:15:50,883
Even though Zachary was killing
it on the investment front,
355
00:15:50,883 --> 00:15:54,019
his acting career
was still D. O. A.
356
00:15:54,019 --> 00:15:57,189
So he decided to use some
of that money that was coming in
357
00:15:57,189 --> 00:16:01,060
to invest in projects
that he could cast himself in.
358
00:16:01,060 --> 00:16:03,796
What Zach Horwitz,
movie producer, did
359
00:16:03,796 --> 00:16:07,700
as Zach Avery,
growing movie star,
360
00:16:07,700 --> 00:16:09,368
was basically pay for play.
361
00:16:09,368 --> 00:16:12,604
He took his own money,
and he made his own projects.
362
00:16:12,604 --> 00:16:15,274
It was enough money,
millions of dollars,
363
00:16:15,274 --> 00:16:17,910
that he could sustain
the creation of movies
364
00:16:17,910 --> 00:16:20,245
and stick himself in the cast.
365
00:16:20,245 --> 00:16:22,715
Zach was simply kind of
refining and updating
366
00:16:22,715 --> 00:16:25,484
what was a very old,
traditional Hollywood idea.
367
00:16:25,484 --> 00:16:27,152
And it worked.
368
00:16:27,152 --> 00:16:28,921
Everything's great.
369
00:16:28,921 --> 00:16:31,590
Goldberg: Zach Horwitz/Avery
370
00:16:31,590 --> 00:16:34,259
was making big waves
in Los Angeles.
371
00:16:34,259 --> 00:16:36,395
The networking of Zach Horwitz
372
00:16:36,395 --> 00:16:40,599
turned into more and more
screen time for Zach Avery.
373
00:16:40,599 --> 00:16:43,302
I think what makes
Zach Horwitz's story so great
374
00:16:43,302 --> 00:16:44,837
is that it's not
just about a guy
375
00:16:44,837 --> 00:16:46,605
who wants to be
behind the camera.
376
00:16:46,605 --> 00:16:48,974
He wants to be a star.
377
00:16:48,974 --> 00:16:50,642
To look at his filmography,
you would think
378
00:16:50,642 --> 00:16:52,411
that Zach Avery was a guy
379
00:16:52,411 --> 00:16:55,347
whose career was absolutely
about to explode
380
00:16:55,347 --> 00:16:56,582
into A-list fame.
381
00:16:56,582 --> 00:16:58,450
He'd gone from uncredited roles
382
00:16:58,450 --> 00:17:01,620
to sort of mid-level roles
with higher profiles,
383
00:17:01,620 --> 00:17:03,856
to starring alongside
people like Olivia Munn
384
00:17:03,856 --> 00:17:06,158
in a film called "The Gateway."
385
00:17:06,158 --> 00:17:08,360
Avery: Yeah, well, I'm here now,
and I'm done with that [bleep]
386
00:17:08,360 --> 00:17:10,462
You don't have to
worry about anything.
387
00:17:10,462 --> 00:17:11,964
Playing that dynamic
388
00:17:11,964 --> 00:17:15,501
between kind of the good guy
and the bad guy
389
00:17:15,501 --> 00:17:19,037
and how I can work through
those nuances was really fun.
390
00:17:20,272 --> 00:17:23,142
Hackett: It had nothing to do
with Zach Avery's sudden talent
391
00:17:23,142 --> 00:17:24,977
that he became
an above-the-board star
392
00:17:24,977 --> 00:17:26,178
or accredited star.
393
00:17:26,178 --> 00:17:27,679
It had to do with the fact,
394
00:17:27,679 --> 00:17:30,048
unbeknownst to people
involved in the movie,
395
00:17:30,048 --> 00:17:32,985
that he was financing it
with money that he raised.
396
00:17:32,985 --> 00:17:34,653
For what it's worth,
397
00:17:34,653 --> 00:17:38,657
I was not terribly impressed
by Zach's acting chops,
398
00:17:38,657 --> 00:17:42,327
and I think for that reason,
it was not terribly surprising
399
00:17:42,327 --> 00:17:45,330
to learn that he had
a side hustle.
400
00:17:45,330 --> 00:17:46,999
If you have that kind of money,
401
00:17:46,999 --> 00:17:48,534
you can make
your own playgrounds.
402
00:17:48,534 --> 00:17:51,003
And that's exactly
what he was doing.
403
00:17:51,003 --> 00:17:52,871
He was building his own toys
404
00:17:52,871 --> 00:17:56,675
and hiring the best actors
in Hollywood to play with him.
405
00:17:56,675 --> 00:17:59,711
♪♪
406
00:17:59,711 --> 00:18:02,714
Goldberg: We get it.
He's not a great actor.
407
00:18:02,714 --> 00:18:06,084
But as a producer,
he earned rave reviews.
408
00:18:06,084 --> 00:18:08,187
The money continued to flow,
409
00:18:08,187 --> 00:18:10,656
with more and more investors
signing on
410
00:18:10,656 --> 00:18:12,090
for a piece of Hollywood riches.
411
00:18:12,090 --> 00:18:14,393
People were buying nice houses.
412
00:18:14,393 --> 00:18:16,094
They were talking about
413
00:18:16,094 --> 00:18:17,863
the return on investment
that they were receiving
414
00:18:17,863 --> 00:18:20,866
and how happy they were
with participating
415
00:18:20,866 --> 00:18:24,036
and being able to be a part
of what Zach was doing.
416
00:18:24,036 --> 00:18:26,405
Hackett: Variety and trade
magazines wrote stories
417
00:18:26,405 --> 00:18:29,575
about 1inMM Capital
and about the idea
418
00:18:29,575 --> 00:18:32,377
of the investments
involved in these movies.
419
00:18:32,377 --> 00:18:35,214
So much of this
is about appearance,
420
00:18:35,214 --> 00:18:37,216
and whether or not
it's successful
421
00:18:37,216 --> 00:18:41,920
is up to the people
who don't live in Hollywood.
422
00:18:41,920 --> 00:18:44,356
Goldberg: With his career
on track to stardom,
423
00:18:44,356 --> 00:18:46,692
Zach asked
his girlfriend, Mallory,
424
00:18:46,692 --> 00:18:49,094
to be his leading lady in life
425
00:18:49,094 --> 00:18:52,364
and began planning
a blockbuster wedding.
426
00:18:52,364 --> 00:18:54,633
At this point, everything
is going well for Zachary.
427
00:18:54,633 --> 00:18:58,237
He starts blowing this money
on a big Hollywood wedding,
428
00:18:58,237 --> 00:19:00,572
and you know
that had an open bar.
429
00:19:00,572 --> 00:19:02,374
Goldberg: In 2014,
430
00:19:02,374 --> 00:19:05,911
Horwitz assembled his friends
and family in Beverly Hills
431
00:19:05,911 --> 00:19:10,048
to witness him marry his
longtime girlfriend, Mallory.
432
00:19:10,048 --> 00:19:11,950
The wedding at the Four Seasons
was very lavish.
433
00:19:11,950 --> 00:19:13,452
It was well-done.
434
00:19:13,452 --> 00:19:15,921
I'm sure that the wedding
planner that they used
435
00:19:15,921 --> 00:19:17,155
cost a lot of money.
436
00:19:17,155 --> 00:19:19,391
She did a fantastic job.
437
00:19:19,391 --> 00:19:20,726
Hackett:
I've seen weddings
438
00:19:20,726 --> 00:19:22,294
at the Four Seasons
in Beverly Hills.
439
00:19:22,294 --> 00:19:23,795
They are elaborate affairs.
440
00:19:23,795 --> 00:19:27,132
They must cost hundreds
of thousands of dollars.
441
00:19:27,132 --> 00:19:29,167
They're enormous testimonials
442
00:19:29,167 --> 00:19:32,271
to, frankly, the wealth
and glamour and riches
443
00:19:32,271 --> 00:19:34,506
of the individuals
having the ceremony.
444
00:19:34,506 --> 00:19:37,943
♪♪
445
00:19:37,943 --> 00:19:40,412
He had a 1,000-bottle
wine cellar.
446
00:19:40,412 --> 00:19:41,980
He flew on private jets.
447
00:19:41,980 --> 00:19:45,450
He wore $500 T-shirts.
448
00:19:45,450 --> 00:19:48,854
Goldberg: Zach was the living
embodiment of success.
449
00:19:48,854 --> 00:19:50,489
And the bigger he got,
450
00:19:50,489 --> 00:19:52,324
the more people wanted
to follow in his footsteps.
451
00:19:52,324 --> 00:19:54,526
Hackett: I think when investors
saw the lifestyle
452
00:19:54,526 --> 00:19:56,595
Zach was leading,
they thought to themselves,
453
00:19:56,595 --> 00:19:58,297
"This is how it's done
in Hollywood,
454
00:19:58,297 --> 00:20:01,300
and he's successful,
and I should be part of it."
455
00:20:01,300 --> 00:20:04,636
This helped him fan the flames
and just bring in more money
456
00:20:04,636 --> 00:20:06,672
and live an even higher life.
457
00:20:06,672 --> 00:20:08,674
♪♪
458
00:20:08,674 --> 00:20:10,709
Goldberg: From 2014 to 2019,
459
00:20:10,709 --> 00:20:14,279
Zach was a filmmaking
financial hit maker.
460
00:20:14,279 --> 00:20:19,651
Investors were paid on time
with their 40% return profit.
461
00:20:19,651 --> 00:20:23,689
A well-oiled, camera-ready
Hollywood machine.
462
00:20:23,689 --> 00:20:26,458
And then came 2020.
463
00:20:26,458 --> 00:20:28,527
Krebs: People were quitting
their regular day jobs
464
00:20:28,527 --> 00:20:29,828
to participate in this
465
00:20:29,828 --> 00:20:31,163
and kind of pool
all their money together.
466
00:20:31,163 --> 00:20:33,966
And by early 2020,
467
00:20:33,966 --> 00:20:37,970
there was talk that payments
had started to be delayed.
468
00:20:37,970 --> 00:20:39,504
Goldberg: Uh-oh.
469
00:20:39,504 --> 00:20:42,140
♪♪
470
00:20:42,140 --> 00:20:44,376
Krebs:
The initial reaction was worry.
471
00:20:44,376 --> 00:20:46,745
So I was asking questions.
472
00:20:46,745 --> 00:20:49,915
Zach was blaming HBO
and Netflix.
473
00:20:49,915 --> 00:20:51,817
He said they weren't
honoring the contract
474
00:20:51,817 --> 00:20:55,187
and paying on the exact date
that they were supposed to.
475
00:20:55,187 --> 00:20:57,155
It was a similar update
every time.
476
00:20:57,155 --> 00:20:59,358
"There's a reason
why these guys can't pay,
477
00:20:59,358 --> 00:21:01,193
but I promise I'm working on it,
478
00:21:01,193 --> 00:21:04,029
and eventually,
you'll get your money."
479
00:21:04,029 --> 00:21:06,331
Goldberg: You know,
I've seen this movie before,
480
00:21:06,331 --> 00:21:08,667
and it's box office poison.
481
00:21:08,667 --> 00:21:11,670
♪♪
482
00:21:16,775 --> 00:21:18,844
♪♪
483
00:21:18,844 --> 00:21:20,846
Goldberg: 2020 --
a real-life disaster flick.
484
00:21:20,846 --> 00:21:22,347
And for Zach Horwitz,
485
00:21:22,347 --> 00:21:25,450
this was the year
his meteoric rise in Hollywood
486
00:21:25,450 --> 00:21:29,287
started to look like it might
crash back down to earth.
487
00:21:29,287 --> 00:21:32,924
The payments to investors
start to get delayed,
488
00:21:32,924 --> 00:21:35,427
but Zachary promises
that everything's fine.
489
00:21:35,427 --> 00:21:37,095
Krebs:
As things kept progressing,
490
00:21:37,095 --> 00:21:39,898
there was always
a different story or a reason
491
00:21:39,898 --> 00:21:41,733
as to why the payments
weren't coming.
492
00:21:41,733 --> 00:21:45,404
And everybody was very mad.
493
00:21:45,404 --> 00:21:48,273
♪♪
494
00:21:48,273 --> 00:21:50,075
I've had conversations
with friends,
495
00:21:50,075 --> 00:21:53,278
and they're talking about
how much they had invested
496
00:21:53,278 --> 00:21:57,115
and just how difficult
that circumstance was.
497
00:21:57,115 --> 00:21:59,584
It was basically, "We don't
think there's any money,
498
00:21:59,584 --> 00:22:01,486
and there's no contracts."
499
00:22:01,486 --> 00:22:03,055
The people that we thought
we were dealing with
500
00:22:03,055 --> 00:22:07,893
either don't exist
or were fabricated by Zach.
501
00:22:07,893 --> 00:22:10,595
Goldberg: When you're on the
hook for millions of dollars,
502
00:22:10,595 --> 00:22:13,565
quick tip --
Don't ghost your investors,
503
00:22:13,565 --> 00:22:17,402
or they might give a quick tip
to the authorities.
504
00:22:17,402 --> 00:22:19,571
♪♪
505
00:22:19,571 --> 00:22:22,274
Verrasto: I tend to specialize
in financial crime,
506
00:22:22,274 --> 00:22:24,409
economic crime,
sometimes also referred to
507
00:22:24,409 --> 00:22:26,278
as white-collar crime.
508
00:22:26,278 --> 00:22:29,247
♪♪
509
00:22:29,247 --> 00:22:34,019
We started an investigation
February 24, 2021,
510
00:22:34,019 --> 00:22:37,589
and then engaged with the
United States Attorney's Office.
511
00:22:37,589 --> 00:22:41,493
And we found that the SEC
had an investigation, as well.
512
00:22:41,493 --> 00:22:44,529
♪♪
513
00:22:44,529 --> 00:22:47,599
Schwab: Whenever you get a case
like this, you always wonder,
514
00:22:47,599 --> 00:22:50,202
is this just
a business deal gone awry,
515
00:22:50,202 --> 00:22:53,972
and there's unhappy investors,
or is this actually a fraud?
516
00:22:53,972 --> 00:22:57,109
And those things oftentimes
look similar at the outset,
517
00:22:57,109 --> 00:22:59,811
and it takes a little bit of
digging to distinguish the two.
518
00:22:59,811 --> 00:23:03,648
And we started to realize this
was an unusually large scheme.
519
00:23:03,648 --> 00:23:07,652
♪♪
520
00:23:07,652 --> 00:23:09,154
Chao: We deal with
a lot of fraud cases,
521
00:23:09,154 --> 00:23:10,822
but right off the bat,
it was apparent
522
00:23:10,822 --> 00:23:14,559
that there were several
hundreds of million dollars
523
00:23:14,559 --> 00:23:17,462
that nobody could account for.
524
00:23:17,462 --> 00:23:20,165
Goldberg: Did he just say
hundreds of millions?
525
00:23:20,165 --> 00:23:24,402
This fraud just became
a Hollywood blockbuster.
526
00:23:24,402 --> 00:23:25,704
Schwab:
When the investigative team
527
00:23:25,704 --> 00:23:28,473
reached out to Netflix or HBO,
528
00:23:28,473 --> 00:23:29,841
we found out
that they didn't have
529
00:23:29,841 --> 00:23:31,343
the types
of business relationships
530
00:23:31,343 --> 00:23:34,246
that he was representing
to his investors.
531
00:23:34,246 --> 00:23:38,216
In fact, in many instances,
they had no idea who he was.
532
00:23:38,216 --> 00:23:39,684
Goldberg: Wait a minute.
533
00:23:39,684 --> 00:23:42,821
Working with streamers
was his entire business.
534
00:23:42,821 --> 00:23:46,825
What was he doing?
Where was all that money going?
535
00:23:46,825 --> 00:23:48,827
Verrasto: When the investigation
first started,
536
00:23:48,827 --> 00:23:51,062
some of the first steps
that I did was, you know,
537
00:23:51,062 --> 00:23:54,099
reach back out to investors
to get more information,
538
00:23:54,099 --> 00:23:59,337
documentation from them,
to kind of build out the case.
539
00:23:59,337 --> 00:24:01,573
Mosley:
The FBI had surveilled him
540
00:24:01,573 --> 00:24:05,577
making six-months to one-year
promissory notes to investors
541
00:24:05,577 --> 00:24:09,514
through his production
company, 1inMM.
542
00:24:09,514 --> 00:24:12,017
Zach was being investigated,
but he didn't know it.
543
00:24:12,017 --> 00:24:15,086
So we had to kind of
carry on conversations with him
544
00:24:15,086 --> 00:24:16,555
like everything was normal.
545
00:24:16,555 --> 00:24:18,256
And we were told that,
546
00:24:18,256 --> 00:24:20,392
"You might be asked
for text messages.
547
00:24:20,392 --> 00:24:22,594
You might be asked for e-mails,"
things like this.
548
00:24:22,594 --> 00:24:25,063
And it got real very quickly.
549
00:24:25,063 --> 00:24:28,400
We learned that Zach Horwitz
was telling investors
550
00:24:28,400 --> 00:24:31,870
that he was purchasing
distribution rights
551
00:24:31,870 --> 00:24:35,807
and then licensing those rights
to streaming services.
552
00:24:35,807 --> 00:24:38,410
He would present to investors
different films
553
00:24:38,410 --> 00:24:40,612
that he was
considering purchasing,
554
00:24:40,612 --> 00:24:44,482
and he would provide a list,
and then investors could choose,
555
00:24:44,482 --> 00:24:47,719
like, which films
they wished to invest in.
556
00:24:47,719 --> 00:24:49,588
Zachary Horwitz,
also known as Zach Avery,
557
00:24:49,588 --> 00:24:51,590
was potentially conducting
a Ponzi scheme.
558
00:24:51,590 --> 00:24:53,391
Goldberg:
Did he just say Ponzi scheme?
559
00:24:53,391 --> 00:24:55,460
Okay, time for a flashback,
560
00:24:55,460 --> 00:24:57,896
'cause you probably remember
the Ponzi scheme
561
00:24:57,896 --> 00:25:01,600
from the Bernie Madoff
scandal in 2008.
562
00:25:01,600 --> 00:25:03,635
It's a form of investment fraud
563
00:25:03,635 --> 00:25:05,904
where new investors
are recruited
564
00:25:05,904 --> 00:25:08,607
to pay off old investors.
565
00:25:08,607 --> 00:25:11,443
And when you're desperate
for new investors,
566
00:25:11,443 --> 00:25:14,446
sometimes that means
bringing in your friends
567
00:25:14,446 --> 00:25:17,983
to keep it all going.
568
00:25:17,983 --> 00:25:19,451
I'm William D. Cohan,
569
00:25:19,451 --> 00:25:21,987
New York Times
best-selling author.
570
00:25:21,987 --> 00:25:24,823
It was a classic Ponzi scheme
571
00:25:24,823 --> 00:25:28,326
where he used the money
from new investors
572
00:25:28,326 --> 00:25:30,528
to pay off the old investors.
573
00:25:30,528 --> 00:25:33,999
Of course, given the ridiculous
rates of return
574
00:25:33,999 --> 00:25:38,703
he was promising, there was
no way he could sustain it.
575
00:25:38,703 --> 00:25:40,205
Hackett: Zach thought he could
576
00:25:40,205 --> 00:25:42,274
just keep paying out
the long-term investors
577
00:25:42,274 --> 00:25:45,844
while just sucking in more money
into the front end.
578
00:25:45,844 --> 00:25:48,813
But he just couldn't
do it anymore.
579
00:25:48,813 --> 00:25:51,116
Mosley: Zachary Horwitz
took money from investors
580
00:25:51,116 --> 00:25:52,951
as promissory notes.
581
00:25:52,951 --> 00:25:54,986
And in order to repay that note,
582
00:25:54,986 --> 00:25:57,555
you would get money
from the licensing
583
00:25:57,555 --> 00:26:00,992
that happened
through HBO or Netflix.
584
00:26:00,992 --> 00:26:02,827
Verrasto: And so what he would
tell the investors is,
585
00:26:02,827 --> 00:26:04,462
"When you provide me with funds,
586
00:26:04,462 --> 00:26:07,299
that's how I secure the rights
to these films."
587
00:26:07,299 --> 00:26:11,836
And what ended up happening was
none of that was true.
588
00:26:11,836 --> 00:26:14,339
Goldberg: In other words,
Zach was given money
589
00:26:14,339 --> 00:26:16,675
to buy the rights to real films
590
00:26:16,675 --> 00:26:19,878
but then never
really bought them.
591
00:26:19,878 --> 00:26:21,680
He continued to lull
the investors
592
00:26:21,680 --> 00:26:25,850
by providing them
with fake correspondence
593
00:26:25,850 --> 00:26:31,323
that he purported to be having
with agents at Netflix and HBO.
594
00:26:31,323 --> 00:26:34,225
He goes as far as
to provide them documentation
595
00:26:34,225 --> 00:26:35,727
from the streaming platforms
596
00:26:35,727 --> 00:26:38,430
that says that the payments
are on the way.
597
00:26:38,430 --> 00:26:43,735
But these documents are as fake
as Zachary's acting.
598
00:26:43,735 --> 00:26:45,704
Goldberg:
Zach may not be a method actor,
599
00:26:45,704 --> 00:26:50,108
but his documents went through
extensive transformations.
600
00:26:50,108 --> 00:26:53,578
He would find
sample deals online,
601
00:26:53,578 --> 00:26:56,681
change the names
to real studio execs
602
00:26:56,681 --> 00:26:58,883
that he dug up on LinkedIn,
603
00:26:58,883 --> 00:27:02,620
add a forged signature
for flourish, and voilà,
604
00:27:02,620 --> 00:27:06,791
an Oscar-worthy faked contract.
605
00:27:06,791 --> 00:27:09,627
There's so much more access
to information now.
606
00:27:09,627 --> 00:27:13,298
Back in the day when we didn't
share files over e-mail,
607
00:27:13,298 --> 00:27:14,699
it would have been
much more difficult
608
00:27:14,699 --> 00:27:16,468
to get your hands
on something like that.
609
00:27:16,468 --> 00:27:20,405
But now he could have found
a way to do it fairly easily.
610
00:27:20,405 --> 00:27:23,742
Using those fake e-mails
and correspondence,
611
00:27:23,742 --> 00:27:27,278
Horwitz was able to essentially
drag on the scheme
612
00:27:27,278 --> 00:27:29,914
for another year or so.
613
00:27:29,914 --> 00:27:31,316
Zach Horwitz was successful
614
00:27:31,316 --> 00:27:33,385
at staying current
on those investments,
615
00:27:33,385 --> 00:27:36,921
paying back the promissory notes
as he had promised.
616
00:27:36,921 --> 00:27:38,757
But at a certain point,
you're gonna run out
617
00:27:38,757 --> 00:27:41,059
of additional people,
additional money.
618
00:27:41,059 --> 00:27:43,661
It becomes too big, too unwieldy
to keep the thing going.
619
00:27:43,661 --> 00:27:45,296
From the get-go,
there was no business.
620
00:27:45,296 --> 00:27:47,132
He was telling investors
he was doing things,
621
00:27:47,132 --> 00:27:49,834
and he just simply wasn't doing
them, and he never did them.
622
00:27:49,834 --> 00:27:52,570
He created an extremely large
Ponzi scheme
623
00:27:52,570 --> 00:27:54,606
that he obviously
could not keep up with.
624
00:27:54,606 --> 00:27:57,575
And I think that his real goal
in all of this
625
00:27:57,575 --> 00:28:00,078
was simply to become
a famous actor,
626
00:28:00,078 --> 00:28:02,614
which is almost
the saddest part.
627
00:28:02,614 --> 00:28:04,616
♪♪
628
00:28:04,616 --> 00:28:08,653
C-list actor.
No experience in finance.
629
00:28:08,653 --> 00:28:11,089
No experience on Wall Street.
630
00:28:11,089 --> 00:28:13,491
Zero credentials. Zero.
631
00:28:13,491 --> 00:28:18,496
And here he is making
these promises of 40% returns
632
00:28:18,496 --> 00:28:20,698
in six to nine months to a year.
633
00:28:20,698 --> 00:28:22,667
It's just beyond the pale.
634
00:28:22,667 --> 00:28:24,302
The largest victim
635
00:28:24,302 --> 00:28:28,006
was over $160 million
they were out at the end.
636
00:28:28,006 --> 00:28:30,675
And then within
the investment pools,
637
00:28:30,675 --> 00:28:34,379
it's everybody from, you know,
your mom, your dad,
638
00:28:34,379 --> 00:28:36,514
grandparents, friends, family,
639
00:28:36,514 --> 00:28:39,284
people who, you know,
were convinced
640
00:28:39,284 --> 00:28:42,787
that this was a good investment
and it was relatively secure
641
00:28:42,787 --> 00:28:44,823
and they could trust it.
642
00:28:44,823 --> 00:28:46,724
And then they lost everything.
643
00:28:46,724 --> 00:28:48,993
♪♪
644
00:28:48,993 --> 00:28:52,297
For these schemes, usually,
like, the investigative period
645
00:28:52,297 --> 00:28:57,035
is six months to a year
and a half, sometimes longer.
646
00:28:57,035 --> 00:28:59,904
This particular investigation
moved very quickly,
647
00:28:59,904 --> 00:29:01,706
and from the time
that it was opened
648
00:29:01,706 --> 00:29:04,542
to the time that, you know,
we filed a complaint
649
00:29:04,542 --> 00:29:07,645
was about 42 days.
650
00:29:07,645 --> 00:29:09,914
There was so much documentation
that it was getting to the point
651
00:29:09,914 --> 00:29:11,916
to go and ask
for an arrest warrant.
652
00:29:11,916 --> 00:29:13,685
Goldberg:
Next up, his $5.5 million home
653
00:29:13,685 --> 00:29:16,921
gets a surprise visit.
654
00:29:16,921 --> 00:29:20,792
♪♪
655
00:29:28,566 --> 00:29:31,169
♪♪
656
00:29:31,169 --> 00:29:33,605
Goldberg: Now that the feds
have built their case,
657
00:29:33,605 --> 00:29:37,442
they have set the scene to bring
our movie villain to justice.
658
00:29:37,442 --> 00:29:39,911
Once we determine
that we have probable cause,
659
00:29:39,911 --> 00:29:42,881
we obtain a search warrant
that's approved by a judge,
660
00:29:42,881 --> 00:29:45,283
and then the FBI executes
that search warrant
661
00:29:45,283 --> 00:29:47,051
at the approved location.
662
00:29:47,051 --> 00:29:49,087
[ Siren wails ]
663
00:29:49,087 --> 00:29:52,090
We moved quickly
because Zach Horwitz
664
00:29:52,090 --> 00:29:54,259
had already listed
his house for sale,
665
00:29:54,259 --> 00:29:56,561
and we wanted to make sure that
he didn't have an opportunity
666
00:29:56,561 --> 00:29:59,597
to sell that out
from under the investors
667
00:29:59,597 --> 00:30:02,233
and prevent us from
recovering those assets
668
00:30:02,233 --> 00:30:04,802
that could, in fact,
be used as restitution.
669
00:30:04,802 --> 00:30:06,070
We didn't want
to take the chance
670
00:30:06,070 --> 00:30:07,972
that he would flee the area.
671
00:30:07,972 --> 00:30:10,375
[ Siren wailing ]
672
00:30:10,375 --> 00:30:12,443
So, in April of 2021,
673
00:30:12,443 --> 00:30:15,914
Zachary and his wife, Mallory,
get a wake-up call,
674
00:30:15,914 --> 00:30:17,649
only it's not their alarm.
675
00:30:17,649 --> 00:30:19,651
It's an FBI raid.
676
00:30:19,651 --> 00:30:21,920
♪♪
677
00:30:21,920 --> 00:30:24,455
Verrasto: 6:30 a. m.
678
00:30:24,455 --> 00:30:26,724
We put together a team
to go out there
679
00:30:26,724 --> 00:30:30,628
and to execute
the search warrant.
680
00:30:30,628 --> 00:30:32,430
We knew more than likely
681
00:30:32,430 --> 00:30:35,600
that Zach Horwitz would be home,
his wife would be home,
682
00:30:35,600 --> 00:30:39,437
and that we knew he had
two small children, as well.
683
00:30:39,437 --> 00:30:42,473
We go to the door.
We knock.
684
00:30:42,473 --> 00:30:44,409
We announce.
685
00:30:44,409 --> 00:30:46,678
And then the first people
that came to the door
686
00:30:46,678 --> 00:30:49,781
was Zach's wife
687
00:30:49,781 --> 00:30:52,784
and their young son.
688
00:30:52,784 --> 00:30:54,919
She was very surprised
by our presence
689
00:30:54,919 --> 00:30:58,456
and kind of shocked
that we were there.
690
00:30:58,456 --> 00:31:00,959
Hackett: You can imagine what it
was like in the pre-dawn hours
691
00:31:00,959 --> 00:31:04,162
when someone suddenly
is pounding on your door.
692
00:31:04,162 --> 00:31:06,664
Mallory is awake
and has no idea what's going on.
693
00:31:06,664 --> 00:31:08,499
They have a 1-year-old
and a 3-year-old.
694
00:31:08,499 --> 00:31:10,268
You can only imagine the terror.
695
00:31:10,268 --> 00:31:11,836
Verrasto: We kind of
briefly explain to her
696
00:31:11,836 --> 00:31:13,771
what was going on,
asked her to come outside.
697
00:31:13,771 --> 00:31:15,139
You know, we removed her
from the house.
698
00:31:15,139 --> 00:31:17,542
That was the first moment
she found out
699
00:31:17,542 --> 00:31:21,980
that the life she'd been living
was a life full of lies.
700
00:31:21,980 --> 00:31:24,649
Zach's wife, Mallory,
knew nothing
701
00:31:24,649 --> 00:31:27,452
of the schemes
and lies of Zach's
702
00:31:27,452 --> 00:31:31,689
until the FBI banged
on their door in April of 2021.
703
00:31:31,689 --> 00:31:34,626
Verrasto: And then
the next person to come out
704
00:31:34,626 --> 00:31:36,294
was Zach Horwitz.
705
00:31:36,294 --> 00:31:39,897
He came down,
didn't have a shirt on.
706
00:31:39,897 --> 00:31:42,066
We immediately
put him in handcuffs
707
00:31:42,066 --> 00:31:44,302
and then also removed him
from the house, as well.
708
00:31:44,302 --> 00:31:47,205
Mosley: Zachary's wife, Mallory,
and her children
709
00:31:47,205 --> 00:31:49,841
were so startled to find
the FBI raiding their home.
710
00:31:49,841 --> 00:31:51,409
But what was curious
711
00:31:51,409 --> 00:31:54,812
was that Zachary was calmly
taken away in handcuffs,
712
00:31:54,812 --> 00:31:57,582
almost as if he knew
it was coming.
713
00:31:57,582 --> 00:31:58,983
Verrasto:
He said absolutely nothing.
714
00:31:58,983 --> 00:32:00,418
He was just very stoic.
715
00:32:00,418 --> 00:32:01,886
Just came to the door,
716
00:32:01,886 --> 00:32:03,755
took whatever direction
we gave him,
717
00:32:03,755 --> 00:32:07,258
and was just quiet
the whole entire time.
718
00:32:07,258 --> 00:32:09,027
Goldberg:
Soon after Zach's arrest,
719
00:32:09,027 --> 00:32:12,563
Mallory Horwitz
filed for divorce.
720
00:32:12,563 --> 00:32:14,098
Krebs: I don't think
anybody was surprised
721
00:32:14,098 --> 00:32:15,600
that she filed for divorce.
722
00:32:15,600 --> 00:32:17,535
I think the quickness
with which it happened
723
00:32:17,535 --> 00:32:19,937
maybe caught everybody
a little bit off-guard.
724
00:32:19,937 --> 00:32:22,040
But I think you either
have to decide right away
725
00:32:22,040 --> 00:32:23,775
whether you're gonna
stick with that person
726
00:32:23,775 --> 00:32:26,210
that's your husband, or you're
gonna distance yourself
727
00:32:26,210 --> 00:32:27,679
as far as possible,
728
00:32:27,679 --> 00:32:32,116
and I think she certainly
made the right decision.
729
00:32:32,116 --> 00:32:34,352
Chao: Horwitz was charged
with 13 counts,
730
00:32:34,352 --> 00:32:37,722
including securities fraud,
wire fraud,
731
00:32:37,722 --> 00:32:41,259
and aggravated identity theft.
732
00:32:41,259 --> 00:32:43,728
In order to prosecute
a Ponzi scheme,
733
00:32:43,728 --> 00:32:45,463
you need to follow the money
734
00:32:45,463 --> 00:32:47,465
to figure out,
how was the money spent?
735
00:32:47,465 --> 00:32:48,866
Was it spent on the ways
736
00:32:48,866 --> 00:32:50,535
in which there
should have been spent,
737
00:32:50,535 --> 00:32:52,570
or was it spent
for other reasons?
738
00:32:52,570 --> 00:32:55,306
It was relatively easy to see
739
00:32:55,306 --> 00:32:57,375
that the money that was
coming in from investors
740
00:32:57,375 --> 00:33:00,545
was not being used
to purchase film rights
741
00:33:00,545 --> 00:33:04,549
but instead was being used
for paying off other investors
742
00:33:04,549 --> 00:33:09,987
or to fund Horwitz's
own lifestyle.
743
00:33:09,987 --> 00:33:14,392
There's the $5.5 million house
that he lived in.
744
00:33:14,392 --> 00:33:16,260
It showed that he used
investor funds
745
00:33:16,260 --> 00:33:20,131
to pay off credit card bills
in excess of $6 million.
746
00:33:20,131 --> 00:33:25,570
There's over $700,000 spent on
a celebrity interior decorator.
747
00:33:25,570 --> 00:33:28,473
He used it to make trips
to Las Vegas
748
00:33:28,473 --> 00:33:31,142
and nightclubs there.
749
00:33:31,142 --> 00:33:34,912
Oftentimes, Zach Horwitz
traveled by private jet,
750
00:33:34,912 --> 00:33:36,948
because that was
not only something
751
00:33:36,948 --> 00:33:38,916
that he could afford
with other people's money,
752
00:33:38,916 --> 00:33:41,152
but was something that fit
the role, fit the idea
753
00:33:41,152 --> 00:33:44,622
that he was this
Hollywood success story.
754
00:33:44,622 --> 00:33:46,924
Chao:
The investors generally invested
755
00:33:46,924 --> 00:33:49,961
between half a million
to a million dollars
756
00:33:49,961 --> 00:33:51,763
in any given promissory note,
757
00:33:51,763 --> 00:33:54,432
but there were hundreds
of promissory notes
758
00:33:54,432 --> 00:33:57,135
over the course of this scheme
since 2014.
759
00:33:57,135 --> 00:33:59,337
And in the aggregate,
those numbers added up
760
00:33:59,337 --> 00:34:03,441
to in excess of $650 million.
761
00:34:03,441 --> 00:34:06,110
Goldberg: $650 million?
762
00:34:06,110 --> 00:34:09,180
That is a heck of a movie.
763
00:34:09,180 --> 00:34:11,382
There were red flags
at every single step of this con
764
00:34:11,382 --> 00:34:12,817
that anyone who's experienced
in the business
765
00:34:12,817 --> 00:34:14,852
would have recognized
right away.
766
00:34:14,852 --> 00:34:17,522
I mean, I'm sure Zach Horwitz
couldn't believe it himself
767
00:34:17,522 --> 00:34:19,824
when he was pulling this off,
and people were actually
768
00:34:19,824 --> 00:34:22,527
sending him
hundreds of millions of dollars.
769
00:34:22,527 --> 00:34:26,497
I mean, he was living the life
of a Hollywood mogul,
770
00:34:26,497 --> 00:34:29,233
and he was a two-bit criminal.
771
00:34:29,233 --> 00:34:31,969
To actually achieve
what he initially set out to do,
772
00:34:31,969 --> 00:34:35,206
which was to be
a well-known actor,
773
00:34:35,206 --> 00:34:38,476
it didn't quite fit
that motivation.
774
00:34:38,476 --> 00:34:41,879
It felt like he was just trying
to legitimize his own name
775
00:34:41,879 --> 00:34:43,714
within the business.
776
00:34:43,714 --> 00:34:45,917
♪♪
777
00:34:45,917 --> 00:34:48,052
Schwab: After his arrest,
Zach Horwitz was in custody
778
00:34:48,052 --> 00:34:49,520
for a period of time.
779
00:34:49,520 --> 00:34:51,722
He was eventually released.
780
00:34:51,722 --> 00:34:54,192
Zach Horwitz's mother
posted a bond
781
00:34:54,192 --> 00:34:56,027
that was secured
by her own house
782
00:34:56,027 --> 00:34:58,596
and a million dollars in equity
in that house.
783
00:34:58,596 --> 00:35:02,166
Goldberg: Despite
the well-documented $650 million
784
00:35:02,166 --> 00:35:04,068
that went through Zach's hands,
785
00:35:04,068 --> 00:35:07,672
a large portion of that
can't be found.
786
00:35:07,672 --> 00:35:11,776
It is typical that we see
several-million-dollar losses,
787
00:35:11,776 --> 00:35:16,581
but this amount, which was
in excess of $200 million
788
00:35:16,581 --> 00:35:20,184
that were unaccounted for,
that was unusual.
789
00:35:20,184 --> 00:35:21,919
Hackett: I'm sure
to some degree, he thought
790
00:35:21,919 --> 00:35:24,589
he would never get caught,
but he had to have been aware
791
00:35:24,589 --> 00:35:27,058
of the hundreds
of millions of dollars
792
00:35:27,058 --> 00:35:28,793
that he had stolen from people
793
00:35:28,793 --> 00:35:31,462
and that, eventually,
the jig was gonna be up.
794
00:35:31,462 --> 00:35:33,865
A Ponzi scheme
can only grow so large,
795
00:35:33,865 --> 00:35:35,366
and it appears that Zach Horwitz
796
00:35:35,366 --> 00:35:38,102
tapped the entirety
of that universe.
797
00:35:38,102 --> 00:35:40,771
Goldberg:
With the walls closing in,
798
00:35:40,771 --> 00:35:41,239
Zach prepares for his final act.
799
00:35:41,239 --> 00:35:45,743
♪♪
800
00:35:50,882 --> 00:35:54,051
♪♪
801
00:35:54,051 --> 00:35:56,487
Goldberg: By mid-2021,
802
00:35:56,487 --> 00:36:01,259
Zach was facing the consequences
of running a giant Ponzi scheme.
803
00:36:01,259 --> 00:36:04,428
His Hollywood star had collapsed
into a black hole,
804
00:36:04,428 --> 00:36:08,933
taking with it the investments
of his friends and family.
805
00:36:08,933 --> 00:36:11,669
Chao: I think what really drove
me in prosecuting this case
806
00:36:11,669 --> 00:36:14,605
was obtaining justice
for the victims.
807
00:36:14,605 --> 00:36:18,009
A lot of them were ordinary,
middle-class folks,
808
00:36:18,009 --> 00:36:20,478
many of them who were
retired and elderly
809
00:36:20,478 --> 00:36:22,280
who had put their life savings
with Horwitz.
810
00:36:27,585 --> 00:36:29,520
♪♪
811
00:36:29,520 --> 00:36:32,857
The night before Zachary Horwitz
was supposed to appear in court,
812
00:36:32,857 --> 00:36:36,427
he pleads guilty
to a federal securities charge
813
00:36:36,427 --> 00:36:38,996
and running a Ponzi scheme.
814
00:36:38,996 --> 00:36:41,599
Cohan: It's clear
that the evidence against him
815
00:36:41,599 --> 00:36:43,200
was overwhelming.
816
00:36:43,200 --> 00:36:46,804
Had he gone to trial,
he clearly would have lost.
817
00:36:46,804 --> 00:36:50,675
There's no way he could've
ever explained what he did
818
00:36:50,675 --> 00:36:53,644
as being anything but a scam.
819
00:36:53,644 --> 00:36:57,949
I'm sure his attorney
gave him the right advice
820
00:36:57,949 --> 00:37:02,153
to not take this to trial
and to plead guilty.
821
00:37:02,153 --> 00:37:03,854
When he got sentenced
to 20 years,
822
00:37:03,854 --> 00:37:07,825
I was sad for him,
sad for his family,
823
00:37:07,825 --> 00:37:12,029
but happy for all of us
that were defrauded by him,
824
00:37:12,029 --> 00:37:13,864
that were hurt by him.
825
00:37:13,864 --> 00:37:18,703
I think, sadly enough to say,
that he got what he deserved.
826
00:37:18,703 --> 00:37:21,539
Chao: Unfortunately,
with these types of schemes,
827
00:37:21,539 --> 00:37:27,311
it is usually the case
that the money's already gone.
828
00:37:27,311 --> 00:37:30,581
Goldberg: The FBI searched
for every last dollar,
829
00:37:30,581 --> 00:37:34,352
but of the $650 million,
830
00:37:34,352 --> 00:37:37,755
over 1/3 has appeared
to have vanished.
831
00:37:37,755 --> 00:37:39,857
$230 million seems like
a lot of money
832
00:37:39,857 --> 00:37:41,359
to completely blow through.
833
00:37:41,359 --> 00:37:43,861
But the fact that nothing
has been found yet
834
00:37:43,861 --> 00:37:46,430
is obviously not a great sign.
835
00:37:46,430 --> 00:37:48,432
♪♪
836
00:37:48,432 --> 00:37:50,568
At the end of the day,
I think our group of friends
837
00:37:50,568 --> 00:37:54,038
has become even closer
because of all of this.
838
00:37:54,038 --> 00:37:56,774
We certainly lost someone
that we thought was a friend.
839
00:37:56,774 --> 00:37:59,543
But I think everybody's
smart enough
840
00:37:59,543 --> 00:38:01,612
and young enough
that they're gonna rebound,
841
00:38:01,612 --> 00:38:03,781
and they'll end up
ultimately okay,
842
00:38:03,781 --> 00:38:07,551
even if the next handful
of years are tough.
843
00:38:07,551 --> 00:38:11,022
Younger people, if you still
have a career in front of you,
844
00:38:11,022 --> 00:38:12,957
you know, you can recover.
845
00:38:12,957 --> 00:38:16,460
But when you're in your 60s,
70s, sometimes 80s
846
00:38:16,460 --> 00:38:18,195
and lose everything,
847
00:38:18,195 --> 00:38:21,232
that financial damage
is irrecoverable.
848
00:38:21,232 --> 00:38:23,534
♪♪
849
00:38:23,534 --> 00:38:25,069
Goldberg:
Like most things in Hollywood,
850
00:38:25,069 --> 00:38:27,405
appearances can be deceiving.
851
00:38:27,405 --> 00:38:30,408
Despite maintaining
a lavish lifestyle,
852
00:38:30,408 --> 00:38:33,811
Zach actually owned
very few luxury items.
853
00:38:33,811 --> 00:38:36,714
His remaining assets
were a small fraction
854
00:38:36,714 --> 00:38:39,450
of the missing $230 million.
855
00:38:39,450 --> 00:38:41,118
Verrasto:
You're looking for assets
856
00:38:41,118 --> 00:38:44,822
that, you know, investor money
was used to purchase.
857
00:38:44,822 --> 00:38:47,058
And unfortunately, in this case,
a lot of it was leased.
858
00:38:47,058 --> 00:38:49,093
Things like his cars
were leased.
859
00:38:49,093 --> 00:38:50,728
He had, like, a watch service,
I think,
860
00:38:50,728 --> 00:38:52,797
that he was, like,
renting watches from.
861
00:38:52,797 --> 00:38:55,599
He was basically
just leasing everything,
862
00:38:55,599 --> 00:38:58,602
so there's nothing to recover.
863
00:38:58,602 --> 00:39:01,005
Goldberg: The Securities
and Exchange Commission
864
00:39:01,005 --> 00:39:03,507
has filed a civil case
against Horwitz
865
00:39:03,507 --> 00:39:08,479
in hopes of recovering
missing funds for the victims.
866
00:39:08,479 --> 00:39:11,582
Schwab: If Zach Horwitz were to
come into money down the road,
867
00:39:11,582 --> 00:39:13,284
we have tools at our disposal
868
00:39:13,284 --> 00:39:15,686
to make sure that that money
is going to end up
869
00:39:15,686 --> 00:39:18,923
going to victims
to help make them whole.
870
00:39:18,923 --> 00:39:22,293
Chao: Victims who testified
and spoke at the sentencing,
871
00:39:22,293 --> 00:39:25,596
one of those, for example,
said that he's also
872
00:39:25,596 --> 00:39:27,131
in dire financial straits now,
873
00:39:27,131 --> 00:39:30,301
and he has two kids
who he's trying to support
874
00:39:30,301 --> 00:39:35,439
and is using food stamps
to get by.
875
00:39:35,439 --> 00:39:37,174
Krebs:
This person's gonna be in jail
876
00:39:37,174 --> 00:39:40,444
until they're in their 50s,
and he's got two young kids.
877
00:39:40,444 --> 00:39:41,812
You hate to see that
878
00:39:41,812 --> 00:39:44,782
for somebody
that didn't need to do it.
879
00:39:44,782 --> 00:39:47,518
I don't think that he did it
for his wife or for his kids.
880
00:39:47,518 --> 00:39:49,987
I think that he did it
for himself.
881
00:39:49,987 --> 00:39:51,489
And at the end of the day,
882
00:39:51,489 --> 00:39:55,292
what he cared about most
is just himself.
883
00:39:55,292 --> 00:39:58,796
That idea is just heartbreaking
and just unbearable to me
884
00:39:58,796 --> 00:40:00,397
and I think to most people.
885
00:40:00,397 --> 00:40:02,800
But in the minds of a con
or in the heart of a con person,
886
00:40:02,800 --> 00:40:04,068
they're not.
887
00:40:04,068 --> 00:40:05,903
It's kind of
the collateral damage.
888
00:40:05,903 --> 00:40:07,304
It's hard to say whether or not
889
00:40:07,304 --> 00:40:09,740
he's gonna feel
the exact same way.
890
00:40:09,740 --> 00:40:12,176
Probably not.
891
00:40:12,176 --> 00:40:14,478
Okay, so, Zach
would never win an Oscar
892
00:40:14,478 --> 00:40:16,347
for his performance here,
893
00:40:16,347 --> 00:40:19,150
but the performance
that he gave investors?
894
00:40:19,150 --> 00:40:21,552
Meryl Streep could never.
895
00:40:21,552 --> 00:40:23,587
Schwab:
Zach Horwitz's Ponzi scheme
896
00:40:23,587 --> 00:40:26,023
was absolutely sophisticated.
897
00:40:26,023 --> 00:40:28,192
It was massive,
but at its root,
898
00:40:28,192 --> 00:40:30,161
there was something
simple about it.
899
00:40:30,161 --> 00:40:34,198
He was using lies
to take people's money.
900
00:40:34,198 --> 00:40:37,434
Clark: I don't care how nice
of a lifestyle you were living.
901
00:40:37,434 --> 00:40:41,672
When the cost is potentially
being away from your kids
902
00:40:41,672 --> 00:40:45,042
for an untold amount of years,
903
00:40:45,042 --> 00:40:47,044
how is that worth it?
904
00:40:47,044 --> 00:40:49,713
He won life's lottery
in a lot of ways,
905
00:40:49,713 --> 00:40:54,552
and there was no need for him
to do what he ultimately did.
906
00:40:54,552 --> 00:40:56,887
He's not famous, he's infamous.
907
00:40:56,887 --> 00:41:01,625
And I think that on some level,
he probably enjoys that.
908
00:41:01,625 --> 00:41:03,561
There's something
about the breadth
909
00:41:03,561 --> 00:41:06,797
and the scale of his scam
910
00:41:06,797 --> 00:41:08,899
that is gonna be irresistible
911
00:41:08,899 --> 00:41:11,869
to the very places
that he told his investors
912
00:41:11,869 --> 00:41:13,804
he was doing projects with.
913
00:41:13,804 --> 00:41:16,273
Some streaming service
is gonna do a story
914
00:41:16,273 --> 00:41:18,876
that's gonna be about the guy
who told people
915
00:41:18,876 --> 00:41:21,745
that he had a deal
with streaming services
916
00:41:21,745 --> 00:41:25,616
and that you could get rich
if you just gave him your money.
917
00:41:25,616 --> 00:41:28,819
Goldberg:
And that's Hollywood, baby.
918
00:41:28,819 --> 00:41:32,223
♪♪