Federal prosecutors have charged Jeffrey Spotts, 58, of Summit, New Jersey, with orchestrating a $294 million securities fraud conspiracy while serving as CEO and co-founder of Prophecy Asset Management LP, Acting U.S. Attorney and Special Attorney Alina Habba announced Tuesday.
Spotts was arraigned in U.S. District Court in Trenton on four counts: conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, and securities fraud. Each wire fraud count carries a potential sentence of up to 20 years in prison and a $250,000 fine, while the securities fraud charge carries a possible 20-year term and a $5 million fine. The conspiracy to commit securities fraud charge carries up to five years in prison.
Spotts’s co-founder, John Hughes, 58, of Mahwah, has already pleaded guilty to securities fraud in connection with the same case and is scheduled to be sentenced on March 10, 2026.
Prosecutors said Spotts and Hughes launched Prophecy Asset Management, a hedge fund that once managed more than $360 million in investor funds. Between 2015 and 2020, they allegedly attracted investors with a “first-loss” investment strategy that promised limited risk through collateral posted by outside sub-advisors.
Authorities allege that those claims were false. Instead of diversifying investments, Spotts and Hughes concentrated most of the fund’s money with a single sub-advisor who failed to post adequate collateral and eventually lost roughly $290 million. Despite knowing about the losses, the defendants allegedly forged records, created sham transactions, and collaborated with the sub-advisor to mislead both investors and auditors about the fund’s true performance.
The scheme ultimately caused the collapse of Prophecy’s funds and hundreds of millions of dollars in investor losses. The U.S. Securities and Exchange Commission has filed a civil complaint against Spotts and
