On a cold day in late 2017, Jacob “Jake” Wunderlin, cofounder of JJMT Capital, showed up at a diner in Chicago’s Gold Coast neighborhood for a meeting. His lunch companion, Adam Ferrari, was a petroleum engineer who had started investing with Wunderlin and wanted to ask some questions. Through JJMT Capital, Ferrari had been purchasing promissory notes issued by a company in Los Angeles, 1inMM, which said it was licensing movies and selling them to HBO and Netflix
“Why are HBO and Netflix not doing this on their own,” Ferrari asked? He also wanted to make sure Wunderlin was investing his own money in the deals. Wunderlin carefully answered Ferrari’s questions and assured him the 1inMM notes represented an incredible opportunity. Ferrari would end up investing about $250,000 in nine of the 1inMM (one in a million) notes that promised to pay him interest of 25%.
On Tuesday, federal agents in Los Angeles arrested Zachary Horwitz, the 34-year-old small-time actor behind 1inMM, and accused him of running a Ponzi scheme that securities regulators said totaled $690 million. The movie-licenses and the deals with HBO and Netflix were bogus, federal prosecutors said, adding that “by far the largest source of investor funds” that came into the Ponzi scheme was raised by JJMT.
Jake Wundrelin knew Horwitz well. The two had become fast friends when both were students at Indiana University Bloomington. There, Wunderlin had also become a good friend of two Beta Theta Pi Fraternity brothers, Joe deAlteris and Matthew Schweinzger. All four men struck up a close relationship. After graduating from college in 2010, Horwitz headed for Hollywood and tried to become an actor under the name Zach Avery, while the three other young men went to Chicago and New York to make a go of it in finance.
In Chicago, Wunderlin and deAlteris began together as financial analysts at JPMorgan
Back in Hollywood, Horwitz had founded 1inMM and had a proposal that was a sure thing. He told his Indiana University buddies he would purchase regional distribution rights to films and license them for more than he paid to online platforms like HBO and Netflix for distribution outside the U.S. DeAlteris invested in one of these deals as early as 2014 and made money.
In the summer of 2015, Horwitz sent Wunderlin, deAlteris and Schweinzger an annual report touting 1inMM had acquired and distributed 49 films “without incurring a single loss in the process.” He said HBO and Netflix were hungry for content. For a personal touch, Horwitz also sent his college buddies a bottle of Johnny Walker Blue Label scotch with the annual report.
Wunderlin, deAltris and Schwinzger founded JJMT Capital in an 1,100 square-foot Chicago apartment and started raising money for the deals. They were joined by Tyler Crookston, who had graduated from Indiana University in 2007. JJMT stood for the first initials of the founders, Jake, Joe, Matthew and Tyler. Wunderlin and deAltris quit their days jobs, but the other two did not and Crookston left the group within two years.
The JJMT crew went out and found dozens of investors for Horwitz’s promissory notes. They sold the notes to their family, friends and professional contacts. The notes carried maturities of between 6 and 12 months and each was tied to a specific movie like “Blood Quantum” and “La Melodie.” In total, JJMT alone raised about $216 million, securities filings show, and entered into 500 promissory notes. They would take a cut of the 30% to 40% interest rates that Horwitz promised to pay.
For years, Horwitz made steady payments on the notes. He also lived an extravagant life. Horwitz bought a $5.7 million home in the Los Angeles neighborhood of Beverlywood, and spent $124,000 on trips to Las Vegas and $2.5 million for a celebrity interior designer, securities regulators say. Horwitz also used $137,000 to charter jets and $54,600 for a luxury watch subscription service.
But starting in December 2019, Horwitz stopped making payments on 160 notes sold through JJMT, eventually defaulting on more than $160 million in principal and another $59 million in returns on the JJMT-sold notes. When JJMT confronted Horwitz, he conjured bogus emails between him and employees of Netflix and HBO to keep JJMT at bay, federal prosecutors claim. Eventually, JJMT notified federal law enforcement that something was up. It turned out, securities regulators claim, that Horwitz had all along been using money from new investors to make good on payments that had become due on early notes, and had used investor funds to finance his lavish lifestyle.
JJMT declined to comment. Anthony Pacheco, Horwitz’s lawyer, did not respond to requests for comment.
“They thought this was their golden goose. I had no idea the scale of it,” said Adam Ferrari, the petroleum engineer who invested in nine of Horwitz’s notes through JJMT. He lost about $100,000 and has filed a lawsuit against JJMT. “My frustration with the JJMT group is they had a fiduciary duty to vet this guy in L.A. and they didn’t do it.”