U.S. authorities have arrested and charged the owner of a Buffalo-based venture capital firm in connection with an alleged Ponzi-type scheme to pay off one set of investors with money from other investors.

Preet Bharara, U.S. attorney for the Southern District of New York, announced that Gregory Gray Jr., 39, has been charged with one count of securities fraud, one count of wire fraud and one count of perjury in connection with his testimony to the U.S. Securities and Exchange Commission (SEC). He is presumed innocent until proven guilty.

Last week, the SEC alleged that Gray and his firms, Archipel Capital LLC and BIM Management LP, solicited money for a fund created to invest in pre-IPO shares of Twitter, Inc. It said that Gray raised nearly US$5.3 million from investors, which was enough to purchase 230,000 pre-IPO Twitter shares but that only 80,000 shares were actually purchased.

“Faced with increasing pressure from investors to deliver the promised shares and profits, Gray allegedly stalled and stole to make up the shortfall by tapping three other unrelated funds to pay investors in the Twitter-related fund,” the SEC stated.

The SEC’s complaint, which was filed in the U.S. District Court for the Southern District of New York, alleged that most of the money used to make these payments was diverted from one investor who was told his money was invested in $5 million worth of stock in Uber Technologies, Inc.

The regulator obtained an emergency asset freeze to halt the Ponzi-like scheme, it said last week.

The SEC charged Gray and his firms with violating securities laws. The complaint notes that BIM, is owned by Archipel and a Toronto-based firm, Bennington Investment Management, Inc.

None of the allegations have been proven.

“As alleged, Gregory Gray dangled the opportunity to invest in new companies like Twitter and Uber to entice his victims into fraudulent investment schemes and, in an effort to extricate himself from one scam, he devised another,” said Bharara, in announcing the charges. “Then, as the complaint charges, he made things worse by lying about it to the SEC. The investments Gray allegedly offered were fake but the charges he faces are real.”