Kosta Kovachev, 57, is charged in a criminal complaint filed in the U.S. District Court for the Southern District of New York

Kosta Kovachev, 57, is charged in a criminal complaint filed in the U.S. District Court for the Southern District of New York with one count of conspiracy to commit wire fraud.The government alleges in a separate criminal complaint that Dreier sold as much as $380 million in fake promissory notes from 2006 to 2008 to three hedge funds in the name of a New York real estate development company.The developer later told the government it was in the dark about the sales and that the notes were bogus. The names of the hedge funds and developer were not disclosed in the criminal complaints.

Dreier LLP, a well-known law firm founded by Marc Dreier, has since collapsed. The firm had 250 attorneys in New York, Connecticut, Pennsylvania and California.

Last fall, one of the hedge funds became concerned when $115 million worth of promissory notes it purchased had not been repaid in a "timely manner," according to the complaint filed in Kovachev's case.The fund demanded a meeting with the developer to discuss repayment. According to court papers, Dreier had access to the developer's Manhattan offices because of prior business dealings with the company. He then set up a meeting there Oct. 15 without the developer's authorization.
At the meeting Kovachev allegedly pretended to be the developer's controller and helped pull off the ruse by answering financial questions posed by the hedge fund's employees.Federal prosecutors said Kovachev is a former registered stockbroker with no employment connection to the developer.The complaint further alleges that earlier the same month Kovachev helped Dreier sell more of the developer's fake promissory notes for $13.5 million to another hedge fund.Kovachev also is charged with posing as the developer's CEO during a telephone conference with a third hedge fund in which he helped seal a $100 million promissory note deal last November. Federal prosecutors said Kovachev faces a maximum of five years in prison and a minimum $250,000 fine. The fine could be much larger - up to twice the gross gain or loss from the scheme, they said.Dreier could get up to 40 years in prison for masterminding the scheme, along with millions of dollars in fines, prosecutors said.
The New York Times reported Jan. 18 that Dreier is incarcerated in a Lower Manhattan federal jail awaiting trial. The government has seized his homes in Manhattan and the Hamptons, a third home in the Caribbean, an art collection, a 121-foot yacht, and four cars, according to the report.