The largest Ponzi scheme in Hollywood history

Mallory quickly filed for divorce. According to her files, their joint accounts were frozen by the authorities; The only money in her name was a checking account with a $100.75 balance. Horowitz was charged with thirteen counts of fraud, serving what prosecutors called an “elaborate illusion” — the largest Ponzi scheme in Hollywood history. He had raised more than six hundred and ninety million dollars by deceiving hundreds of investors, starting with his closest friends. The hapless actor on screen turned out to be a surprisingly convincing performer in life.

The magnitude of the lie was too great for Mallory to comprehend. Her husband did not have any deals with HBO or Netflix. He had never met Howard Schultz. When Zach left for late-night meetings, there were no meetings. The only thing real is his slim footprint on the screen. “I loved him. I adored him,” she wrote in her files. “Zach is a master manipulator and a liar and he brainwashed me into thinking he was this perfect man, which he made everyone around him feel like he was. Only a sociopath could live the kind of deceptive life that… Zach lived with her for nearly ten years. Mallory’s father bought her and the children a one-way ticket to Indiana. On May 1, she returned home.

Horowitz was out on bail: $1 million, paid by his mother. For a week or two, the case made headlines around the world, but he kept a low profile, telling his children that he was a dog walker. Among people who knew him, the reaction I encountered most often was disbelief that he was intelligent enough to manage such a scheme. “I don’t know how he was able to do that,” one of his closest friends told me. Another colleague said: “If you had asked me if this guy had Photoshop downloaded onto his computer, I would have told you: ‘Not at all.’” Quite a few believed his distribution network in Latin America was a front for a drug cartel.

The government did not agree. The SEC described him as the sole defendant, noting that he alone controlled 1inMM’s bank accounts. When I told Verastro, the FBI agent, that a lot of people were confused and no one else had been charged, he said he couldn’t go into detail about that decision. But he was quick to add: “The only thing that is clear in this case is that there was no one on top of him. He’s the main man.”

As with many frauds, the prosecution sparked a series of lawsuits, with investors fighting over the remaining assets and accusing each other, as well as banks and various law firms, of failing to detect the crime. Alexander Loftus, a lawyer representing some of the investors, has filed lawsuits against Horowitz’s friends in Chicago. “When you’re acting as a broker, it’s your job to see if it’s good or not before you sell it,” he told me. Loftus said the friends in Chicago ultimately agreed to give up more than $9 million, though they insisted they acted in good faith. “My family members who trusted me are not smart,” Dialteris said. “I thought I was being fairly objective about how I handled it. My family members were not. One chip became two chips, which became all their chips. It’s unbelievable that they would have suspected a scam rooted in A friendship long before Zach went to Hollywood, which they let their families participate in.”

In the end, there was surprisingly little money left to recover. A judicial guard, appointed by the court to search for the assets, reported that an “unknown” amount may be “hidden.” But lawyers involved in the case told me that Horowitz spent most of the money to keep the scheme going. He used the rest to pay for planes, yachts and the pursuit of stardom: Prosecutors listed $605,000 for Mercedes-Benz and Audi, $174,000 for party organizers, and $54,600 for a “luxury watch subscription” service. Six months after his arrest, and facing widespread evidence of his deception, Horowitz pleaded guilty.

On the afternoon of February 14, 2022, I attended my sentencing hearing in the federal courthouse in Los Angeles. Horowitz arrived early, wearing a blue tailored suit and brown wingtips. His mother and other relatives filled the rows behind the defense table. “It is difficult to imagine a more egregious white-collar crime,” prosecutors declared in a written argument before the judge. They noted that Horowitz began his scheme by “betraying the trust of his friends, people who had let their guard down because they could not imagine that someone they had known for years would so unhesitatingly deceive them and their families and take their life savings.”

Victims were invited to provide a description of the impact on their lives. One investor, a sixty-four-year-old who lost $1.4 million, described coming out of retirement to pay for food and shelter: “I cry every day and have stopped seeing friends or family because of the shame of this financial loss. They now have a severe distrust of other human beings.” “If it were not for my spiritual beliefs, I would have committed suicide.” Another wrote: “I am the mother of a 46-year-old girl with special needs. I will never be able to recover from the emotional damage.”

Some victims chose to speak in person. Robert Heaney, a lanky screenwriter with two young children, stepped up to the microphone. “I don’t live an extravagant lifestyle,” he said. “My career could hit some bumps and we’d be fine. Even after my wife was diagnosed with cancer, we were fine for fifteen years, living frugally.” They lost $1.8 million in the scheme. “For the first time, we are not okay, and I don’t know if we will be or not,” he said.

When it was Horowitz’s turn to speak, he stood before the judge, shoulders hunched and hands clasped. “I became the exact opposite person of what I wanted to be,” he said. He cried and stopped to collect himself. “I am devastated and haunted every day and night by the harm I have caused others.” He asked the judge to issue a lenient sentence that would allow him “to return to my little children while they are still children.”

Judge Mark C. Scarsi was not impressed. The maximum penalty requested by the prosecution was applied: twenty years imprisonment. (Elizabeth Holmes, founder of disgraced biotech startup Theranos, was sentenced to eleven years in prison; Sam Bankman-Fried, the billionaire founder of FTX, is serving a twenty-five-year sentence.) As the verdict was announced, Horowitz stared into the distance and then up On the ceiling.

After the courtroom emptied, Heaney stopped at the bathroom. As he prepared to leave, the door opened and Horowitz entered. “We look out for each other,” Heaney recalls. “And he says, ‘Hey, I just want to tell you, I’m so sorry.'” Heaney, who is six-foot-four, towered over him. “You took everything from us,” he said.

One of Horowitz’s relatives stuck his head in the door and said, “Hey, are we all good here?”

“Yes, we’re fine,” Horowitz reassured him and closed the door again.

Heaney could have asked him why he did it, or how he lived with himself. But, as a writer, he was only interested in one thing: “How did you think you were going to get out of this? What was your endgame?”

Cartoon by Rose Chast

Horowitz paused, then said, “I didn’t have one.”

Until the end, Horowitz seemed to believe that one of his identities would save him: actor, producer, investor. Something had to be done. Lie until you make it.

One morning last November, I took a taxi to the Federal Correctional Institution on Terminal Island. It is located on a peninsula at the far end of the industrial strip, south of Los Angeles, extending into the harbor waters. The facility is surrounded by barbed wire and gun towers, but is ridiculously close to the city. As I stepped inside, I could hear the sounds of seagulls and the distant sounds of cranes on the docks.

She has exchanged letters and emails with Horowitz since his sentencing, in which he agreed to keep “lines of communication open” but did not say “anything specific.” He seemed more interested in highlighting the rehabilitation story. He described the shift in his mindset and said, “I feel healthier every day.” He envisioned teaching a class to fellow prisoners, called “Emotional Intelligence through Acting,” which would give them a “safe space to express vulnerability.”

I went through prison hoping to get Horowitz to talk more openly about his crimes. In the visiting room, he was wearing a khaki shirt tucked into khaki pants, and his hair was cropped short. He was relaxed and unfailingly polite. But for all his talk of expressing weakness, he remained unwilling to answer questions on the record. In an email later, he told me that publicity doesn’t help, because “all the wounds keep opening and more salt is poured on top of them.”