The musical “Hamilton” has been perhaps the biggest smash hit of Broadway in recent years. Tickets have been nearly impossible to get, aside from months of waiting. Whenever there are events in incredibly high demand like “Hamilton,” we can practically expect a secondary market to pop up to accommodate some of that demand. However, sometimes these secondary markets are not on the level. In this case, a U.S. regulatory agency just announced charges of a Ponzi scheme in the resale of Hamilton tickets.

The U.S. Securities and Exchange Commission (SEC) recently announced fraud charges against two New York City men accused of running a Ponzi scheme with money raised from investors to fund businesses purportedly created to purchase and resell tickets to such high-demand shows as Adele concerts and the Broadway musical “Hamilton.”

In the complaint, the SEC alleged that Joseph Meli and Matthew Harriton misrepresented to investors that all of their money would be pooled to buy large blocks of tickets that would be resold at a profit to produce high returns for investors.

The bulk of investor funds were allegedly used for other undisclosed purposes, namely making Ponzi payments to prior investors using money from new investors. Meli and Harriton allegedly diverted almost $2 million for such personal expenses as jewelry purchases, private school and camp tuition, and casino payments.

The scheme went so far as to misrepresent that an agreement was in place with the producer of “Hamilton” to purchase 35,000 tickets to the musical. Investor money was supposedly paying part of that cost with the return on investment promised within eight months.

Meli and Harriton allegedly raised more than $81 million from at least 125 investors in 13 states.

In a parallel action, the U.S. Attorney’s Office announced criminal charges against Meli.

When “Hamilton” opened, it had a multi-million-dollar advance in ticket sales with roughly $30 million before the official opening. “Hamilton” also set a Broadway box office record for the most money grossed in a single week in New York City. In late November 2016, the show grossed $3.3 million for an eight-performance week, the first show to break $3 million in eight performances.

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