Craig Berkman, an investment adviser in Florida and a former gubernatorial candidate in Oregon, pleaded guilty for swindling investors in a securities scheme involving shares of Facebook Inc (NASDAQ:FB) prior to its initial public offering in May 2012, according to a report from Reuters.

Facebook IPO

Berkman pleaded guilty to one count each of securities fraud and wire fraud that he committed at United States District Court in Manhattan. He faces a maximum sentence of 20 years in prison.

Facebook Shares

According to prosecutors, Berkman admitted that he lured investors to put their money into Facebook Inc (NASDAQ:FB) shares by telling them that he had access to scarce pre-IPO shares of the social network giant. He also told investors that he had access to shares of other technology companies such as Groupon Inc (NASDAQ:GRPN), LinkedIn Corp (NYSE:LNKD), and Zynga Inc (NASDAQ:ZNGA).

Berkman Created a Ponzi Scheme

Berkman swindled more than 120 investors who invested around $13.2 million for the shares of Facebook Inc (NASDAQ:FB). Instead of investing the money entrusted to him by investors, Berkman used it to pay off earlier investors, and to pay for personal expenses including a $6 million personal bankruptcy case. Prosecutors described his action a classic Ponzi scheme.

Federal authorities arrested Berkman last March in connection with the investigation of the Securities and Exchange Commission (SEC).

During a court hearing, Berkman expressed regrets for defrauding investors and he apologized to them. He said, “I deeply regret my actions. I’ve devastated my family.” According to Berkman, some of his victims were “dear, dear friends” and he is “very, very sorry.”

In a statement, Manhattan U.S. Attorney Preet Bharara said “Through various misrepresentations, Craig Berkman enticed investors with highly coveted investment opportunities, and then swindled them out of millions of dollars, using much of it for his personal benefit.”

Berkman to Forfeit $13.2 Million

Berkman agreed to forfeit the $13.2 million he raised from investors as part of the deal for pleading guilty. U.S. Magistrate Judge Kevin Nathaniel Fox scheduled the sentencing on his case on October 1.

According to the SEC, Berkman offered and sold convertible promissory notes without a brokerage license, and the Oregon Division of Finance and Securities issued a cease and desist order and a penalty of $50,000 in 2001.

In 2008, a jury in Oregon found Berkman guilty for breach of fiduciary duty, conversion of investor funds, and misrepresentation to investors related to his involvement with a firm called Synectic Ventures.