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SEC, Justice Department Crack Down on Alleged Ponzi Scheme
Three men allegedly raised more than $300 million from investors, including family offices, under a Ponzi-like scheme that supported their lavish lifestyles, according to the SEC.
A federal grand jury has charged three men with an alleged $364 million Ponzi scheme that the Securities and Exchange Commission says involved investors across the U.S.
Kevin Merrill, Jay Ledford, and Cameron Jezierski were indicted on charges of conspiracy, wire fraud, identity theft, and money laundering, according to a statement Wednesday from the U.S. Attorney’s office for the District of Maryland. They’ve been arrested for the fraudulent scheme, which allegedly began in 2013.
Merrill, Ledford, and Jezierski attracted investors by promising significant profits from the purchase of consumer debt portfolios, according to an SEC statement Wednesday. Instead of buying the portfolios, the defendants allegedly made Ponzi-like payments to earlier investors, the regulator said.
In addition, the SEC claimed that Merrill and Ledford stole at least $85 million from investors to maintain lavish lifestyles, including spending millions of dollars on luxury items such as high-end cars, a diamond ring, and expensive homes. The defendants allegedly used “a web of lies, fabricated documents, and forged signatures” to perpetuate the fraud, according to the SEC.
The regulator said it obtained a court order to shut down the Ponzi-like scheme and has obtained an asset freeze.
“The defendants touted their purported investment expertise to siphon millions of dollars from unsuspecting investors,” Stephanie Avakian, co-director of the SEC’s division of enforcement, said in the regulator’s statement. “We filed this action on an emergency basis to put a stop to this fraud and protect investors from further harm.”
Merrill, Ledford, and Jezierski raised about $90 million from individual investors, $52 million family offices, and almost $203 million from feeder funds that pool money from individuals, according to the SEC’s complaint, which was filed under seal in the U.S. District Court for the District of Maryland on September 13. The complaint was unsealed on September 18 upon the arrests of the defendants.
The Justice Department said the victims of the alleged Ponzi scheme included investors in Maryland, Washington, D.C., Northern Virginia, Las Vegas, and Texas. They are small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, professional athletes, and financial advisors, according to the complaint.
“Federal prosecutors, FBI agents, and our SEC partners together interrupted an ongoing fraud scheme, with the potential to victimize even more people,” Robert Hur, U.S. Attorney for the District of Maryland, said in the Department of Justice statement Wednesday. “Most of these investors are just learning that they have been victimized.”
Hur urged anyone who believes they may be victim of the alleged Ponzi scheme to contact MerrillLedford@fbi.gov.
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Investors allegedly duped by Merrill, Ledford, and Jezierski were expecting to make money from batches of defaulted consumer debts by collecting the payments people had made on them, or flipping the portfolios in a sale to third parties, according to the statement from the Department of Justice.
“The defendants created imposter companies with names similar to actual consumer debt sellers or brokers and opened bank accounts in the names of those imposter companies,” the Justice Department said.
They also created false portfolio overviews and sales agreements using the names and forged signatures of actual employees of the sellers, according to its statement. The scheme also involved fake collections reports and falsified bank wire transfer records and bank statements, the Justice Department alleged.
“We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains,” Kelly Gibson, the associate regional director of the SEC’s Philadelphia office, said in the regulator’s statement. “Investors should be warned that low-risk, high-return investments that never lose should be a red flag.”
The indictments are not a finding of guilt, meaning the individuals charged in this case are presumed innocent as they head into criminal proceedings, according to the Justice Department.
Merrill, who lives in Towson, Maryland, is expected to have a detention hearing on September 20, while Jezierski, of Fort Worth, Texas, is scheduled to make his initial court appearance in Maryland on September 24. Ledford, who is from Westlake, Texas and Las Vegas, will appear in court in Maryland at a later date, according to the Justice Department’s statement.