SEC Shuts Down $345 Million Fraud and Obtains Asset Freeze

[nitpicker]

https://www.sec.gov/news/press-release/2018-201

SEC Shuts Down $345 Million Fraud and Obtains Asset Freeze

FOR IMMEDIATE RELEASE
2018-201
Washington D.C., Sept. 19, 2018 —

The Securities and Exchange Commission today announced it has obtained a court order halting an ongoing Ponzi-like scheme that raised more than $345 million from over 230 investors across the U.S. The SEC also obtained an emergency asset freeze and the appointment of a receiver.

An SEC complaint unsealed yesterday alleges that Kevin B. Merrill, Jay B. Ledford and Cameron Jezierski attracted investors to their scheme by promising significant profits from the purchase and resale of consumer debt portfolios. But in fact, the defendants were allegedly using a web of lies, fabricated documents, and forged signatures in an elaborate scheme to entice investors and perpetuate the fraud. Rather than direct investor funds to the acquisition and servicing of debt portfolios as promised, the defendants allegedly used the funds to make Ponzi-like payments to earlier investors. The SEC also alleges that Merrill and Ledford stole at least $85 million of the investor funds to maintain lavish lifestyles, spending millions of dollars on luxury items, including $10.2 million on at least 25 high-end cars, $330,000 for a 7-carat diamond ring, $168,000 for a 23-carat diamond bracelet, millions of dollars on luxury homes, and $100,000 to a private fitness club.
(snip)

The SEC's complaint, filed on Sept. 13 in federal district court in Maryland, charges Merrill, Ledford, and Jezierski, along with their entities, Global Credit Recovery, LLC, Delmarva Capital, LLC, Rhino Capital Holdings, LLC, Rhino Capital Group, LLC, DeVille Asset Management LTD, and Riverwalk Financial Corporation, with violations of the antifraud provisions of the federal securities laws. The court granted the SEC's request for an asset freeze, temporary restraining order, and the appointment of a receiver. The SEC seeks disgorgement of allegedly ill-gotten gains and prejudgment interest, and financial penalties against the defendants.

[nitpicker]

1. From the DoJ PR

https://www.justice.gov/usao-md/pr/baltimore-and-texas-men-indicted-alleged-364-million-ponzi-scheme-one-largest-ever

(snip)
According to the fourteen-count indictment, beginning in January 2013, the defendants perpetrated a Ponzi scheme to defraud investors of more than $364 million. The scheme was revealed with the arrests and unsealing of the indictment. Specifically, the indictment alleges that Merrill and Ledford invited investors to join them in purchasing consumer debt portfolios. “Consumer debt portfolios” are defaulted consumer debts to banks/credit card issuers, student loan lenders, and car/truck financers which are sold in batches called “portfolios” to third parties which attempt to collect on the debts. The defendants falsely represented to investors that they would use the investors’ money to buy consumer debt portfolios and make money for them by (1) collecting the payments that people made on their debts or (2) selling the portfolios for a profit to third party debt buyers--in a practice called “flipping.” According to the related complaint filed by the SEC, the victim investors included small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, professional athletes, and financial advisors, located in Maryland, Washington, D.C., Northern Virginia, Las Vegas, Texas, and elsewhere.

The indictment alleges that in order to induce investors to participate, the defendants falsely represented who they were buying the debt portfolios from and how much they were paying for the portfolios; whether they were investing their own funds, and their track record of success. At times, according to the indictment, there was no underlying debt portfolio purchased with the investors’ money. To conceal the truth, 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. In addition, to lend credibility to the transactions, the defendants created false portfolio overviews, sales agreements which used the names and forged signatures of actual employees of the sellers, created false collections reports, and falsified bank wire transfer records and bank statements.

Further, the indictment alleges that the defendants falsely represented that the monies they paid to investors were “proceeds” from collections and/or flipping debt portfolios, when in fact, the proceeds were paid from funds provided by other investors. The indictment alleges that Merrill, Ledford, and Jezierski personally enriched themselves and concealed their diversion of $73 million of investors’ funds to purchase and renovate high end homes in Maryland, Texas, Nevada, and Florida, purchase luxury automobiles, jewelry, boats, and a share in a jet plane, gamble $25 million at casinos, and support a lavish lifestyle.
(snip)

If you believe you may have been a victim, or have information concerning these charges, please email [e-mail](link sends e-mail) and complete a brief questionnaire. Your responses are voluntary. You may be contacted by the FBI.
(snip)

[nitpicker]

2. And from the Baltimore Sun

http://www.baltimoresun.com/news/maryland/crime/bs-md-ponzi-scheme-20180918-story.html

(snip)
U.S. Attorney Robert Hur called their business model one of the largest Ponzi schemes ever charged in Maryland. Hundreds of investors around the country — retirees, small-business owners, bankers, lawyers and doctors — were duped into paying the men $364 million in the past five years, prosecutors say.
(snip)

The investors believed their money was buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” But prosecutors say the businessmen actually were funneling money from new investors to their previous investors. Sometimes, prosecutors say, the men paid an investor with the person’s own money, only returning the funds under the guise of profits.
(snip)

Hur said federal prosecutors and FBI agents continue to search for investors who lost money. He said the number of victims may grow beyond 400. Many of them are believed to be in Maryland.
(snip)

Those who believe they may be a victim can contact the FBI by email at [e-mail] or or by calling 410-265-8080.

[Sherman A1]

3. Hope they get to pay back every dime

with interest and penalties.

[bucolic_frolic]

4. So far we still have a functioning SEC

Must be some reason Trump doesn't chase them with the wrecking ball like he does everything else. Wonder why.

Maybe doesn't want to invite scrutiny of Ponzi schemes?