How is it that people fall prey to financial schemes? Certainly, they hear in a “hucksters voice” the promises of big returns and riches, of shady details and almost, backroom inside-type information. Ponzi Schemes – Ferraris – Lost Ethics, leads to over 400 victims!
The State of Maryland has uncovered a huge Ponzi scheme that dates to 2013. Hundreds of investors were defrauded by more than $360 million. The scheme was elaborate and could have only survived in the darkness of rationalization and ignorance.
Fraudsters
The three fraudsters were Kevin Merrill, 53, of Towson, Maryland; Jay Ledford, 54, of Westlake, Texas, and Las Vegas; and Cameron Jezierski, 28, of Fort Worth, Texas. They created a scheme built on air; of falsified statements and every once in a while, a minor transaction to almost give it the appearance of legitimacy. According to the Department of Justice press release (September 19, 2018):
“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.’”
It is a tricky business, at best. It is a highly specialized area of investing that “common investors” should avoid, even when the offering is done within the confines of an experienced and established brokerage house.
The fraudsters were clever enough to go after greedy investors who had a vague idea of debt, of what it is like when customers cannot keep up with payment or even make payments. As the DOJ press release stated: “…the victim investors included small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, professional athletes, and financial advisors.”
In other words, those investing wanted to capitalize on the inability of those locked in debt who could no longer meet their obligations. While it is a whole other blog topic, we should not be surprised that among those hoodwinked by the scam were “bankers” and “financial advisors.” This is why (to repeat myself) it is so important to thoroughly check out the credentials of those who profess to be financial advisors and people who are involved in banking. Though the DOJ did not state this fact, I would not be at all surprised to learn that those same advisors inadvertently recommended the scheme to some of their clients, thus perpetuating the fraud
The scheme produced false statements with falsified returns Given the ease of computer generation of financial reports and the ability to produce statements and newsletters on a single laptop, the scam could easily work out of a single location. Perhaps attracting more and more money was the scheme’s biggest challenge. The fraudsters mainly worked the DC-Metro area, but also extended the deal to Las Vegas and parts of Texas.
The fraudsters used fake companies and fake bank accounts and as with any Ponzi scheme, they paid off investors with funds from the new victims who came in at the bottom of the pyramid. There were no profits.
400 Victims
In all, 400 “investors” had passed into the scheme. Some pulled out, but most lost everything. Ponzi schemes invariably collapse.
The scam artists gifted themselves sports cars such as Ferraris, Lamborghinis, and a Rolls Royce. They traveled in a private jet, lived in lavish homes (actually, nine properties) and bought jewelry such as 7- and 9-carat diamond rings, and a 23-carat diamond bracelet. I can’t help but wonder what the spouses of these men felt when they realized the lavish gifts they gave them were the result of stealing from hundreds of victims.
Other funds were transferred into their private bank accounts. There was no conscience. They merely misled investors and usually, no debt portfolios were ever purchased with investor funds, not even fractions on the dollar.
The three fraudsters each face a maximum of 20 years in prison. The kid of the group, Cameron Jezierski, will leave prison when in his late 40s. However, Merrill and Ledford face an additional 20 years each for money laundering. They could both die in prison. Was it worth it? Is unethical behavior ever worth the outcome? The naïve might say “yes,” the wise know better. Ponzi Schemes – Ferraris – Lost Ethics, greedy investors beware!
