A former San Diego restaurant owner is awaiting sentencing for federal white-collar crime charges. She was involved in operating a $300 million fraudulent Ponzi scheme. She allegedly raised hundreds of millions of dollars from investors after offering individuals who wanted to obtain liquor licenses short-term, high-interest loans. She took the money but never used it to make loans. Instead, she diverted the funds into her own companies.
The Longest-Running Ponzi Schemes
The defendant has run what one U.S. Attorney called the “longest-running Ponzi scheme in San Diego history.” Her fraudulent Ponzi scheme has cost investors up to $400 million in losses. The victims of the defendant's Ponzi scheme will only recover approximately 65% of their losses. She pleads guilty to conspiracy, securities fraud, and obstruction of justice in July. Now she is awaiting her sentencing. She could face up to 15 years in prison.
The SEC is pursuing a separate civil claim against the defendant, and she intends to settle with the SEC. The proposed settlement agreement includes restitution for the victims, but the amount they will receive depends on the defendant’s SEC investigation and her company's holdings. A civil court froze her company's holdings in August 2019, and a receiver appointed by the court has recovered approximately $15 million in net assets so far.
Facing Charges for a Ponzi Scheme
Most states have laws making it illegal to engage in a pyramid scheme or Ponzi scheme. Under Illinois fraud laws, Ponzi schemes and pyramid schemes fall under the umbrella of fraud. It is illegal to knowingly sell, offer to sell, or attempt to sell the right to participate in a pyramid sales scheme. Under Illinois law, a pyramid scheme involves any plan or operation in which a person, in exchange for money:
Acquires the opportunity to receive a benefit primarily based upon inducing additional people to participate in the same operation or plan and,
Is not primarily continence on the volume or quantity of goods or services sold or distributed to persons for purposes of resale to consumers
Violating Illinois Ponzi scheme laws is a class A misdemeanor which carries a prison sentence of up to one year and a fine of up to $2,500 for each offense.
Facing Federal White-Collar Crime Charges
Federal agencies such as the Federal Trade Commission and the Securities and Exchange Commission can also prosecute these types of crimes. Defendants who are involved in a large-scale Ponzi or pyramid scheme typically face federal charges with severe penalties. The FBI often investigates Ponzi scheme suspects for a while before prosecutors bring charges. If you suspect you are under investigation, we recommend hiring a lawyer as soon as possible. Having an attorney at your side during these types of cases during investigation can potentially change the severity of the consequences of the investigation.
Contact an Illinois White-Collar Crime Lawyer
When you need an attorney, experience matters. If you are facing state or federal charges related to a Ponzi scheme, we can help. Contact the experienced criminal defense lawyers at Glasgow & Olsson today to schedule your free initial consultation.