Saturday, May 14, 2005

Eight Arrested in California and Costa Rica in Connection With Alleged $80 Million Ponzi Scheme

The Department of Justice announced the arrest of eight people -- five in Southern California and three in Costa Rica -- related to an alleged ponzi scheme called the Genesis Fund.  Press releases by the DOJ (here) and the U.S. Attorney's Office for the Central District of California (here) describe the scheme that has resulted in the unsealing of an 83 count indictment for mail and wire fraud, conspiracy, money laundering, obstruction of justice, and tax charges:

The indictment alleges that between May 1998 and June 2002, Genesis Fund investors entrusted more than $80 million with the defendants. The defendants - through promotional materials, account agreements and other means - allegedly told investors that their money would be pooled and invested in foreign currency trading through a currency dealer in Hong Kong and Macau that had earned large profits for investors in the past. Instead, the indictment alleges, virtually all investor funds were used to make Ponzi payments to investors and to personally enrich the defendants.

The indictment also alleges that in June 2002 - just weeks after advising investors that the Genesis Fund was worth $1.3 billion - investment, trading and payment activities in the fund were suspended. After the collapse of the Genesis Fund, the defendants presented investors with a new investment plan to lull them into believing that there was hope of recovering their money.

The promotional literature asserted that because the fund was operated off-shore through Costa Rica, investors would not owe federal taxes.  Needless to say, virtually all of the money has disappeared. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/05/eight_arrested_.html

Fraud, Prosecutions | Permalink

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