International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, August 22, 2014

How Did a 21 Year Old, FAU Student Ponzi $10 million From Investors?

FBISealDonald R. French was a 21 years old FAU student, living in Boca Raton in 2008 when he opened an LLC online "D3 Funds LP".  He moved to Rome, Italy but from 50 investors in Florida, Massachusetts, and Michigan, he raised $10 million.  The FBI stated:

French promised the investors high rates of return, in some instances as high as 50 percent. French created web-based statements of account, which falsely stated that the victim’s investments had generated large profits. French defrauded more than 50 victims out of more than $10 million, the majority of which was spent on himself and his co-conspirators, including approximately $1.5 million which he spent on check/debit card purchases for his personal living expenses and approximately $689,900 to pay for his casino gambling debts.

In 2013, upon his aprehension in South Africa, he plead guilty to running a ponzi scam in 2013.  He is now a resident of Oakdale, Louisiana for up to the next 121 months (it's a prison).

How does a college student go about raising $10 million for his investment fund? 

Read Ponzitracker's take on it - 'Junior Bernie Madoff' Gets 10-Year Sentence ...

French attributed his ability to convince investors to part with their hard-earned money to his "gift of gab."   

SECSEC Proceeding

French admitted that he created a false and fraudulent prospectus for investors, supplemented by his false and fraudulent oral representations, which led investors to believe their investments would be invested in legitimate investment vehicles, minus a small management fee. French’s false representations included representing a high rate of return, and that investors would be protected or guaranteed against loss. French admitted to providing investors with fraudulent web based monthly account statements, which were also used to solicit further investments.

Although French represented to investors that 98% of the monies given to D3 Funds LP were to be invested, French only used a small percentage of that money for actual investment. French admitted to defrauding victims out of more than $10 million during the course of the scheme, the majority of which was spent on himself and his co-conspirators, including personal living expenses through use of check/debit cards, gambling debts, and cash withdrawals.

See Attorney Jonathan Pollard's assessment in the Florida Business Litigator

 

When he started his scam, he was 21 years old and a student at FAU.  French had no experience in investing or investment management.  He had no track record.  Instead, all he had was D3 Capital.  Anybody can go online and form an LLC. 

See Lexis Article

French formed D3 Capital Management, LLC ("D3") in early 2008 (when he was just 21 years old) in the upscale Mizner Park shopping area of Boca Raton, Florida.  The company advertised itself as the 'premier provider of global investment management,' and told potential investors they could expect annual returns of up to 50% through a variety of unconventional investments including the purchase and resale of precious stones, solar energy, and foreign currencies

Criminal Proceedings

https://lawprofessors.typepad.com/intfinlaw/2014/08/how-did-a-21-year-old-fau-student-ponzi-10-million-from-investors.html

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