The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) announced last month the indictment and arrests of three people, including a Baltimore man, involved in the largest-ever Ponzi scheme in Baltimore-Washington metropolitan area.
More than 230 people have been taken for a financial rollercoaster as three men ((Kevin B. Merrill ("Merrill"), Jay B. Ledford ("Ledford"), and Cameron Jezierski ("Jezierski") raised $345 million, more than $90 million was invested by over 200 individual investors (including small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, current and former professional athletes, and financial advisors); approximately $52 million by family officers; and nearly $203 million from feeder funds, said the SEC.
According to an indictment from Federal prosecutors in Baltimore, Merrill and Ledford touted their experience in collecting on and reselling consumer debt to investors, with the promise of significant profits. The pair operated a web of companies they owned and/or controlled, including Defendants Global Credit Recovery, LLC; Delmarva Capital, LLC; Rhino Capital Holdings, LLC; Rhino Capital Group, LLC; DeVille Assets Managment LTD; and Riverwalk Financial Corporation, which they then sold securities to investors.
Merrill and Ledford used the corporate entities and 55 bank accounts to shift investor money, deceive investors, and continue their Ponzi scheme that only survived with the influx of greater and greater investor cash inflow.
Here is how the Merrill - Ledford scheme worked:
Documents show the men used a web lies, forgeries, and fake documents to conduct the fraud since 2013, using investor money for exotic cars, high-end real estate, private jets, private clubs, casinos, and funding their lavish lifestyles.
"We allege defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains," said Kelly Gibson, the associate regional director of the SEC's Philadelphia office.
The SEC stated approximately $200 million of the money was used to pay prior investors and deceive current investors that their money was generating high returns.
Merrill owned five mansions, 25 exotic cars -- including Bugattis, Ferraris, and Rolls Royces -- private jets, powerboats, and more, according to filings.
If Merrill, Ledford, and Jezierski are convicted, their assets, will be seized by the U.S. Government. In the latter stages of a credit cycle, fraud schemes are usually not sustainable and go bust -- an ominous sign that an economic downturn is nearing.