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Wednesday
Oct242012

Charged by CFTC in 2009, Authorities Now Unveil Criminal Charges Against Las Vegas Man Accused In $15 Million Ponzi Scheme

A Las Vegas man who curiously managed to avoid criminal charges despite having a $42 million civil judgment entered against him for a $14 million Ponzi scheme has seen his luck run out, as federal authorities filed criminal charges relating to the scheme earlier this month.  Gordon Driver, 54, was arrested October 9th and charged with two counts of mail fraud, nine counts of wire fraud, two counts of commodity pool operator fraud, and three counts of making false statements to the Securities and Exchange Commission.  If convicted of all charges, he faces up to 275 years in federal prison.

Driver was originally the subject of an enforcement proceeding brought by the Commodity Futures Trading Commission ("CFTC") in May 2009, alleging that Driver bilked investors out of millions of dollars by promising above-average returns purportedly achieved through trading commodity futures.  Driver was the sole owner and principal of Axcess Automation, LLC (“Axcess Automation”) and Axcess Fund Management LLC (“Axcess Management”).  Beginning in February 2006, Driver solicited investors, telling them he had developed proprietary trading software to trade E-Mini S&P 500 futures that had achieved average weekly trading returns of 1% to 5%.  Investors believed Driver, and ultimately approximately 100 investors contributed over $14 million to the venture.  

However, Driver was not nearly as successful as his alleged trading record suggested.  Not only did Driver invest less than $4 million of investor funds, but he experienced $3.5 million in trading losses - a realized loss of 94%.  Rather than achieving regular monthly returns of 1% to 5%, Driver had profitable trading months only twice, in March and May 2009, and when the CFTC obtained an emergency asset freeze, only $77,592 remained in Driver's accounts.  

The CFTC enforcement action featured celebrity attorney Mark Geragos as Driver's counsel until his withdrawal just before Driver was ordered to to pay restitution of $9,562,488.00 and civil monetary penalties of $31,800,000.00 by July 22, 2012.  

Despite being successfully prosecuted by civil regulatory authorities for masterminding a massive Ponzi scheme, any intervention by criminal authorities remained conspicuously absent.  In a Forbes article I authored earlier this summer pondering this same question, I noted that "while the CFTC outlined allegations in its complaint that could form the basis of mail and/or wire fraud, the five-year statute of limitations continues to tick." Among the criminal charges Driver now faces are two counts of wire fraud and nine counts of mail fraud.  

Also noteworthy is the decision to charge Driver with three counts of making false statements to the Securities and Exchange Commission.  Authorities rarely bring this charge against those accused of Ponzi schemes, with the only known exception to be Laura Pendergast-Holt, the former chief investment officer under Allen Stanford's massive $7 billion Ponzi scheme who received a three-year prison sentence after pleading guilty to obstructing an SEC investigation.  Driver was presumably charged under 18 U.S.C. 1001, which forbids making any false or fraudulent statement in "any matter within the jurisdiction of the executive, legislative, or judicial branch" of the U.S. government.  Each charge carries a maximum sentence of up to five years in federal prison.

Driver was scheduled to be arraigned this week.  

A copy of the CFTC’s Complaint is here.

A copy of the Final Judgment is here.

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