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Thursday
Aug072014

John Elway Among Victims To Receive Distributions In $147 Million Ponzi Scheme

The court-appointed receiver tasked with recovering assets for victims of a $150 million Ponzi scheme has announced that victims, including former NFL star John Elway, may soon share in a $10 million distribution from recovery efforts.  Receiver C. Randel Lewis has filed a distribution plan in a Colorado court that, if approved, will return approximately 16% of each allowed claim.  The mastermind of the scheme, Sean Mueller, is currently serving a 40-year prison sentence after pleading guilty to racketeering, fraud, and theft charges.  

Mueller was the owner of Mueller Capital Management ("MCM"), which operated the Mueller Over Under Fund (the "Fund").  After forming the Fund in 2000, Mueller began soliciting investors to purchase interests in the Fund under the guise that Mueller's day trading strategy could generate risk-free annual returns of 12% to 25%.  In offering documents distributed to investors, Mueller represented that he would hold dozens of positions long and short, and would also use options trading to increase his returns.  Mueller also bragged that he had never suffered a monthly loss since he began trading.  Mueller sought to give off an aura of exclusivity by telling potential investors that he was very selective with accepting clients while simultaneously recruiting members of a top Denver-area country club.  From 2000 to 2010, at least 145 investors entrusted over $147 million with Mueller.

In early 2010, Mueller's operation began unraveling.  In mid-April, investors received several ominous emails from Mueller in which he confessed the fraud, claimed that only he was responsible, and that he felt "like there are no good options left."  Shortly after the first email was sent, police responded to calls that Mueller was threatening to commit suicide by jumping off a parking garage.  A second email was sent automatically using a time delay function. After police talked him out of suicide, Mueller was subsequently arrested.  

An investigation by authorities found that, despite his claims of never suffering a monthly loss, Mueller suffered heavy trading losses in 2008 and 2009. However, rather than disclose these losses to investors, Mueller allegely lived a life of luxury that included the purchase of multiple homes, expensive cars, personal living expenses, and memberships in exclusive country clubs.  By April 2010, Mueller's cash on hand was tens of millions of dollars less than customer liabilities.  

Following Mueller's arrest, it was disclosed that the scheme's investors included several high-profile figures, including John Elway and Blaine Rollins, a former money manager at Janus Capital Group Inc.  Elway was revealed to be the scheme's largest investor, having invested a total of $15 million on behalf of himself and his business partner with Mueller and later having a net claim of $9 million after accounting for withdrawals.  With the distribution, Elway stands to receive approximately $1.44 million, while Rollins stands to receive approximately $561,000 on a $3.5 million claim.

A copy of Mueller's arrest warrant is below:

 

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