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Monday
Aug172015

Trial Of Accused $300 Million Ponzi Scheme Masterminds Ends In Acquittal, Mistrial

In a rare loss for the government in a Ponzi scheme trial, the trial of a husband-and-wife duo accused of defrauding thousands of investors out of hundreds of millions of dollars in an alleged timeshare Ponzi scheme ended with a full acquittal for the wife and a mistrial declared for her husband.  After a federal jury acquitted Cristal Clark of all fraud charges, U.S. District Judge Jose E. Martinez declared a mistrial after a federal jury deadlocked for the fourth day of negotiations on the fate of Fred "Dave" Clark.  The government has indicated that it intends to retry Fred Clark, who faces up to thirty years in federal prison for each bank fraud charge.  

Cay Clubs operated from 2004 to 2008, marketing the offering and sale of interests in luxury resorts to be developed nationwide.  Fred Clark served as Cay Clubs' chief executive officer, while Cristal Clark was a managing member and served as the company's registered agent.  Through the purported purchase of dilapidated luxury resorts and the subsequent conversion into luxury resorts, Cay Clubs promised investors a steady income stream that included an upfront "leaseback" payment of 15% To 20%.  In total, the company was able to raise over $300 million from approximately 1,400 investors.

However, by 2006 the company was alleged to have lacked sufficient funds to carry through on the promises made to investors.  Instead of using funds to develop and refurbish the resorts, Cay Clubs allegedly used incoming investor funds to pay "leaseback" payments to existing investors in what authorities alleged was a classic example of a Ponzi scheme.  After an investigation that spanned several years, the Securities and Exchange Commission initiated a civil enforcement action in January 2013 against Cay Clubs and five of its executives, alleging that the company was nothing more than a giant Ponzi scheme.  However, the litigation came to an abrupt end in May 2014 when a Miami federal judge agreed with the accused defendants that the Commission had waited too long to bring charges and dismissed the case on statute of limitations grounds.  

Just weeks after the dismissal of the Commission's action, authorities unveiled criminal charges against Fred and Cristal Clark and coordinated their arrest and extradition from Honduras and Panama where they had previously been living.  The charges stemmed from the Clarks' operation of an unrelated scheme to siphon money from their operation of a series of pawn shops throughout the Caribbean. Authorities alleged that the pair used a series of bank accounts and shell companies previously used with Cay Clubs to steal funds from the pawn shops to sustain their lavish lifestyles abroad.  Several months later, authorities filed bank fraud charges related to the Clarks' interaction with lenders as part of their operation of Cay Clubs - a strategy seemingly designed to ensure the charges would withstand any statute of limitation challenges given that bank fraud carries a 10-year statute of limitations.  

In the wake of the charges against the Clarks related to their operation of Cay Clubs, authorities targeted former sales directors Barry Graham and Ricky Lynn Stokes and charged the pair with conspiracy to commit bank fraud.  The charges resulted in guilty pleas and identical five-year sentences, and each of the men reportedly testified at the Clarks' trial.  

A forensic analysis conducted by the government alleges that Cay Clubs evolved into a Ponzi scheme as early as April 2005, with $2 out of every $3 paid to investors allegedly coming from existing investors.  The forensic analysis also showed that the Clarks lived lavishly, including nearly $20 million in boat purchases and expenses, $5 million in aircraft expenses, and $3 million in personal credit card bills.  Fred Clark also allegedly spent over $3 million at a Bradenton golf and country club.

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  • Response
    The involvement of the clubs in some of the crimes make them more eye catcher. This incident is really informative for the people and i think they may have some great ideas form this incident. Thanks for sharing this information here with us.

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