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Thursday
Sep202018

Three Men Charged With $345 Million Ponzi Scheme

Authorities filed civil and criminal fraud charges against three men on allegations that they masterminded "one of the largest Ponzi schemes ever charged in Maryland" that raised at least $345 million from hundreds of investors nationwide.  Kevin B. Merrill, 53, Jay B. Ledford, 54,  and Cameron Jezierski, 27, were the subject of an emergency enforcement action filed by the Securities and Exchange Commission that included a request for an asset freeze and appointment of a receiver.  The trio also face fourteen criminal charges, including mail fraud, wire fraud, money laundering, conspiracy, and identity theft charges.  If convicted of all charges, each could face dozens of years in prison.

According to authorities, the trio operated a number of entities including Defendants Global Credit Recovery, LLC; Delmarva Capital, LLC; Rhino Capital Holdings, LLC; Rhino Capital Group, LLC; DeVille Asset Management LTD; and Riverwalk Financial Corporation (the "GCR Entities").  The GCR Entities solicited investors through promises of steady returns from the deeply-discounted purchase of consumer debt portfolios.  Consumer debt, including automobile, credit card, and student loan debt, is often bundled into portfolios and sold in bulk to investors, which the GCR Entities told investors they were purchasing for their benefit.  While the scheme involved the actual purchase of some debt portfolios, authorities allege that the vast majority of purported debt purchases were fraudulent and that the actual purchases of debt portfolios were used as part of the scheme to solicit more investors. 

Using a dizzying array of interwoven entities and bank accounts, the trio solicited investors across the nation including both individual and institutional investors. Potential investors were often provided with documentation describing the investment structure and also viewed presentations offering projections about the anticipated investment returns.  These promises included offering some investors 100% of collections of up to 25% of their principal investment annually - meaning those investors were offered annual returns of up to 25% along with the option for even higher returns.  Potential investors also received "due diligence" documents prepared by Ledford or Jezierski providing a supposed analysis of the portfolio(s) they were purchasing as well as the anticipated purchase price. In total, the GCR Entities are believed to have raised over $345 million from at least 230 investors. 

But authorities allege that the GCR Entities had not been in the business of buying consumer debt since 2014, and that the purported investment opportunity was a giant Ponzi scheme that used new investor funds to pay returns to existing investors.  Approximately $197 million was paid out as purported remittances, collections, or profits, meaning that investors are facing total losses of roughly $150 million.  Unfortunately, authorities believe that a significant portion of those losses were diverted to sustain the trio's extravagant lifestyles.  The indictment alleged that investor funds were used to buy over 20 high-end automobiles, at least nine houses, and over $8 million in jewelry, as well as at least $25 million in casino gambling. 

The sheer amount of real estate, automobiles, and jewelry sought to be forfeited from Defendant Kevin Merrill alone is staggering.  Among other things, the indictment seeks to forfeit the following assets from him that were allegedly purchased with proceeds of the fraud:

  • 6 properties, including a 7,700 square foot mansion in Naples, Florida that Merrill purchased earlier this year for $10.5 million;
  • A 2018 35' Formula Boat;
  • An interest in a Gulfstream Aircraft G200;
  • A 9+ carat diamond ring; and
  • 7 Richard Mille watches.

The list of automobiles is truly a who's who of luxury automobiles.  The list includes 25 (yes, 25) high-end automobiles including:

  • 2014 Lamborghini Aventador Roadster
  • 2016 Ferrari 488
  • 2017 Audi R8 5.2 Plus
  • 2017 Lamborghini Huracán convertible
  • 2018 Rolls-Royce Dawn
  • 2017 Rolls-Royce Wraith
  • 2018 McLaren 720S
  • 2008 Bugatti Veyron
  • 2013 Ferrari California
  • 2014 BMW M6 Gran Coupe
  • 2014 Ferrari F12 Berlinetta
  • 2014 Pagani Huayra
  • 2017 Lamborghini Aventador
  • 2018 Ferrari 488 Spider
  • 2018 Lamborghini Huracán 

The Court overseeing the SEC's enforcement action granted the SEC's request to appoint Gregory Milligan as Receiver over the GCR Entities.  

A link to the SEC's Complaint is here.

A link to the Indictment is here.

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