A California man faces up to five years in federal prison after admitting he failed to report millions of dollars in profits he received from a massive Ponzi scheme. Donald Lopez, 63, pled guilty to a single count of willful income tax evasion related to nearly $3.5 million in profits received from Matthew LaMadrid's massive Ponzi scheme that were not reported to the Internal Revenue Service. Lopez faces up to five years in prison, as well as a maximum fine of $250,000.
LaMadrid operated the Plus Money Return Premium Funds from 2004 to 2008, which advertised above-average returns through purported covered-call stock option trading. However, rather than engage in legitimate trading, LaMadrid operated a Ponzi scheme, using investor funds to pay returns to ther investors and misappropriating investor funds to support a lavish lifestyle that included luxury cars, art, and gambling. In November 2007, as the scheme was on the throes of collapse, LaMadrid caused $10 million to be wired to an account controlled by Lopez. Lopez kept approximately $3.94 million of that amount for himself, of which $3.42 million should have been reported as taxable income to the IRS. As a result, the IRS was deprived of $1.3 million in revenue.
La Madrid received a ten-year prison sentence for his scheme last July. He was also ordered to pay $23.5 million in restitution to defrauded investors.