A Utah man was sentenced to nearly four years in federal prison for swindling investors out of nearly $2 million in what investors thought was a sophisticated foreign currency trading operation. Instead, Frederick H.K. Baker had come up with the idea that he could identify other Ponzi schemes and be one of the early investors who received high yields from such operations. According to his attorney, Baker effectively ran a Ponzi scheme to invest in other Ponzi schemes. Baker was sentenced to forty-one months in federal prison after previously pleading guilty to two counts of wire fraud and conspiracy earlier this summer. Another defendant, Mark Akins, was named in a 49-count indictment charging him with marketing Baker's scheme to other investors.
From June 2006 to June 2008, Baker told potential investors that he could promise them monthly returns ranging from eight to twelve percent from a system he had developed that profited off fluctuations in world currency markets. With the alleged help of Akins, he received nearly $2 million from approximately seventy investors. Yet, instead of using the funds to make forex investments, Baker invested in several other Ponzi schemes with the intent to be one of the early investors in the schemes and in effect "scam the scammers." Baker planned to invest, collect returns, and then withdraw his principal. According to prosecutors, Baker utilized E-Bullion to make transfers of money. E-Bullion is a California company that has also been referenced in the AdSurfDaily Ponzi scheme.
Baker was also ordered to pay $776,000 in restitution to victims of his fraud. His co-defendant, Akins, is currently scheduled to stand trial on January 3, 2011.