Federal authorities unveiled an indictment charging an Atlanta man with a Ponzi Scheme that allegedly resulted in losses exceeding $7 million. In an indictment unsealed last week, Charles Michael Vaughn, 42, of Atlanta, Georgia, was charged with five counts of wire fraud and nine counts of mail fraud. Under federal sentencing guidelines, Vaughn could face up to 20 years and a $250,000 fine for each convicted offense. Vaughn has since been released on a $50,000 bond.
According to the indictment, Vaughn solicited investors from several states during the time period spanning July 2004 through at least March 2008. At least 25 investors residing from Florida, Georgia, North Carolina and Tennessee placed their funds with Vaughn, who claimed he operated a hedge fund called "CM Vaughn, LLC." Yet, according to the FBI, Vaughn never filed required documentation with the National Association of Securities Dealers or to become an investment adviser. To entice investors, Vaughn promised monthly returns of 2% - 3.5% and annual returns as high as 50%. Additionally, Vaughn represented that the investments were insured and could not fall below certain levels. However, according to the FBI, Vaughn never invested any of the funds.
To convince investors that the returns they were receiving were authentic, Vaughn allegedly generated fictitious monthly account statements and sent several checks purporting to be dividend income. Instead, Vaughn is accused of paying investor returns with new investor funds and misappropriating the remaining funds. Vaughn allegedly purchased several luxury items with investor money, including expensive jewelry and automobiles.
Vaughn's scheme was uncovered in late 2008, and he quickly filed bankruptcy as the scheme began to unravel. An attorney was appointed by the court to begin liquidating Vaughn's assets. According to published reports, Vaughn fled the country after the FBI began investigating his scheme.