The court-appointed receiver of the Three Hebrew Boys Ponzi scheme has announced that victims of the scheme have been mailed distribution checks that contain a recovery of 46% of each investor's principal loss - a stunning outcome in the receivership community and one of the highest recoveries in recent memory. Beattie Ashmore, the receiver, issued 3,800 checks representing a total distribution of $19 million to investors with approved claims. The outcome is particularly noteworthy considering that the average Ponzi scheme victim will typically only receive pennies on the dollar of their original investment.
The Three Hebrew Boys was a scheme concocted by Tony Pough, age 47, Joseph Brunson, age 47, and Timothy McQueen, age 52, all of Columbia, South Carolina. The scheme derived its name from the biblical story of three men whose faith saved them after they were thrown into a fire after refusing to bow to a statute but emerged unscathed. From 2004 to 2007, the three used this religious link to convince investors that they were part of a ministry, and promised exorbitant returns from a forex trading operation. Investors were told that, for a contribution of a few thousand dollars, they could use the promised profits to pay off a mortgage, car payment, or other financial obligation. The men held seminars to attract investors, promising that they could expect monthly returns of ten percent on their initial investment for the rest of their life. In total, approximately 7,000 investors contributed over $80 million to the operation.
Yet, rather than investing the funds, the trio used investor funds to make interest payments to investors to give the appearance that the operation was legitimate and successful. Additionally, each of the group enjoyed a lavish lifestyle that included the payment of an annual salary of $1 million, the purchase of a private jet, luxury suites at the Atlanta Falcons and Carolina Panthers stadiums, and a $900,000 party bus, among other items. The three were indicted in June 2008 and charged with thirty-five counts of mail fraud and one count of conspiracy to commit mail fraud, with more counts added as further information was discovered. Following a trial, a jury took less than three hours to convict the trio of fifty-eight counts of mail fraud, money laundering, and transporting stolen goods. Two of the men later received twenty-seven year sentences in federal prison, while the remaining fraudster received a thirty-year sentence due to an existing criminal record.
Since being appointed as receiver in late-2007, the Receiver has faced the daunting task of determining the gains or losses for the estimated 7,000 investors duped by the scheme, and pursuing those who were "net winners" - that is, who withdrew more funds than originally invested - for return of those profits to the receivership. Often, early investors may receive more than their original investment as a result of the continuing exorbitant returns. A review of the docket shows that this was a daunting task, and at least several investors who resisted the demand to have the profits returned saw the issuance of arrest warrants for civil contempt. Additionally, the receiver conducted the sale of numerous properties and exotic automobiles seized after the men were arrested. In total, the receiver recovered approximately $19 million for distribution to victims, representing nearly half of their initial investment. By contrast, the first interim distribution made to victims of Bernard Madoff's massive Ponzi scheme received approximately 4% of their initial investment. Additionally, another Charleston-based Ponzi scheme involving economist Al Parish saw victims ultimately recoup less than 14 cents on the dollar.
The Receiver's website is here.