A Colorado man and his wife have been sentenced to prison for operating a Ponzi scheme that defrauded investors in the United States and five foreign countries. Richard Dalton, and his wife Marie, were given ten-year and five-year sentences, respectively, after each entered into a plea agreement with prosecutors. Richard Dalton pled guilty to a single count of money laundering, while his wife pled guilty to a single count of conspiracy to commit mail fraud. A hearing is scheduled for July 24 to determine the amount of restitution.
The Daltons owned and operated Universal Consulting Resources LLC ("UCR"). Beginning in March 2007, OCR promised potential investors lucrative returns through trading in diamonds and international note trading. Investors were told that the investments were "extremely low risk," and that their money could be returned to them at any time. These two investment ventures, known as the "Trading Program" and the "Diamond Program," were also pitched by "finders" or "brokers" who received commissions from UCR for each investor they successfully brought into the program.
According to Richard Dalton, the Trading Program featured an unnamed European trader who would use investor funds to buy and sell investment notes, and this trading was so profitable that investors were guaranteed monthly returns ranging from 4% - 5%. Some investors were promised even higher rates, including one investor who was promised 75% - 80% per month - an annual return of nearly 1,000%. Similarly, the Diamond Program purported to trade in diamonds, and promised a 10% monthly return. In total, the Daltons and UCR raised approximately $17 million from investors.
Not surprisingly, the exorbitant returns promised by the Daltons had no basis in reality, and were instead part of an elaborate Ponzi scheme in which new investor funds were used to pay returns and principal to existing investors. Over $5 million of investor funds were used to make 'Ponzi payments,' and over $1 million was used for a variety of personal expenses, including $35,000 in custom dental work, the Daltons' daughter's wedding, and a $1 million house.
While the Daltons stopped making scheduled payments to investors in early 2010, they provided numerous written and verbal misrepresentations to investors concerning the status of their invested principal, including:
- that the European trader had betrayed the Daltons;
- that the Daltons were busy liquidating a cache of diamonds;
- an airplane that made weekly trips to Africa to pick up diamonds had the 'number three engine go out'; and
- that the African government had mixed in 18,000 fake diamonds.
In late 2010, Richard Dalton even sought to reassure an impatient investor, telling him he had been in constant contact with the Securities and Exchange Commission, stating
So they know that and know I’m not Bernie Madoff, you know, I didn’t go out there and get into a huge lifestyle off of your dough. So they’re backing off and letting me clean this thing up.
The Daltons were later indicted in September 2011, and were arrested after returning from South Africa.
A copy of the SEC Complaint is here.