A former youth pastor was sentenced to serve 51 months in federal prison for masterminding a Ponzi scheme purporting to buy and sell precious jewels. Matthew James Addy, 34, received the sentence from United States District Judge James C. Cacheris after previously pleading guilty to a single count of securities fraud back in February. He was also ordered to pay approximately $2.74 million in restitution to defrauded investors.
According to authorities, Addy owned Edward J & Compant, which operated LaPorte Jewelers ("LaPorte"). Beginning in 2010, Addy began seeking investors for promissory notes in which the proceeds would be used for the purchase and resale of wholesale jewelry and loose precious stones. In exchange for their investments, individuals were given promissory notes carrying above-average rates of interest that purportedly were linked to specific jewelry transactions entered into by Addy. In seeking investors, Addy relied on his affiliations with various religious organizations, and a majority of the 40-plus total investors were recruited from these groups. In all, Addy raised more than $3 million.
However, according to the FBI and as admitted by Addy, LaPorte was nothing more than a front for an elaborate Ponzi scheme that used investor funds to make Ponzi-style payments and for a variety of other unauthorized uses. While approximately $665,000 was paid to investors, these payments came not from legitimate profits, but instead from the funds of new investors - the hallmark of a Ponzi scheme. When LaPorte originally closed down in June 2012, Addy blamed the store's bad fortunes on mounting monthly losses due to declining revenues.