Two More Executives Charged In Alleged $300 Million Cay Clubs Ponzi Scheme

Nearly two months after federal authorities filed fraud charges against a husband and wife for allegedly masterminding a $300 million real estate Ponzi scheme, two more executives of the now-defunct company are now facing similar charges.  Barry J. Graham, 59, and Ricky Lynn Stokes, were each charged in recent days with a single count of conspiracy to commit bank fraud while employed as sales executives with Cay Clubs Resorts and Marinas ("Cay Clubs").  If convicted of the charges, Graham and Stokes could face up to twenty years in federal prison.  

Cay Clubs operated from 2004 to 2008, and marketed the offering and sale of interests in luxury resorts to be developed nationwide.  Fred Clark served as Cay Clubs' chief executive officer, while Cristal Clark was a managing member and served as the company's registered agent.  Through the purported purchase of dilapidated luxury resorts and the subsequent conversion into luxuxy resorts, Cay Clubs promised investors a steady income stream that included an upfront "leaseback" payment of 15% To 20%.  In total, the company was able to raise over $300 million from approximately 1,400 investors.

However, by 2006 the company lacked sufficient funds to carry through on the promises made to investors.  Instead of using funds to develop and refurbish the resorts, Cay Clubs used incoming investor funds to pay "leaseback" payments to existing investors in what authorities alleged was a classic example of a Ponzi scheme.  After an investigation that spanned several years, the Securities and Exchange Commission initiated a civil enforcement action in January 2013 against Cay Clubs and five of its executives, alleging that the company was nothing more than a giant Ponzi scheme.  However, the litigation came to an abrupt end in May 2014 when a Miami federal judge agreed with the accused defendants that the Commission had waited too long to bring charges and dismissed the case on statute of limitations grounds.  

Graham was the director of sales for Cay Clubs from 2004 through late 2007, while Stokes was initially a sales agent and the director of investor relations before he took over the director of sales position upon Graham's departure in late 2007.  According to authorities, Graham and others participated in sales transactions with Cay Clubs at artificially inflated prices that were then used to convince investors of the purported profits their investment could yield.  Marketing materials distributed to investors touted the rapidly increasing sales price of the units without disclosing that the transactions were not typical arms-length sales.  

Fred and Cristal Clark are currently being held in a Key West detention facility after a judge determined that no bail conditions existed that could ensure the two would not flee before their March 2015 trial.  The two were initially arrested earlier this summer in Central America on fraud charges stemming from their operation of an unrelated company.  A subsequent indictment added fraud charges from the Clarks' operation of Cay Clubs.  

The superseding indictment is below:

Superseding Indictment by jmaglich1