“He created the books, he ran the fraud, he’s the mastermind behind the scene. He’s not the victim. He’s one of the worst kinds of financial predators. He’s so arrogant he thinks he’s infallible.”
- Assistant U.S. Attorney Matthew Borgula
A Michigan man who started his own Ponzi scheme after discovering that he had been entrusting investor funds to a collapsed Ponzi scheme learned that he will spend the next 30 years in federal prison. David McQueen, 44, learned his fate last week from U.S. District Judge Gordon Quist, who raised doubts as to the veracity of McQueen's professed regrets. In addition to his lengthy sentence, McQueen was also ordered to pay $36 million in restitution to victims, although any significant recovery appears highly unlikely. A federal jury convicted McQueen of fifteen fraud charges earlier this year, and he has been is custody since the verdict awaiting sentencing.
McQueen initially began investing in a Florida company known as Maximum Return Transactions ("MRT"). Operated by James Clements and Zeina Smidi, MRT promised investors monthly returns ranging from 5% to 11% from trading in foreign currencies. Beginning in 2006, McQueen began receiving 10% monthly returns from MRT. After receiving the promised returns for several months, McQueen devised a plan to recruit investors to MRT through his connection and promised monthly returns of 5% (with McQueen pocketing the remaining 5%). McQueen's entity, Accelerated Income Group ("AIG"), also recruited insurance agents to sell the investment to their clients. For a short period of time, this form of arbitrage was successful.
However, in mid-2007, MRT stopped making payouts to investors (and was later alleged of being a Ponzi scheme in a civil enforcement action filed by the Securities and Exchange Commission). However, rather than notifying AIG's investors of the failure of MRT, McQueen continued soliciting investors with promises of the lucrative monthly returns. In an attempt to reconstruct the returns from MRT, McQueen placed nearly 1/3 of investor funds in a variety of speculative investments that resulted in severe losses. Despite these losses, investors continued to receive falsified account statements showing consistent account gains.
In August 2009, federal authorities executed search warrants and seized approximately $430,000 from McQueen. In a last-ditch attempt to rescue his scheme, McQueen took approximately $400,000 in hidden funds from a New Zealand bank account to make more speculative investments - which also failed.
Prosecutors have been unable to recover any significant amount of investor funds, and have estimated that a best case scenario for victims is "small checks over time."