A California man has been arrested and charged with operating a massive Ponzi scheme that took in more than $125 million from investors that thought they were financing a highly profitable business of supplying gloves to the government. Deepal Wannakuwatte, 63, was charged with multiple offenses, including mail fraud, wire fraud, and bank fraud. Each of the charges carries a maximum 20-year prison sentence, as well as criminal monetary penalties of up to $250,000.
Wannakuwatte operated International Manufacturing Group ("IMG") and RelyAid Global Healthcare Inc. ("RelyAid") (collectively, the "Companies"), California entities that solicited investors based on purported dealings with the U.S. Department of Veterans Affairs ("USVA"). Potential investors were told that the Companies had annual sales exceeding $100 million from lucrative contracts with the USVA. Based on these representations, Wannakuwatte and the Companies raised at least $125 million from an unknown amount of investors.
However, authorities allege that Wannakuwatte grossly overstated the extent of the Companies' dealings with the USVA - indeed, rather than $100 million in sales from the supply of medical gloves, authorities claim that actual sales were just $25,000 per year. In an example of these significant discrepancies, CBS 13 Sacramento reports that last month, Wannakuwatte altered paperwork orders to modify a $257 invoice to instead show a $12 million invoice. Further details remain scarce about the scheme and the whereabouts of investor funds.
The scheme appears to have began unraveling last August when Wannakuwatte, his wife, and the Companies were sued by a creditor, General Electric Capital Corp. ("GE Capital"), who claimed that RelyAid had defaulted on a loan it had taken out to purportedly build a latex glove factory. A federal judge recently ordered Wannakuwatte to turnover a $3 million King Air private plane that had been pledged as collateral on the loan. An FBI arrest warrant indicates that multiple government agencies began investigating Wannakuwatte and the Companies in September, shortly after the filing of the GE Capital lawsuit.
According to Ponzi Clawbacks, a detention hearing is scheduled for tomorrow to assess whether bail will be granted to Wannakuwatte.
The scheme is the largest Ponzi scheme uncovered in 2014. To view statistics about Ponzi schemes uncovered and prosecuted over the past six years, visit Ponzitracker's Ponzi Database here.