A California man will serve nearly five years in federal prison after pleading guilty to operating a $15 million Ponzi scheme that ensnared close to 250 victims. William Yotty, 69, received the sentence from U.S. District Judge Margaret M. Morrow, who remarked that it was "important that people who engage in business frauds face substantial sentences." Yotty pleaded guilty earlier this year to one count of mail fraud and one count of wire fraud, and could have been sentenced to a maximum term of forty years in prison. Yotty was also ordered by Judge Morrow to pay over $15 million in restitution to his victims. It remains unknown whether Yotty will be able to satisfy the restitution order.
Beginning in Spring 2007, Yotty began soliciting victims to purchase interests in various debt instruments that he represented were safe, secure, and would pay substantial returns of up to 25% annually. Potential investors were told that the companies issuing the debt instruments were adequately capitalized to pay the promised interest and that they could be counted on to repay the principal investment upon maturity. Based on these representations, Yotty raised more than $11 million from investors. Payments to investors ceased in 2009.
In a second scheme, which started sometime in the summer of 2007, Yotty pitched investments in two companies he owned - including one called Fortuno Millionaire Club - which offered above-average annual returns through profits purportedly earned through purchasing foreclosed real estate and flipping it to earn 200% - 300%. In presentations to investors, Yotty told potential investors that “Our club member receives the down payment, the monthly payments from the new buyer, and all the proceeds from the sale of the Note! It’s a win…win…win!” Another presentation promised it could show investors "how to take $400 and turn it into $25,000 in the next 30 days."
However, while Yotty was flipping houses, he was selling houses that he had previously purchased at a deep discount to his investors, often at prices several times what he had originally paid. And while Yotty promised that the houses were in livable condition and that he would undertake management, the reality was that the houses were dilapidated and uninhabitable. Because of the deplorable condition and the inflated value, those investors were often unable to resell the houses.
Yotty had been held without bail since he was arrested in May 2014.