Another Ponzi, Another Lesson

Why you need to be your own protector against investment scams

Ric Edelman: It's Tuesday, February 14. Another day, another scam. Three crooks are now in prison for stealing $345 million in a Ponzi scheme. They stole $1.5 million dollars per victim on average, 230 investors. All told, they've now agreed to pay the SEC $235 million in restitution. The con men used the money they collected to fund lavish lifestyles. They bought 25 automobiles, including a Bugatti, a Pagani, Ferraris and Lamborghinis and a Rolls Royce. They also bought a seven-carat diamond ring, a 23-carat diamond bracelet. They bought a $5.5 million dollar house in Naples. They spent $2 million in home renovations. They bought a Gulfstream jet, a $350,000 boat. And to top it all off, they transferred $15 million to casinos. They ran their Ponzi from 2013 through 2018.  

Yeah, it took the SEC five years to find out about this one and shut it down. And the wives of two of the crooks were also named as defendants because they took millions of dollars from the fraud, too. The SEC says the crooks sold fake securities with fake debt, forged signatures and fabricated wire transfers. They were selling shares of nonexistent bonds to financial advisors, bankers and accountants, in addition to retirees. When somebody invested, they gave them profits that weren't really profits. It was just really money they crooks had taken from other investors.  

So Kevin Merrill, Jay Ledford and Cameron Jezierski, along with their wives, Amanda Merrill and Lane Ledford, are all involved. They did business under a variety of company names: Global Credit Recovery, Delmarva Capital, Rhino Capital Holdings, Rhino Capital, Group de Ville Asset Management and River Walk Financial Corp. Kevin Merrill is serving 22 years in prison. Jay Ledford got 14 years. Jezierski served two years. He's already been released.  

There are several lessons here. First, don't expect the SEC or any law enforcement agency to protect you. You know the phrase, 'there's never a cop around when you need one'. They all arrive at the crime scene after the scene is a crime; after it's occurred. That's not their fault. It's just how it works. In other words, you've got to be your own protector.  

Second, if the crooks do get caught, don't expect to get your money back. The SEC has been working on this for five years already, and if the crooks repay any money, investors are going to get a fraction of what they lost.  

Third, be careful even when your advisor or accountant or banker pitches you the idea. If it's not a publicly available security like a stock or an ETF, if it's a private investment that has limited availability, ask lots of questions. Do your own research. Ask if the advisor is getting a commission when you invest. They could be suffering from a conflict of interest, even if they're not part of the fraud. Scams happen all the time. They involve every kind of investment - stocks, bonds, real estate, gold oil, collectibles, rare coins and stamps, baseball cards, artwork, crypto, you name it. It's your money. Don't be lackadaisical. Don't assume someone else has the primary responsibility for protecting it.  

Oh, and by the way, Happy Valentine's Day. I nearly forgot.