Four Charged In Multi-Million Dollar Ponzi Scheme
MOBILE, AL - United States Attorney Kenyen R. Brown announces today that Yaman Sencan, David Petersen, Stephen Merry and Timothy Durkin were indicted on May 29, 2013 for the roles in a multi-million dollar Ponzi scheme. The indictment was unsealed today.
The indictment charges that the defendants conspired to operate a nationwide Ponzi scheme, with several victim investors in Mobile and Baldwin County, Alabama. According to the indictment, the defendants falsely represented to the investors, among other things, that: they had developed a high speed, computerized arbitrage trading system that was designed to take of advantage of, and profit from, stock price differentials among different markets; a billionaire real estate mogul in New York financially backed the system; there was little, if any, risk of losing money in the arbitrage system; any trading losses, in the rare event they occurred, would be capped at $5,000; and they could withdraw their principal and earned income at any time.
In actuality, although the real estate developer had a prior business relationship with one of the defendants, he did not financially support, nor was he associated with, the defendants’ purported investment system. Further, the funds were not invested as promised. In fact, once the investors wired their funds to participate in the investment system, they were quickly diverted by the defendants to make Ponzi payments to other investors or converted to their personal use. Despite that, each week the defendants sent account statements to the investors falsely representing that their funds were being invested and that they were recognizing a continual profit regardless of market conditions. At one point, many investors unexpectedly requested the return of their funds. In response, the defendants repeatedly stalled these requests by claiming that the funds could not be returned until a purported sale of the system to another investment group could be completed. To this date, no such sale has been finalized, and no investors have received the return of their funds.
All defendants are charged with one count of conspiracy to commit securities and wire fraud, under 18 U.S.C. § 371, one count of substantive securities fraud, under 15 U.S.C. § 77q, and 18 counts of wire fraud, under 18 U.S.C. § 1343. The maximum terms of imprisonment for these charges range from five to 20 years.
The indictment also includes a forfeiture notice seeking a $4.9 million money judgment against the defendants, which represents the total amount of funds invested in the Ponzi scheme.
The case is being investigated by the Federal Bureau of Investigation and the Alabama Securities Commission. Assistant United States Attorneys Adam W. Overstreet and Gregory A. Bordenkircker and will prosecute the case for the United States. As in all criminal cases, the indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by the defendants. The defendants, of course, are presumed innocent until and unless they are proven guilty at trial.