TENNESSEE MAN PLEADS GUILTY TO PERPETRATING NEW INVESTMENT FRAUD SCHEME WHILE ON “HOUSE ARREST” FOR EARLIER CONVICTION
June 13, 2011
ATLANTA, GA - JON E. HANKINS, 38, of Knoxville, Tennessee, pleaded guilty today in federal district court to three counts of wire fraud, relating to an investment scheme HANKINS began shortly after being charged in an earlier investment scheme.
United States Attorney Sally Quillian Yates said of the case, “The boldness of this recidivist defendant is simply incredible. Before even being discharged from an earlier federal sentence for investment fraud, this defendant started doing it all over again. Thankfully, this time, through the hard work of the FBI his scheme was identified and shut down very quickly, before investors suffered more losses. Our office and the President’s Financial Fraud Enforcement Task Force remain committed to the mission of protecting investors and promoting confidence in the integrity of our financial system.”
According to United States Attorney Yates, the charges and other information presented in court: HANKINS, in the winter of 2009/2010, was serving a federal imprisonment sentence for a 2007 securities fraud conviction in Knoxville. HANKINS had been convicted in 2007 for a $8 million fraud scheme involving his Knoxville-based investment company, “Tenet Asset Management.” As with many non-violent offenders, to facilitate his transition back into the community, HANKINS, who was imprisoned at a facility in Nashville, Tennessee, was permitted by the United States Bureau of Prisons to serve the last six months of his sentence in home confinement in Knoxville.
Shortly after his period of home confinement began in the winter of 2009, HANKINS concocted another scheme. He created a website, fake brochures and other business documents, and rented office space and mail forwarding addresses in the names of two entities, “Christian Financial Brotherhood,” and “Banker’s Trust Annuity.” He advertised these entities on the internet and elsewhere and solicited investors, investment advisors and stock brokers to invest their funds with him. From at least December 2009 through February 2010, HANKINS represented to an investment professional he was soliciting that Banker’s Trust managed over $100 million in assets for various clients, that the funds were held at an account at the leading wall street firm Goldman Sachs, that he was making substantial investment returns for existing clients in a hedge fund he called the “Strategic Arbitrage Fund,” and that these firms were well-established and that at least one of them had been in business for a century. HANKINS produced a brochure dated November 2009, which claimed that the “Strategic Arbitrage Fund” maintained over $30 million in client funds at that time, and which listed various individuals as supposed directors or partners in the fund, including retired high-ranking military officials and the son of a former U.S. Cabinet Secretary. None of this was true, as Christian Financial and Banker’s Trust were sham companies, had nothing close to the assets that HANKINS represented, had been “in business” for only a few months, had not been engaged in profitable securities trading, and was not associated with the high profile individuals listed on the brochure.
HANKINS, in soliciting investors, also deliberately lied about his own background. He promoted himself on the basis of his investment and accounting experience and education, including his Master’s of Business Administration degree, but deliberately omitted mention of his securities fraud conviction, the old company, “Tenet Asset Management,” or the fact that as he was soliciting investors for his new scheme he remained under a federal imprisonment sentence.
The FBI quickly learned of HANKINS’ marketing efforts, and executed a search warrant in April 2010, which shut down the scheme. Because this new investment scheme was caught quickly, HANKINS had succeeded in obtaining less than $500,000 from his victim-investors, of which nearly $200,000 was recovered and returned to victims.
HANKINS was indicted in October 2010 on three counts of wire fraud and today he pleaded guilty to all counts. He could receive a maximum sentence of 20 years in prison and a fine of up to $250,000 for each count. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
Sentencing is scheduled for August 19, 2011, at 10 a.m., before United States District Judge Amy Totenberg.
This law enforcement action was undertaken as part of President Barack Obama's Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being investigated by Special Agents of the Federal Bureau of Investigation.
Assistant United States Attorney Justin S. Anand is prosecuting the case.
For further information please contact Sally Q. Yates, United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney's Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney's Office for the Northern District of Georgia is www.justice.gov/usao/gan.