Seattle Man Pleads Guilty to Wire Fraud & Money Laundering for Ponzi Scheme Involving Fake Investments in Peru

A Seattle man who marketed real estate investment opportunities in Peru pleaded guilty in U.S. District Court in Seattle today to wire fraud and money laundering for his creation and operation of a classic Ponzi scheme, announced U.S. Attorney Jenny Durkan.  JOSE L. NINO DE GUZMAN, Jr., 30, ran NDG Investment Group, LLC from 2006 until 2009, when the Washington State Department of Financial Institutions issued a cease and desist order concerning his fraudulent sales of investment opportunities.  According to the plea agreement filed in the case, DE GUZMAN raised more than $30 million from over 200 investors for real estate investments in Peru.  However, the investments as described to investors did not occur.

DE GUZMAN is scheduled to be sentenced by U.S. District Judge Robert S. Lasnik on November 1, 2013.  Pursuant to the terms of the plea agreement, the government will recommend a sentence of 151 months imprisonment.

According to records filed in the case, DE GUZMAN left school at the University of Washington without graduating and at the age of 23 founded NDG Investment Group LLC.  Prior to starting the company in September 2006, DE GUZMAN had been employed by U.S. Bank as a teller and then as a personal banker.  However, despite his true background, DE GUZMAN solicited investors by telling them he had worked at U.S. Bank for three years as a business and commercial lending officer and specialized in fixed income with a focus on real estate.

            “This defendant brazenly and persistently defrauded investors by lying about his background and success and misused millions of their dollars for his personal benefit,” said Jenny A. Durkan, U.S. Attorney for the Western District of Washington.  “His victims included family members, friends and co-workers who did not know he paid for his glitz with their money.  When the scheme crumbled, they sadly learned that Mr. De Guzman had perpetuated a massive fraud.”

            DE GUZMAN made numerous misrepresentations about his success and the most basic fundamentals of the investments.  For example, DE GUZMAN falsely represented to investors that he had a proven track record of successfully developing real estate through an established company in Peru; that the investors’ funds would be used for specific real estate projects and that the investments were secured by real property in Peru; that investors would get a high rate of return on their investments when the development projects were complete; and that NDG would only receive a portion of the profits upon successful completion of the projects and after all the investors had received their original investment and projected rates of return.  These representations were false.  Neither DE GUZMAN nor NDG had ever successfully completed any real estate projects in Peru and, despite raising funds for approximately twenty projects, had only purchased a limited number of real properties.  No projects ever generated a profit.  Nevertheless, NINO DE GUZMAN told the investors their projects were completed or were progressing, and he sent periodic, fraudulent “updates” to investors, including showing “construction” sites for projects in which the land had not even been purchased.  Investors’ funds instead were used to fund DE GUZMAN’s lavish lifestyle, including the purchase of a $365,000 diamond ring, a $600,000 yacht, a $250,000 suite at Qwest Field for Seahawks games and a $200,000 Bentley automobile.  Moreover, as in a classic Ponzi scheme, DE GUZMAN used millions of dollars of investors’ funds to pay off previous investors to continue the illusion that DE GUZMAN was a successful developer, and to induce additional investors.

“The FBI is pleased that Mr. De Guzman is finally taking responsibility for his actions,” said Special Agent-in-Charge Laura M. Laughlin of the FBI Seattle office.  “He exploited friends, loved ones, and coworkers indiscriminately to fund a lavish lifestyle for himself.  The FBI stands with the prosecutors and victims in refusing to tolerate such heartless criminal activity.”

            DE GUZMAN pitched his investment opportunity at expensive downtown clubs and hotels, and emphasized NDG’s established alliances and relationships with well-known businesses and individuals.  Some of the investors were the parents or friends of people employed by NDG, and it was some of these employees who first reported DE GUZMAN to regulators when they became aware of the fraud.

            The case was investigated by the Washington State Department of Financial Institutions (DFI), the Internal Revenue Service Criminal Investigations and the Federal Bureau of Investigation.  The case is being prosecuted by Assistant United States Attorneys Tessa Gorman, Justin Arnold and Aravind Swaminathan, as well as Special Assistant United States Attorney Robert Kondrat, who is a DFI attorney cross-designated to the United States Attorney’s Office to prosecute securities fraud cases.

            For additional information please contact Thomas Bates for the United States Attorney’s Office at (206) 553-7970 or Thomas.Bates@usdoj.gov.