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Thursday, December 18, 2014

California Investment Manager Sentenced to 225 Months in Prison for $33 Million Fraud Scheme

A California investment manager was sentenced yesterday to serve 225 months in prison for orchestrating a $33 million Ponzi scheme resulting in $15.2 million in losses to investors.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Carlie Christensen of the District of Utah, Special Agent in Charge Mary Rook of the FBI’s Salt Lake City Field Office and Special Agent in Charge John Collins of the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Las Vegas Field Office made the announcement.

Robert L. Holloway, 57, of San Diego, California, was found guilty on Aug. 5, 2014, after a seven-day jury trial, of four counts of wire fraud and one count of making a false income tax return.  In addition to the prison sentence, U.S. District Judge Robert J. Shelby of the District of Utah ordered Holloway to pay $15.2 million in restitution.

Evidence presented at trial established that Holloway served as the chief executive officer and managing partner of US Ventures LC between May 2005 and April 2007.  From October 2005 until at least April 2007, Holloway recruited investors by making false representations, including that US Ventures used proprietary trading software that was consistently profitable, that US Ventures generated returns of 0.8 percent per trading day and that US Ventures would retain a 30 percent share of investors’ profits as a management fee.

The evidence also showed that Holloway generated and distributed reports to investors showing false daily returns on their investments.  Indeed, between October 2005 and April 2007, contrary to the returns shown on the false reports, US Ventures lost more than $10 million in trading, and the “profit” figures on the investor reports were entirely fabricated.  US Ventures raised more than $33 million from investors for its purported trading activities.  

Evidence at trial further demonstrated that Holloway and US Ventures made “profit distributions” to investors from funds solicited from new investors, and that Holloway misappropriated investors’ funds for a variety of personal expenses, including supporting his then-wife’s eBay business, and purchasing hundreds of thousands of dollars of jewelry.  During 2006 alone, Holloway diverted more than $1.2 million in investor funds to a “business” account that he used as a personal account.  During that same year, Holloway falsely claimed a gross income of only $27,500 on his personal tax return.

The case was investigated by the FBI’s Salt Lake City Field Office and the IRS-CI’s Las Vegas Field Office.  The Commodity Futures Trading Commission and the Securities and Exchange Commission also provided assistance in the investigation.  This case was prosecuted by Trial Attorney Thomas B.W. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jason R. Burt of the District of Utah.

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Updated December 18, 2014