Former Chief Financial Officer Sentenced to Federal Prison for Conspiracy Related to $20 Million Ponzi Scheme
Admitted Conspiring with Dawn Bennett to Misappropriate Investors’ Funds, and to Making False Statements to SEC Investigators
Greenbelt, Maryland – U.S. District Judge Paula Xinis today sentenced Bradley Mascho, age 53, of Frederick, Maryland, to 30 months in federal prison, followed by three years of supervised release, for conspiracy to commit securities fraud and for making a false statement. Judge Xinis also ordered Mascho to pay restitution of $4,824,131.
The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur and Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office.
According to his plea agreement, beginning in at least 2009, Mascho worked with Dawn J. Bennett at Bennett Group Financial Services, LLC (“BGFS”), which Bennett used to provide investment advice and financial services to clients in Maryland and elsewhere. In 2013, Bennett formed DJB Holdings, d/b/a DJBennett.com, an Internet retail website for luxury sportswear. At times and at Bennett’s request, Mascho acted as the Chief Financial Officer of DJB Holdings.
According his plea agreement, between December 2014 and April 2017, Bennett and Mascho solicited individuals, including BGFS clients, to invest money in DJB Holdings, offering an annual interest rate of 15% via convertible or promissory notes. In order to entice individuals to invest, Bennett and Mascho made false and misleading statements, including: how investors’ funds were being used; the risks of investing in DJB Holdings; and concealing the true financial condition of DJB Holdings from investors. Bennett and Mascho convinced several investors to withdraw a significant portion of their retirement accounts to invest in, and loan money to, DJB Holdings.
Between December 2014 and July 2017, Bennett and Mascho solicited and received over $20 million from more than 40 different investors. The evidence showed that Bennett, and to a lesser extent Mascho, misappropriated investor funds, using them to pay their personal expenses and to repay previous investors with funds received from new investors. This is consistent with a Ponzi scheme--a fraudulent investment scheme in which the operator of the scheme solicits investors by promising high rates of return with little risk. The scheme operator then funds payments to the earlier investors through funds obtained through new investors. Typically, the operator of the scheme will use investment funds for purposes other than what was conveyed to the investors.
Further Mashco admitted that on June 19, 2017, he lied under oath in a deposition related to an investigation by the U.S. Securities and Exchange Commission (SEC) into Bennett and DJB Holdings’ unlawful issuance of convertible notes to investors. Mascho admitted that before the deposition, he spoke with Dawn Bennett extensively about his testimony and that his false statements to the SEC were all made under Bennett’s direction and at her insistence.
From 2014 through 2016, Mascho received compensation from BGFS and Bennett personally of approximately $209,000 to $219,000.
On July 31, 2019, U.S. District Judge Paula Xinis sentenced Dawn J. Bennett, age 56, of Chevy Chase, Maryland, to 20 years in federal prison, followed by five years of supervised release, for 17 federal charges including conspiracy, securities fraud, wire fraud, bank fraud, and making false statements on a loan application. Judge Xinis ordered that Bennett must pay restitution of $14,504,290 and forfeiture of $14,306,842. After deliberating for fewer than five hours, a federal jury convicted Bennett of those charges on October 17, 2018.
United States Attorney Robert K. Hur commended the FBI for its work on this investigation and thanked the SEC. Mr. Hur praised Assistant U.S. Attorneys Erin B. Pulice, Thomas P. Windom, and Gregory D. Bernstein, who prosecuted the case.
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