Texas Man Sentenced To 2 Years In Federal Prison For Running Ponzi Scheme
FOR IMMEDIATE RELEASE Contact ELIZABETH MORSE
www.justice.gov/usao/md at (410) 209-4885
Greenbelt, Maryland – On September 13, 2017, U.S. District Judge Paula Xinis sentenced Sidney J. Charles, Jr., age 50, of Levelland, Texas, to two years in prison followed by three years of supervised release for wire fraud. The District Court also entered orders of forfeiture and restitution in the amount of $249,706.30.
The sentence was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning and Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation, Baltimore Field Office.
According to the plea agreement, starting in or around August 2009, Charles founded The Borrowing Station, LLC (“The Borrowing Station”), a Nevada limited liability company with its principal place of business in Bowie, Maryland. From at least October 2009 through at least July 2011, Charles served as the president and chief executive officer of The Borrowing Station. Charles marketed The Borrowing Station as an established investment firm that offered significant returns on investments.
From at least October 2009 through at least July 2011, The Borrowing Station, acting through its officers, employees, and agents, including Charles, orchestrated and operated a scheme to solicit investors with false promises of high rates of guaranteed return on their investments. Charles, did not generate any material revenue for the investors, used funds from later investors to make payments to earlier investors, and used investor funds to enrich himself.
Between at least October 2009 through at least July 2011, in the District of Maryland and elsewhere, The Borrowing Station, through Charles and others, solicited and accepted more than $250,000 from at least 17 individuals and entities for the purpose of participating in a pooled investment vehicle that traded off-exchange leveraged or margined foreign currency contracts (“forex” or “foreign currency”). As part of the scheme to defraud, Charles solicited and accepted these monies for the ostensible purpose of participating in a pooled investment vehicle that traded off-exchange leveraged or margined forex. The subsequent loss of those funds resulted in substantial financial hardship to at least one of the investors.
Charles falsely advertised The Borrowing Station as an established, successful, and safe investment firm. The Borrowing Station website stated, for example, that The Borrowing Station “is an established company in the United States, specializing in Retirement and Education Savings.”
In addition, Charles solicited investors directly and through a website, www.earn25percent.com, a The Borrowing Station website, with false promises that investors could earn substantial investment returns such as 25% per year or 10% per month. Charles also falsely claimed that pool participant funds were guaranteed against trading losses.
The Borrowing Station did not make these returns or guarantee against trading losses, as Charles had falsely represented. Rather, Charles paid pool participants with other pool participants’ funds rather than from any funds generated by trading forex, and deposited only a portion of pool participant funds into actual trading accounts. Charles also hid trading losses from pool participants, including substantial losses resulting from unsuccessful forex trades. Charles used pool participant funds to pay for personal expenses, to make purported profit or commission payments to other pool participants, and to fund Borrowing Station’s operations.
In order to lull the participants, Charles and at least one other individual, both of whom were signatories on The Borrowing Station’s bank account, issued checks drawn on behalf of The Borrowing Station to pool participants that represented purported monthly returns or returns on investment. The amount of the funds that each check paid typically approximated the return of 10% per month that Charles, directly and through others, had promised pool participants. Charles issued these false profit checks and other materially false communications to pool participants in order to conceal the trading losses, the misappropriation of pool participant funds, and the fraudulent scheme.
Charles and others failed to disclose to pool participants and prospective pool participants that their claims of experience and success in trading forex were false and that there was no basis for their representations that pool participants could earn investment returns of 25% per year or 10% per month. Charles failed to disclose that he and others traded only a portion of pool participant funds. Charles failed to disclose to pool participants that Charles used pool participant funds for his personal expenses. In execution of the scheme to defraud, Charles used or caused to be used wire communications in interstate commerce.
Acting United States Attorney Stephen M. Schenning commended the FBI for their work in the investigation. Mr. Schenning thanked Assistant U.S. Attorneys Thomas M. Sullivan and Sujit Raman, who prosecuted the case.