Former Indiana University Foundation Employee Sentenced to One Year in Federal Prison for Embezzling More Than $326,000 in Donations
Indianapolis – Acting U.S. Attorney John E. Childress announced today that George S. Blankenbaker Jr., 56, of Westfield, Indiana, was charged in federal court for two counts of wire fraud and one count of money laundering.
According to the information, between May 2008 and August 2016, Blankenbaker created three business entities, Stargrower Commercial Bridge Loan Fund 1 LLC and Stargrower Asset Management, LLC (hereinafter the Stargrower Entities) and EDU Holding Trust (the Trust). He later used these entities, which he owned and managed, in the execution of a Ponzi and money laundering scheme.
“The victims of this scheme placed enormous trust in Mr. Blankenbaker to wisely manage and invest their hard-earned money,” said Childress. “Instead, he exploited their trust through deception and lies for his own personal gain.”
Blankenbaker persuaded more than 100 individuals to invest more than ten million dollars in the Stargrower Entities. He represented to investors that the funds they invested would be used to finance the use of shipping containers of food in the “international trade of fast moving consumer products similar to what you would find in a grocery store.” The investment funds received by Blankenbaker were deposited into Stargrower Entities bank accounts which he solely controlled and was the sole signatory.
Contrary to Blankenbaker promises to investors, he did not invest their money as he had described. On over 300 separate occasions between September 2016 and May 2019, Blankenbaker diverted the investment money he received to primarily make interest payments and return of principal payments to other Stargrower Entities investors, and to fund personal expenses and unrelated business ventures of his. Thirty-four investors lost over $1,400,000 in this scheme.
Blankenbaker other business entity known as EDU Holding Trust (the Trust), was designed to utilize investor funds to purchase life insurance policies on the secondary market at a price less than the face maturity amount of the policies. Investors in the Trust received a document created by Blankenbaker, entitled “life settlement purchase agreement” that they were beneficiaries of the Trust and that they would receive compensation from the profits generated when the life insurance policy matured, that is, when the insured died. In another document provided to investors, he said that a financial institution, the Bank of Utah, would serve as an escrow agent to receive the proceeds upon the maturity of the life insurance policies and then distribute the funds to the investors appropriately.
In August 2016, one of the policies purchased by the Trust died, and a proceeds check in an amount in excess of 2.5 million dollars was issued to the Trust by the life insurance company on which the policy was drawn. The check was not deposited into the Bank of Utah escrow account, but was rather deposited by Blankenbaker into an account he opened at PNC Bank in the name of EDU Holding Esc Acct. Although some of the funds from this deposit were appropriately transferred to investors in the Trust, others were transferred to another account he controlled at PNC Bank in the name of one of the Stargrower Entities. These funds were used, in part, for business and personal expenses of Blankenbaker unrelated to the purposes of the Trust. This scheme resulted in a loss of $110,200 to an investor in the Trust.
This case was investigated by IRS Criminal Investigation, the United States Postal Inspection Service, and the Securities and Exchange Commission.
“The Special Agents of Internal Revenue Service Criminal Investigation (IRS-CI) are experts at unraveling the fraudulent actions of those, such as George S. Blankenbaker Jr, who scheme to defraud investors,” said Acting Special Agent in Charge Tamera Cantu of IRS-CI’s Chicago Field Office. "We are committed to investigating money laundering as part of our mission to protect the financial well-being of honest, hard-working Americans. We will continue to work with our law enforcement partners to prosecute swindlers like Blankenbaker.”
Bryan Musgrove, Acting Inspector in Charge of the Detroit Division stated, “The U.S. Postal Inspection Service will continue to vigorously pursue those who utilize the U.S. Mail to advance their fraud schemes. Crimes of these type bring grave financial and personal hardships to their victims. Criminal misuse of the U.S. Mail will not be tolerated, and our agency will continue to go after those who seek to exploit vulnerable victims. This case illustrates the benefit of a strong partnerships between U.S. Postal Inspectors and our colleagues in local, state, and federal law enforcement.
According to Assistant U.S. Attorney James M. Warden, who is prosecuting this case for the government, Blankenbaker faces up to 10 years imprisonment for the one count of money laundering charge, and up to 20 years for each wire fraud charge, a maximum fine of $250,000 as to each count, and up to three years of supervised release following any prison term. Also filed today was a petition to enter plea of guilty and plea agreement, whereby Blankenbaker has indicated that he intends to plead guilty to all the counts of the Information.
An information is only a charge and not evidence of guilt. All defendants are presumed innocent until proven otherwise in federal court.
In November of 2020, Acting United States Attorney John E. Childress renewed a Strategic Plan designed to shape and strengthen the District’s response to its most significant public safety challenges. This prosecution demonstrates the Office’s enduring commitment to investigating and prosecuting those who engage in fraud and money laundering. See United States Attorney’s Office, Southern District of Indiana Strategic Plan Section 5.1.