California Attorney Arrested For Multimillion-Dollar Investment Fraud Scheme
Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of DEREK JONES on charges of wire fraud and aggravated identity theft. As alleged in an Indictment unsealed today in Manhattan federal court, JONES, while licensed as an attorney in California, defrauded investors in businesses JONES controlled out of at least approximately $4.5 million. The case has been assigned to U.S. District Judge Loretta A. Preska. JONES, who was arrested this morning in California, will be presented later today before a magistrate judge in the Central District of California. Arraignment will be tomorrow before Judge Preska by teleconference.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Derek Jones not only failed to live up to the canons of the legal profession, he affirmatively lied to investors and defrauded them out of millions of dollars. As alleged, Jones lied about a real estate development opportunity on land he neither owned nor was developing, and he lied to investors to create the false impression that he had real businesses with real employees. Jones allegedly spent investors’ money on himself and his family, and to pay some investors in Ponzi-like fashion. Now, thanks to the FBI, Jones is in custody and facing federal charges.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Jones solicited investments from various clients based on false representations of BlueRidge’s and Realize’s assets. In reality, while at least one of the companies held an account balance in the negative, Jones allegedly was using money received from the fraud to fund personal expenses to include private school tuition for at least one of his children. Investment fraud schemes are unfortunately all too common. Our efforts to bring the perpetrators to justice are as well.”
As alleged in the Indictment:
From at least 2012 through at least 2019, JONES solicited and obtained investments for various companies and investment funds he controlled, including the purported real estate development and investment firm BlueRidge Realty (“BlueRidge”) and the purported venture capital firm Realize Holdings (“Realize”).
JONES routinely made materially false oral and written statements to induce victims to invest, including statements that lied about BlueRidge’s and Realize’s assets. For example, JONES falsely claimed that BlueRidge was developing a “resort village” on land it controlled in Washington State, when in fact neither BlueRidge nor JONES owned or controlled the property, let alone had begun developing a resort there. Additionally, JONES sent a potential Realize investor an altered bank statement showing a balance in a Realize bank account of more than $7 million – at a time when that bank account actually had a negative balance of approximately $268.71.
JONES defrauded investors out of at least approximately $4.5 million. He misappropriated investments and used the funds to, among other things, transfer money to himself or relatives, pay tuition for a private school attended by one or more of his children, and make Ponzi-like payments to other investors. To prolong and conceal the fraud scheme, JONES regularly told lies designed to avoid meetings with or inquiries from victims. For example, in explaining his failure to respond promptly to questions or his reason for postponing an upcoming meeting, JONES falsely told different investors, on different occasions, that one of his relatives was in poor health. JONES also used the names of other individuals – without those individuals’ authorization or knowledge – to communicate via email with investors and thus foster the illusion that JONES’s businesses were viable operations with real employees.
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JONES, 46, of San Marino, California, is charged with one count of wire fraud, which carries a maximum potential prison sentence of 20 years, and two counts of aggravated identity theft, each of which carries a mandatory consecutive prison sentence of two years. The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney David Abramowicz is in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
James Margolin, Nicholas Biase