Jury Convicts KC Man of Investment Fraud Scheme
KANSAS CITY, Mo. – Timothy A. Garrison, United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., man was convicted by a federal trial jury today of a nearly $500,000 investment fraud scheme.
Ryan Scott Luscombe, 45, of Kansas City, was found guilty of all six counts contained in a June 6, 2017, federal indictment. Luscombe was convicted of three counts of wire fraud, two counts of mail fraud and one count of money laundering.
Luscombe solicited investments for his business, Five Star Trading Group, Inc., claiming to investors that he would utilize his expertise in stock trading to produce exorbitant returns. Instead, evidence introduced during the trial indicated that the entirety of investor funds, which totaled $483,482, was used by Luscombe on personal expenditures in 2013, 2014 and 2015, including the purchase of a 2010 BMW 750I and a trip to Bermuda.
To date, none of Luscombe’s investors have received funds from returns or their original investment.
During the course of the scheme to defraud victims of their investment money, Luscombe represented himself as a wealthy individual and a successful day trader capable of producing tremendous returns on investments.
Luscombe told investors he was creating a new business to manage over $50 million from three investors in Arizona. Luscombe claimed he would be the primary investment trader, but because the dollar amount to be invested would be too large for one person to handle, he recruited two people to assist in his trading endeavor. In exchange for a fee or investment in the business, Luscombe offered to train the additional individuals in his trading strategy. Eventually, Luscombe told investors he would allow a small number of friends and family to take advantage or “piggyback” off the investment strategy of the larger investors.
Luscombe’s stated investment strategy was to trade securities in the stock market based on the identification of trends in the upward or downward direction of the stock price. Luscombe told investors the risk was very low and minimal because he constantly monitored the stock price. Luscombe told investors he had been in the trading business for many years and had previously made millions of dollars.
Luscombe regularly provided positive projected investment return updates to the victims regarding their investments, and claimed investor money would be utilized for trading and generating profits for investors. As a direct result of these conversations, investors entrusted their money to him.
Investors never authorized Luscombe to spend investment money on personal expenditures. Luscombe never told investors their investment money would be spent on his personal expenditures. A salary for Luscombe was not authorized by investors. At the time of investment, Luscombe never informed investors that investment funds would be utilized to pay his salary. An analysis of financial activity revealed Luscombe’s spending of investor funds included the following:
(a) $83,088 in cash and cash equivalents;
(b) $78,542 in retail expenses;
(c) $67,990 in restaurants and entertainment;
(d) $52,925 in vehicle expenses;
(e) $45,940 in travel expenses;
(f) $41,058 in rent and utilities;
(g) $39,673 in investment firm losses, fees, and interest; and
(h) $21,144 in nutrition, fitness and beauty expenses.
Luscombe was not registered with the Financial Industry Regulatory Authority as a broker dealer or as an investment advisor representative. Luscombe and Five Star Trading Group were not registered with the Missouri Secretary of State – Securities Division.
Following the presentation of evidence, the jury in the U.S. District Court in Kansas City, Mo., deliberated for a little over two hours before returning the guilty verdicts to U.S. District Judge Roseann Ketchmark, ending a trial that began Monday, Feb. 12, 2018.
Under federal statutes, Luscombe is subject to a sentence of up to 20 years in federal prison without parole on each of the fraud counts, and sentence of up to 10 years in federal prison without parole for money laundering. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendants will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Assistant U.S. Attorney Brent Venneman and Special Assistant U.S. Attorney Courtney R. Pratten. It was investigated by the FBI.