Two Men Sentenced To Seven Years In Prison For Defrauding Investors In Separate Multi-Million Dollar Investment Fraud Schemes
United States Attorney Anne M. Tompkins Western District Of North Carolina
CHARLOTTE, N.C. – Today, U.S. District Judge Robert J. Conrad, Jr. sentenced two defendants to lengthy prison sentences for operating separate multi-million dollar investment fraud schemes. Stephen E. Maiden, 41, of Vienna, Va., was sentenced to 84 months in prison, followed by one year of supervised release for carrying out an $8.9 million Ponzi scheme, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Maiden, who pleaded guilty to securities fraud in May 2013, was also ordered to pay $7,755,752 as restitution.
In a separate case, Judge Conrad sentenced James Alexander Shepherd, 59, of Vass, N.C to 84 months in prison and three years of supervised release for defrauding more than 100 investors of in excess of $6 million. Judge Conrad delayed issuing a final order of restitution to permit the parties to file additional court briefs. The United States is seeking a restitution order of approximately $8 million for victims of the scheme. Shepherd pleaded guilty to one count of securities fraud in June 2013.
United States v. Stephen Maiden
According to filed court documents and today’s sentencing hearing, Maiden, formerly of Charlotte, carried out the scheme through his Charlotte-based hedge fund, Maiden Capital Opportunity Fund (“Maiden Capital”), which he formed in 2006. According to court records, Maiden represented to his victims that the fund was doing well and was profitable. By at least February 2009, however, he had lost the majority of the fund’s assets in failed investments. Beginning in at least February 2009, Maiden began transmitting bogus account statements to his investor victims and to Maiden Capital’s fund administrator, falsely reporting favorable returns. To keep the scheme going, Maiden used money from new investors to satisfy withdrawal requests made by other fund investors, falsely characterizing the transactions as payments from Maiden Capital’s successful operations. As a result of his unlawful conduct, Maiden caused a total loss of at least $8.9 million to approximately 39 victims.
United States v. James Alexander Shepard
According to filed court documents and court proceedings, from 2006 to 2013, Shepherd defrauded investors in Union County and elsewhere of approximately $6 million. Court documents indicate that Shepherd carried out the fraud by promising his victims returns on their investments in funds Shepherd owned and controlled, including “The Shepherd Major Play Option Fund, L.P.” (the “Major Play Fund”) and the “Shepherd’s Model Hedge Fund” (the “Hedge Fund”). In addition, Shepherd had some individual investors that invested their money independent of any particular investment vehicle. In about 2006, and without his investors’ knowledge, Shepherd began misappropriating investor money from the Major Play Fund, and used it, among other things, to pay investors of his hedge fund, to trade in his personal accounts, and to fund the operations of his newsletter he distributed nationwide, court filings show. According to court records, Shepherd also used the money to fund his personal lifestyle, including to build a $2 million home and to make mortgage payments on that residence.
According to court records, to conceal his fraudulent conduct, Shepherd sent to investors certified financial statements for the Major Play fund, accompanied by an Independent Auditor’s Report. This assured investors that an independent audit on the fund had been conducted in compliance with the rules of the U.S. Commodities Futures Trading Commission (“CFTC”). The false financial statements also misrepresented to investor victims the financial condition of the fund. For example, in December 2012, Shepherd’s a fraudulent statement stated that the fund had a $6,041,850 cash balance, when in reality the fund had less than $100,000 at the time.
Shepherd used forged bank documents and names of fictitious bank employees, among other things, to trick an accountant into providing the Independent Auditor’s Report. According to court records, Shepherd’s scheme was uncovered when in March 2013 the accountant insisted on verifying the cash balance of fund’s bank account electronically, through the audit confirmation website www.confirmation.com, which is now the commonly used method of verification by accountants. Shepherd delayed and then refused to give the accountant authority to utilize the website to verify the cash balance of the Major Play Fund, court records show. In March 2013, the accountant notified the National Futures Association (NFA) that his audit opinion could no longer be relied upon.
In making today’s announcement, U.S. Attorney Anne Tompkins said “Prosecuting fraudsters who prey on innocent investors is a top priority of my Office. Each of these two defendants chose a path of deceit and lies to fulfill their greedy self-interest. As a result, both now have lengthy jail sentences to reflect on the inestimable damage they caused to their victims. My Office will continue to aggressively investigate and prosecute those who seek to victimize innocent investors.”
“These prison sentences are a stark reminder to con artists; no matter how elaborate or complex the scheme, you will be caught and held accountable. Unfortunately, victims lose billions of dollars annually to fraudsters. Investors should be cautious and question promises of large payoffs,” said John Strong, Special Agent in Charge of the FBI in North Carolina.
Both Maiden and Shepherd have been released on bond and will be ordered to report to the Federal Bureau of Prisons upon designation of a federal facility. All federal sentences are served without the possibility of parole.
The FBI handled both investigations. U.S. Attorney Tompkins also thanked CFTC and NFA for their invaluable assistance in Shepherd’s case.
Assistant U.S. Attorneys Kurt Meyers and Mark T. Odulio, of the U.S. Attorney’s Office in Charlotte prosecuted Shepherd, and AUSA Odulio prosecuted Maiden.