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Defense Against Allegations of Operating a Ponzi Scheme

Recently, two Florida men, Barry Graham and Ricky Stokes, were sentenced to five years in prison and three years of supervised release for operating a Ponzi scheme involving vacation rentals.

Federal prosecutors have been investigating the men for several years, as they marketed vacation rentals across the United States and the Caribbean through the company Cay Clubs Resorts, promising potential investors that the properties would be developed into luxury resorts and that they would be paid nice returns on their initial contributions. They sold units worth over $300 million to around 1,400 investors, but never followed through on their promises.

Graham served as the director of sales for Cay Clubs Resorts, and Stokes was one of its top sales agents and director of investor relations. The men received $6.5 million and $6.2 million respectively, due to their roles in the scheme. Others who were involved in the fraud will face trial in June 2015.

Federal Prosecution of Ponzi Schemes

Ponzi schemes, a form of fraud that is destined to fail, aims to tap into people’s desire to make money easily. Architects of Ponzi schemes promise investors that they can provide large and low-risk returns. When new investors add their money to the pot, the fraudsters keep part of their investments, using the rest to repay the original investors. Although people who carry out Ponzi schemes are able to keep the illusion intact for many years, even the most carefully planned schemes eventually collapse, when the volume of new investments is not enough to satisfy earlier investors. Often, the underlying investments are incapable of producing good returns, or in some cases, they are pure fiction.

When the economic recession hit in 2008, many investment programs that did not start out as fraudulent schemes began to be converted into Ponzi schemes as the markets declined. The substantial losses that were seen across almost every financial sector were hard for investment managers to stomach, and many began to mislead their clients in order to keep their enterprises from ruin. The stretch from there to recruiting new investments using falsehoods and using investors’ funds for personal use is not very far.

Since the dramatic upswing in investor fraud that followed the economic downturn, prosecuting these types of crimes has become a huge priority for the federal government. The Financial Fraud Enforcement Task Force focuses on attacking and deterring fraud at every level, pushing for harsh penalties for those convicted. As part of this Task Force, the Securities Fraud Working Group coordinates between investigators and prosecutors from the FBI, IRS, SEC, CFTC, FTC, and many other agencies to pursue convictions nationwide.

Contact an Attorney Immediately for Help

If you believe that you are being investigated for financial fraud of any kind, or if charges have been filed against you, it is crucial to secure effective counsel immediately. You should never answer investigators’ questions without an attorney present, since federal prosecutors are trained to elicit inconsistent information which can be used to build a case against you.

Jeffrey S. Weiner, P.A. has successfully represented people charged with investor fraud for decades. Our team of dedicated attorneys are very familiar with the process defending federal fraud charges, and will work to craft an aggressive defense to preserve your freedom and your reputation. Contact our South Florida office today for a consultation.

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