Three men accused of defrauding hundreds of investors in a $364 million Ponzi scheme were arrested Tuesday and charged with wire fraud and money laundering.
The U.S. Attorney’s Office in Baltimore announced the arrests Wednesday and unsealed a 14-count indictment handed down last week charging Kevin B. Merrill, of Towson, and Jay B. Ledford and Cameron R. Jezierski, both of Texas.
The alleged scheme began in January 2013 when Merrill and Ledford invited investors to join them in purchasing consumer debt portfolios and falsely told them they would make them money by collecting on the debts or selling them to third-party debt buyers, according to a news release from the U.S. Attorney. Jezierski was an employee of the defendants’ entities and operated or owned several.
“Federal prosecutors, FBI agents and our SEC partners together interrupted an ongoing fraud scheme with the potential to victimize even more people,” U.S. Attorney Robert K. Hur said in a statement. “According to the indictment, the defendants lured investors through an elaborate web of lies, duping them into paying millions of dollars into this Ponzi scheme.”
The Securities and Exchange Commission, which filed a parallel civil complaint, alleges the defendants used “a web of lies, fabricated documents and forged signatures in an elaborate scheme to entice investors and perpetuate the fraud.”
The SEC complaint, filed Sept. 13 in U.S. District Court in Maryland, charges the defendants and their entities, several of which are based in Maryland, with violations of the anti-fraud provisions of federal securities laws.
The defendants are accused of lying to investors about whom they were buying debt portfolios from and how much they were paying, whether they were investing their own funds and their track record. They allegedly created companies and false portfolio overviews as well as fake bank wire transfers and bank statements to conceal the scheme.
Payments to investors were represented as proceeds from collections or flipping portfolios but were actually paid from funds provided by other investors.
“We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains,” Kelly L. Gibson, of the SEC’s Philadelphia Regional Office, said in a statement. “Investors should be warned that low-risk, high-return investments that never lose should be a red flag.”
The defendants obtained more than 400 investors nationwide. The SEC complaint alleges of the millions raised, more than $90 million came from more than 200 individual investors, $52 million from family offices and nearly $203 million from feeder funds. They made payments of approximately $197 million to investors, most of which allegedly consisted of money received from investors.
“As a result, many unsuspecting investors were victimized repeatedly and referred other prospective investors to Defendants,” the complaint alleges.
The indictment seeks forfeiture of nine properties, 26 luxury cars, one boat, interest in an aircraft, diamond jewelry and a life insurance policy allegedly purchased with the proceeds of the scheme.
The case is United States v. Merrill et al., 1:18-cv-00465.