The Securities and Exchange Commission (SEC) has filed a civil fraud suit against three individuals for their part in defrauding more than 100 people of $16 million in a Ponzi scheme that preyed upon mostly fellow churchgoers, officials announced today.
Filed in the U.S. District Court for the District of Utah on Dec. 29, the SEC complaint alleges that from June 2005 to June 2010, Joseph A. Nelson, 34, of El Dorado Hills, Calif., along with his associates Kevin J. Wilcox, of Vacaville, Calif.; Jennifer E. Thoennes; address unknown; and Eric R. Nelson, of Provo, Utah, convinced investors to buy promissory notes offered by Joseph Nelson's non-existent companies JNC Inc., JCN Capital and JCN International.
The SEC has previously charged Joseph Nelson and others involved in the scheme on June 23, 2010.
Many of the targeted investors were fellow members of the Church of Jesus Christ of Latter Day Saints in Utah that Nelson identified and targeted through church connections and during church functions, according to the SEC complaint.
Joseph Nelson, Wilcox and Thoennes told potential investors that Nelson and his bogus companies purchased "merchant portfolios" of credit card processing accounts, holding them for a certain period of time, and then selling them for a profit to financial institutions, such as banks.
The SEC alleges Joseph Nelson, Wilcox and Thoennes lured investors by offering extraordinary rates of return, with investors given promissory notes that promised returns of 14 percent to 60 percent annually with an additional premium of 20 percent to 60 percent at maturity.
The SEC also alleges Joseph Nelson and his fake companies never purchased or sold a single merchant portfolio. The money invested in Nelson's companies was instead used by him to make incremental payments to investors in a Ponzi scheme, pay his associates, including Wilcox and Thoennes, and fund his and other family members lavish lifestyle.
From June 2005 to June 2010, Joseph A. Nelson solicited at least $12 million from more that 100 persons to invest in promissory notes offered by his three fictitious companies.
Between May 2008 and July 2010, the SEC claims that Wilcox raised approximately $3 million from at least 11 people and that between August 2009 and January 2010, Thoennes raised at least $1.5 million from at least 4 persons, and solicited investments from at least 15 other individuals who had not invested with the Nelson companies. The SEC also claims that Eric Nelson, Joseph Nelson's brother, created fictitious documents that Joseph Nelson and his associates used to mislead investors into believing that Joseph Nelson and his companies were engaged in the business of buying and selling merchant credit card portfolios.
Eric Nelson, claims the SEC, also created fictitious bank account statements reflecting balances in his brother's accounts that were far in excess of the actual amounts in those accounts, which deceived investors about the continued viability of Joseph Nelson and his companies.
The SEC is seeking permanent injunctions and forfeiture of all illegal gains with prejudgment interest, as well as civil penalties against Wilcox, Thoennes, and Eric Nelson.