A 44-year-old creator of two investment companies operating in the Redding, Calif., area was taken into custody Monday after a grand jury indicted him for a $35 million fraud scheme. Facing arrest, he fled FBI agents, leading them on an off-road and highway chase before taking to water—trying to escape on a submersible scooter to evade capture in nearby Lake Shasta, where law enforcement officers said they apprehended him.
A grand jury has indicted Matthew Piercey, of Palo Cedro, with witness tampering, mail fraud, wire fraud and money laundering. Court documents said Piercey raised the $35 million between July 2015 and August 2020, obtaining the money through false representations and omissions about his investment schemes in a number of companies, namely Zolla and Family Wealth Legacy and related entities and funds.
Piercey and his associate, said the U.S. Attorney’s Office for the Eastern District of California, made materially false and misleading statements, “including but not limited to statements, half-truths and omissions about commissions and fees, how investment funds would be used, where investment funds went, the success of investment strategies, the nature and success of trading algorithms, the liquidity of investments, the financial stability of Family Wealth Legacy and Zolla [and] the equity and assets of companies in Zolla including Zolla High Yield Fund LLC,” among other material facts, including the arrangements among the companies and himself.
According to court documents, Piercey in 2016 began to market the “Upvesting Fund,” which he characterized as a trading algorithm with a history of success, and solicited investor funds for it. The U.S. Attorney’s complaint says Piercey admitted to an associate in 2018, that “Upvesting has not taken one penny.” In another example, Piercey and his associate, Kenneth Winton, of Oroville, claimed that one of their products, the Zolla High Yield Fund, boasted 20% equity-to-debt and equity-to-asset ratios when they knew that was false, according to the complaint.
In 2016, Piercey allegedly told two investors that their $144,112 investment had gone into an insurance policy in the name of Family Wealth Legacy, and that the clients’ trust would be the beneficiary. But the policy didn’t exist, said U.S. attorneys, and $19,000 went to Piercey’s personal and business expenses.
“Once investors had sent funds for investment, [Piercey and Winton] used investor funds or arranged for them to be used in ways that were contrary to what investors had been told, including, but not limited to, for commissions and fees, personal use, purchasing real estate, expenses of Family Wealth and Zolla [and] investments other than algorithmic trading” as well as “lulling payments to other investors," court documents said.
They also used the monies for personal expenses, to pay off credit cards, for instance, for real estate and for a houseboat, said the Department of Justice. The DOJ said that some monies were paid back in a Ponzi-scheme style, about $8.8 million having been returned to investors, but the companies now have little of the net invested assets to pay back to investors.
Winton was at first an investor, but Piercey recruited him to help raise funds from other investors and eventually tapped him for help manage Zolla. The U.S. Attorney’s Office said Winton conspired with Piercy in making false statements about the success of the investment strategies, the nature of the investments and the reasons for delayed payments.
The court documents also said Piercey tampered with witnesses by dissuading investors from responding to grand jury subpoenas. He sent e-mails to some investors telling them that the subpoenas stemmed from his appeals to President Donald Trump with plans to rescue the nation’s banking system.
FBI agents said when they tried to apprehend Piercey in Redding on Monday morning, he fled by truck, then led the agents on a chase both off-road and northbound on Interstate 5, through residential neighborhoods when law enforcement began to track him by air. Eventually, he stopped at Lake Shasta and swam into the water, agents said.
“Piercey spent some time out of sight underwater where law enforcement could only see bubbles,” said the U.S. Attorney’s complaint. “He remained in the frigid water for approximately 25 minutes. When Piercey finally emerged from the lake, law enforcement discovered that he had a Yamaha 350Li underwater submersible device.”
“If convicted,” said the U.S. Attorney’s Office for the Eastern District of California, “Piercey faces a maximum statutory penalty of 20 years in prison and a fine of up to $250,000 or twice the gross gain or loss, whichever is greater, for each wire fraud and mail fraud count; 20 years in prison and a fine of up to $250,000 for each witness tampering count; and 20 years in prison and a fine of up to $500,000 or twice the value of the property involved, whichever is greater, for each money laundering count.”