The Securities and Exchange Commission has obtained a court order halting operations and freezing the assets of an ongoing Ponzi scheme that raised more than $345 million from over 230 investors across the U.S.
The SEC complaint, unsealed today, alleged that three operators working out of Maryland, Delaware and Texas used 20 entities and 55 bank accounts to defraud 230 investors including financial advisors, using much of the funds to finance luxury homes, high-stakes gambling, 25 exotic cars and a jewelry collection including a 23-carat diamond bracelet.
The SEC complaint alleges that Kevin B. Merrill, Jay B. Ledford and Cameron Jezierski attracted investors to their scheme by promising significant profits from the purchase and resale of consumer debt portfolios. But in fact, the defendants were using “a web of lies, fabricated documents, and forged signatures in an elaborate scheme to entice investors and perpetuate the fraud,” the SEC alleged.
"The defendants touted their purported investment expertise to siphon millions of dollars from unsuspecting investors," said Stephanie Avakian, Co-Director of the SEC's Division of Enforcement. "We filed this action on an emergency basis to put a stop to this fraud and protect investors from further harm."
Rather than direct investor funds to the acquisition and servicing of debt portfolios as promised, the defendants allegedly used the funds to make Ponzi-like payments to earlier investors and fund luxury purchases.
Ledford misappropriated at least $40 million, including transferring at least $17 million to personal bank accounts and purchasing items including a $368,000 Ferrari, a $330,000 seven-carat diamond ring, and a $168,000 23-carat diamond bracelet, while transferring $13 million to casinos, according to the SEC’s case.
Merrill misappropriated at least $45 million, including a transfer of over $7 million to his personal bank accounts, spending $10.2 million on at least 25 high-end automobiles, including a 2014 Ferrari F12 Berlinetta, a 2017 Rolls Royce Dawn, and multiple Ferraris. and Lamborghinis, $5.5 million toward the purchase of a house in Naples, Florida, over $2 million for home renovations, $500,000 for an interest in a Gulfstream 200 private jet, a $100,000 club membership in Naples, $350,000 on a boat, and a $1 million transfer to casinos, the SEC said.
"We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains," said Kelly L. Gibson, Associate Regional Director of the SEC's Philadelphia Regional Office. "Investors should be warned that low-risk, high-return investments that never lose should be a red flag."
Of the $345 million raised, more than $90 million was invested by over 200 individual investors; approximately $52 million by family offices; and nearly $203 million by feeder funds, largely made up of groups of individuals. These investors included financial advisors, small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, current and former professional athletes.
The SEC's complaint, filed in federal district court in Maryland, charges Merrill, Ledford, and Jezierski, along with their entities, Global Credit Recovery, LLC, Delmarva Capital, LLC, Rhino Capital Holdings, LLC, Rhino Capital Group, LLC, DeVille Asset Management LTD, and Riverwalk Financial Corporation, with violations of the antifraud provisions of the federal securities laws. The court granted the SEC's request for an asset freeze, temporary restraining order, and the appointment of a receiver. The SEC is seeking disgorgement, prejudgment interest and financial penalties against the defendants.