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Final Defendant Sentenced in Massive North Carolina Ponzi Scheme

Earlier this year, a federal judge in North Carolina sentenced the 11th and final defendant in a massive Ponzi scheme that cost investors upwards of $40 million. The so-called Black Diamond Ponzi Scheme conned about 400 victims with promises of significant profits through trading in foreign currencies. Unlike traditional securities markets, foreign exchange (or forex) trading is largely unregulated. Anyone with a computer can get into forex trading, and the continuous operation and inherent volatility of currency markets offers afford savvy investors greater opportunities for profit.

Keith Simmons ran a purported forex trading operation in North Carolina called Black Diamond. He promised investors returns of more than 4% per month trading in foreign currencies. He peddled forex trading as a totally safe investment and promised Black Diamond would never risk more than 20% of the customer’s investment. His sales pitch managed to raise tens of millions of dollars from hundreds of investors, most of them elderly and vulnerable persons living in North Carolina, Virginia and Ohio.

But Simmons never conducted any actual forex trading. Instead, he and his co-conspirators misappropriated most of the investors’ funds for themselves. The Federal Bureau of Investigation arrested Simmons in 2009. He was convicted on charges of securities fraud, wire fraud and money laundering by a Charlotte jury in 2010. U.S. District Judge Robert J. Conrad ultimately sentenced Simmons to 50 years in federal prison and ordered him to pay more than $35 million in restitution.

United States v. Davey

But Simmons was just the tip of the iceberg. The U.S. Attorney’s Office in Charlotte went after nearly a dozen individuals connected with the Black Diamond Ponzi scheme. In the most recent case, Judge Conrad sentenced an Ohio man, Jonathan D. Davey, to 21 years in federal prison for his role in the scheme. Davey was the accountant and administrator for numerous hedge funds that participated in the Black Diamond scam. The U.S. Attorney and the FBI said Davey personally collected nearly $11 million for Black Diamond by lying to investors about the solvency of his own hedge funds, which in reality were nothing more than fronts for the Ponzi scheme. Davey further attempted to cover up his actions by starting a second Ponzi scheme that raised an additional $5 million from investors, whose funds were used to pay off the Black Diamond investors. Prosecutors said Davey also managed an “elaborate network of shell companies to evade taxes and commit money laundering with the proceeds of the Ponzi scheme.”

A jury needed only 45 minutes to convict Davey of securities fraud, wire fraud, money laundering and tax evasion following his 2013 trial. Judge Conrad sentenced Davey on Jan. 15 of this year, ordering him to pay nearly $22 million in restitution along with his prison sentence. The judge said Davey “was driven by greed that the Court rarely sees.”

Always Get Independent Advice

In the wake of the Black Diamond scheme, the FBI has warned investors to beware of increasingly “sophisticated” financial scams. The FBI said Ponzi schemes often rely on personal recommendations from friends and associates to lure victims. A good investor should always “consult an unbiased third party, like an unconnected broker or licensed financial adviser, before investing.”

If you have been the victim of a Ponzi scheme, it is especially important you receive independent legal advice on how to proceed. Contact Florida securities fraud attorney Gregory Tendrich, P.A. today if you need help.

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