42-Year Sentence For Mastermind of $200 Million Ponzi Scheme

42-Year Sentence For Mastermind of $200 Million Ponzi Scheme

 A California man that orchestrated a Ponzi scheme that took in more than $200 million from victims has been sentenced to a 42-year prison term. Shasta County Superior Court Judge Bradley Boeckman handed down the sentence to James Koenig, 60, after a jury convicted Koenig of thirty-five criminal charges back in May 2013. The scheme is one of the largest in California history, with estimated total losses to victims in excess of $90 million.

Koenig ran Asset & Real Estate Investment Company ("AREI") along with fifty affiliated companies, telling potential investors that it specialized in senior housing centers. Beginning in 1997, AREI controlled more than twenty senior housing and residential assisted-living centers, pitching the centers as secure and profitable vehicles for tax-sheltered property exchanges. After purchasing an assisted living facility, Koenig would then sell ownership shares in the property to investors. Eventually, more than 1,000 victims would invest hundreds of millions of dollars with Koenig.

However, rather than reinvesting funds back into the centers, Koenig ran a massive Ponzi scheme that used investor funds to pay returns to existing investors, as well as financing a luxury lifestyle for himself and two co-conspirators. This included the purchase of an 80-acre castle estate, a Lear jet, luxury homes and fancy cars.

While investigators charged that AREI was insolvent no later than May 2007, Koenig continued to bring in new investors based on promises of false profitability. After an investigation, criminal authorities arrested Koenig in 2009 and charged him with 77 criminal charges - 40 counts of securities fraud and 37 counts of residential burglary based on Koenig's entry into investor homes to induce them to invest in his scheme.

According to authorities, Koenig failed to disclose to investors that he had a previous 1986 conviction stemming from his role in a gold-selling scam. He served two years in federal prison and was ordered to pay over $5 million in restitution to defrauded investors. 

For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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