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A Utah man once known as the “Bamboo Cyclist” was sentenced to serve a four-year prison term for masterminding a Ponzi scheme that duped victims out of nearly $3 million. James Ronald Donahoo, II, of Pleasant Grove, Utah, received the sentence after pleading guilty this past summer to wire fraud, money laundering, and failure to file a tax return. The sentence reflects the term agreed to in the plea agreement between Donahoo and prosecutors, and Donahoo will also serve a three-year period of supervise release following his release from prison. Additionally, Donahoo was ordered to pay approximately $2.7 million to his defrauded victims.
Donahoo operated Paradigm, Inc. ("Paradigm"), a Utah corporation that Donahoo represented was in the business of making bridge loans or "hard money loans" to small businesses. Donahoo told potential investors that they could earn monthly returns ranging from 1% to 3% through investments in “hard money” loans or bridge loans. Investors were assured that their investment was safe, with Donahoo representing that each dollar invested was secured by a corresponding amount in the bank. Investors were also shown monthly bank statements for Paradigm that purportedly reflected their investment growth. In total, Donahoo raised at least $2.5 million.
However, Donahoo did not invest in “hard money” or bridge loans; rather, $1.5 million of investor funds were used to invest in various businesses overseen by Donahoo’s friends and family. while Paradigm did invest approximately $1.5 million in various businesses, none of investors' funds were used as represented. Approximately $267,000 was used to make Ponzi-style payments to existing investors, while Donahoo also misappropriated funds to sustain a lavish lifestyle that included the purchase of more than $11,000 in fur coats, trips to Hawaii, jewelry, and a Mercedes-Benz.
After several investors obtained judgments against Donahoo following the scheme's collapse, he reportedly began traveling the country by bicycle billing himself as the "Bamboo Cyclist" as he promoted various philanthropic causes. Donahoo promoted his cause through various social media sites, including YouTube. One website apparently formed by one of Donahoo's victims suggested that these efforts, including Donahoo's claim that he was soliciting "micro loans" for 3rd world countries, were simply a continuation of Donahoo's deceit. One of the YouTube videos is embedded below:
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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