3 Plead Guilty in $41 Million ATM Ponzi Scheme

3 Plead Guilty in $41 Million ATM Ponzi Scheme

A South Carolina man and two California residents entered into a plea agreement admitting to federal charges that they operated a Ponzi scheme that fleeced hundreds of victims out of $27 million.  Alan Flesher, Wayne Flesher, and Nancy Carol Khalial each pled guilty to seventeen criminal counts stemming from an August 2010 indictment.  Each now faces a statutory maximum sentence of up to 340 years in federal prison.

According to authorities, the trio owned and operated Unlimited Cash, Inc. ("Unlimited Cash") and Douglas Network Enterprises, Inc. ("DNE"), both located in Ventura County, California.  Through these companies, the three solicited potential investors by offering above-average returns through the sales of "money voucher machines" (an ATM variation) and "ad toppers" - computer monitors displaying video advertisements.  The money voucher machine would issue vouchers that could then be used exclusively at a single merchant.  A retail customer using the machine would be charged a $1.50 service fee per transaction.  Investors were invited to purchase the money voucher machine at a cost of $4,000, and given the choice whether to personally handle the complicated process required to setup the machine or to hire a service provider, such as DNE, to handle the process on their behalf.  

Investors were told that if their money voucher machine generated an average of 89 transactions per month, they could expect a payment of $53.40 per unit per month.  On an annual basis, this translated to a return of approximately 16%.  Potential investors in the "ad topper" were also offered a similar method of investment.  Through the generation of transaction fees and advertising revenue generated by clients such as Coca-Cola, Gold's Gym and Paramount Pictures, investors could expect to a constant stream of returns. Over a period of four years, over $41 million was raised from approximately 700 investors.

However, very few of the solicited sales of money voucher machines or ad toppers were placed as promised, nor were the investments registered with any state or federal regulators.  Instead, the trio used investor funds for personal expenses and to make Ponzi-style payments to investors to create the appearance of a successful operation. Additionally, investor funds were used to pay commission payments to a series of brokers solicited new investors.  

 A sentencing date has not yet been set.  

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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