A second man has been charged in what authorities charge was a $8 million Ponzi scheme that targeted members of South Florida's gay community. Authorities unveiled criminal and civil charges against James F. Ellis, of Wilton Manors, Florida, who allegedly assisted the mastermind of the scheme, George Elia. While federal prosecutors charged Ellis with a single count of conspiracy to commit fraud, the Securities and Exchange Commission also charged Ellis with multiple violations of federal securities laws. If convicted of the criminal charges, Ellis faces a maximum term of five years in federal prison.
According to authorities, Elia targeted members of the south Florida gay community Wilton Manors, telling them that he was an established day trader who could achieve quarterly returns of 20% for investors. From March 2005 to January 2012, Elia raised more than $11 million from investors for various entities he controlled, including Investor Funding Group and a series of Vision Equity Funds.
Ellis, who was well-known in the Wilton Manors nightlife scene, added to Elia's legitimacy by representing to potential investors that he had invested over $5 million with Elia and that the $20,000 - $25,000 monthly returns allowed him to live a flashy lifestyle that included expensive cruises and luxury travel. Ellis also used his social connections to recruit potential investors, including residents of an apartment community managed by his daughter.
However, rather than use the entirety of investor funds for their promised purpose, Elia misappropriated large amounts of investor funds, transferring money to other companies he controlled and paying personal expenses such as mortgage and car payments. In the marginal amount of trading actually conducted, Elia did not achieve the advertised lucrative gains, but instead incurred losses or only minimal gains. While Ellis did in fact receive monthly payments from Elia that often totaled $20,000 - $25,000, these payments were not investment returns but rather 'kickbacks' given in exchange for Ellis's recruitment of new investors to Elia's scheme. Totaling over $500,000 in just the first six months of 2007 alone, Ellis made major profits at the expense of innocent investors.
Elia was arrested in March after returning from "vacation" in Cyprus - a country known for its lack of extradition treaties with the United States. After apparently rebuffing attempts by authorities to enter into plea negotiations over an initial single charge of wire fraud, Elia found himself the subject of a subsequent indictment in September that unveiled eight more charges of wire fraud. Each count of wire fraud carries a maximum sentence of up to twenty years in prison.
A copy of the SEC's complaint against Ellis is here.
A copy of the SEC's complaint against Elia is here.
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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when is this going to trial? It seems like it is taking along time?