Federal
securities regulators have charged three Dallas-Fort Worth area residents with
orchestrating a $91 million Ponzi scheme that defrauded more than 200 investors
over nearly three years.
The
Securities and Exchange Commission (SEC) filed a civil complaint in the Eastern
District of Texas on Tuesday against Kenneth W. Alexander II, Robert D. Welsh,
and Caedrynn E. Conner, alleging they promised investors guaranteed high
monthly returns from a purported international bond trading business that, in
reality, did not exist.
SEC Alleges $91 Million
Fraud, Homes and Luxury Items Seized
According
to the SEC’s complaint, Alexander and Welsh controlled a trust called Vanguard
Holdings Group Irrevocable Trust (VHG) and promoted an investment program that
claimed to deliver 12 monthly payments of 3% to 6%, with the original principal
returned after 14 months.
The pair
told investors that VHG was a highly profitable enterprise with billions in
assets, generating returns through international bond trading. In truth, the
SEC alleges, VHG had no substantial revenue and used new investor funds to pay
earlier participants-a classic hallmark of a Ponzi scheme.
“The
defendants conducted a large-scale Ponzi scheme that caused devastating losses
to investor victims, while Alexander and Conner misappropriated millions of
dollars of investor funds,” said Sam Waldon, Acting Director of the SEC’s
Division of Enforcement, in a statement. “We remain unwavering in our
commitment to hold individuals accountable for defrauding investors.”
The SEC
further alleges that Conner, acting as trustee of Benchmark Capital Holdings
Irrevocable Trust (Benchmark), funneled more than $46 million in investor money
to VHG through a similar investment program. Benchmark offered even higher
promised returns, and Conner is accused of misappropriating millions for
personal use, including the purchase of a $5 million home.
“Pay Order”
To entice
investors and allay concerns about risk, Alexander, Welsh, and Conner marketed
a so-called “pay order”-a purported financial instrument that allegedly
protected investments from loss. The SEC asserts these protections were
fictitious, with no evidence of actual pay orders being purchased or honored.
Bank records show no transactions with the European banks supposedly backing
these instruments, and when an investor attempted to redeem a pay order, the
issuing bank refused payment.
The
complaint details how the defendants used investor funds not only to pay
returns to earlier investors, but also to settle lawsuits from victims of a
prior advance-fee scheme. As the flow of new investments slowed in early 2023,
the scheme began to unravel, with payments to most investors ceasing and the
defendants providing false excuses for the delays.
The SEC’s
filing seeks permanent injunctions, disgorgement of ill-gotten gains with
interest, and civil penalties against all three men. The agency also wants to
bar the defendants from participating in future securities offerings.
Federal
securities regulators have charged three Dallas-Fort Worth area residents with
orchestrating a $91 million Ponzi scheme that defrauded more than 200 investors
over nearly three years.
The
Securities and Exchange Commission (SEC) filed a civil complaint in the Eastern
District of Texas on Tuesday against Kenneth W. Alexander II, Robert D. Welsh,
and Caedrynn E. Conner, alleging they promised investors guaranteed high
monthly returns from a purported international bond trading business that, in
reality, did not exist.
SEC Alleges $91 Million
Fraud, Homes and Luxury Items Seized
According
to the SEC’s complaint, Alexander and Welsh controlled a trust called Vanguard
Holdings Group Irrevocable Trust (VHG) and promoted an investment program that
claimed to deliver 12 monthly payments of 3% to 6%, with the original principal
returned after 14 months.
The pair
told investors that VHG was a highly profitable enterprise with billions in
assets, generating returns through international bond trading. In truth, the
SEC alleges, VHG had no substantial revenue and used new investor funds to pay
earlier participants-a classic hallmark of a Ponzi scheme.
“The
defendants conducted a large-scale Ponzi scheme that caused devastating losses
to investor victims, while Alexander and Conner misappropriated millions of
dollars of investor funds,” said Sam Waldon, Acting Director of the SEC’s
Division of Enforcement, in a statement. “We remain unwavering in our
commitment to hold individuals accountable for defrauding investors.”
The SEC
further alleges that Conner, acting as trustee of Benchmark Capital Holdings
Irrevocable Trust (Benchmark), funneled more than $46 million in investor money
to VHG through a similar investment program. Benchmark offered even higher
promised returns, and Conner is accused of misappropriating millions for
personal use, including the purchase of a $5 million home.
“Pay Order”
To entice
investors and allay concerns about risk, Alexander, Welsh, and Conner marketed
a so-called “pay order”-a purported financial instrument that allegedly
protected investments from loss. The SEC asserts these protections were
fictitious, with no evidence of actual pay orders being purchased or honored.
Bank records show no transactions with the European banks supposedly backing
these instruments, and when an investor attempted to redeem a pay order, the
issuing bank refused payment.
The
complaint details how the defendants used investor funds not only to pay
returns to earlier investors, but also to settle lawsuits from victims of a
prior advance-fee scheme. As the flow of new investments slowed in early 2023,
the scheme began to unravel, with payments to most investors ceasing and the
defendants providing false excuses for the delays.
The SEC’s
filing seeks permanent injunctions, disgorgement of ill-gotten gains with
interest, and civil penalties against all three men. The agency also wants to
bar the defendants from participating in future securities offerings.
This post is originally published on FINANCEMAGNATES.
