Eight Arrested in Huge Ponzi Scheme

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Five people in Southern California and three others in Costa Rica were arrested this week in an $80 million federal fraud and tax evasion case that said hundreds of victims were duped into investing millions of dollars in a fraudulent offshore fund that claimed to invest money in highly profitable foreign currency trading, the U.S. Attorney’s Office said Friday.


The eight defendants, along with a ninth who is a fugitive, were affiliated with the Genesis Fund, a defunct Anaheim-based private investment fund that the indictment calls a Ponzi scheme. The individuals now face an 83-count indictment, including charges of conspiracy, money laundering, obstruction of justice and tax evasion.


Those arrested included the manager and promoter of the fund and multiple Genesis Fund investors. Marlyn D. “Milt” Hinders, 65, a leading promoter and manager of the Genesis Fund is still at large.


The other five defendants arrested in Southern California on Friday were identified as: David L. Johnson, 66, Walnut; William H. Nurick, 69, Camarillo; William Taylor-Fraser, 57, and his wife Denise, 51, Riverside; Teresa R. Vogt, 51, Anaheim.

Those arrested in Costa Rica were identified as: John S. Lipton, 58, formerly of Mission Viejo and Laguna Hills; Richard B. Leonard, 71, formerly of Littleton, Colo.; Victor H. Preston, 64, formerly of Laguna Beach and Huntington Beach.

The indictment said that between May 1998 and June 2002, the individuals raised $80 million from investors who were told that their money would be pooled and invested in foreign currency trading through a currency dealer in Hong Kong and Macau that had earned large profits for investors in the past. The investors were contacted through promotional materials and account agreements. They were told the Genesis Fund didn’t have to report to the IRS.


But virtually all investor funds were used to make Ponzi payments to investors and to enrich the defendants, the U.S. Attorney’s Office said. Trusts and offshore bank accounts in Costa Rica and Belize were said to be used to receive payments made to the Genesis Fund.


In June 2002 just weeks after telling investors that the Genesis Fund was worth $1.3 billion investment, trading and payment in the fund were suspended. After the fund’s collapse, the defendants presented investors with a new plan to lull them into believing that there was hope of recovering their money.


The U.S. Attorney’s Office said that the defendants didn’t maintain financial records so they could avoid scrutiny of the fund operations by investors and the government. And in an effort to conceal the true nature of the Genesis Fund, the fund’s administrative operations were moved from Anaheim to Costa Rica in April 2000. At that time, paper records and electronic data on computers were hidden or destroyed.


This case was investigated by the Los Angeles field office of the IRS-Criminal Investigation Division.

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