The Securities and Exchange Commission said Wednesday that it has obtained a court order halting an ongoing Ponzi-like scheme that raised more than $345 million from over 230 investors, some of whom were current and former pro athletes, retirees and financial advisors.
The SEC also obtained an emergency asset freeze and the appointment of a receiver.
The SEC complaint, unsealed Tuesday, alleges that Kevin B. Merrill, Jay B. Ledford and Cameron Jezierski attracted investors to their scheme by promising significant profits from the purchase and resale of consumer debt portfolios.
In a parallel action, the U.S. Attorney's Office for the District of Maryland announced criminal charges Tuesday against Merrill, Ledford and Jezierski.
Merrill, 53, is from Towson, Maryland; Ledford, 54, lives in Westlake, Texas and Las Vegas; and Jezierski, 28, lives in Fort Worth, Texas.
From at least 2013 to the present, the trio operated the Ponzi-like scheme that involved, among other things, "securities offerings rife with misrepresentations, fake debt, forged signatures, fabricated wire transfers, the movement of millions of dollars into personal accounts, and an elaborate scheme wherein defendants offered and sold investments in the same (and often fictitious) debt and/or debt portfolios, to multiple victims," the complaint states.
Of the $345 million raised, more than $90 million was invested by over 200 individual investors; approximately $52 million by family offices; and nearly $203 million by feeder funds, largely made up of groups of individuals.
The individual investors included small business owners, restaurateurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, current and former professional athletes and financial advisors.
The SEC also alleges that Merrill and Ledford stole at least $85 million of the investor funds to maintain lavish lifestyles, spending millions of dollars on luxury items, including $10.2 million on at least 25 high-end cars, $330,000 for a 7-carat diamond ring, $168,000 for a 23-carat diamond bracelet, millions of dollars on luxury homes, and $100,000 on a private fitness club.
The SEC's complaint, filed on Sept. 13 in federal district court in Maryland, charges Merrill, Ledford and Jezierski, along with their entities, Global Credit Recovery LLC, Delmarva Capital LLC, Rhino Capital Holdings LLC, Rhino Capital Group LLC, DeVille Asset Management Ltd. and Riverwalk Financial Corp., with violations of the antifraud provisions of the federal securities laws.
"Touting their purported expertise in collecting on and reselling consumer debt, Merrill and Ledford, through a web of entities they owned and/or controlled, … offered and sold securities to investors with the promise of significant profits," the complaint states.
Defendants "used these and a total of approximately 30 interrelated corporate entities and over 55 bank accounts to move investor money, deceive investors, and continue their Ponzi-like scheme that has survived only with the influx of greater and greater sums of cash."
The SEC seeks disgorgement of allegedly ill-gotten gains and prejudgment interest, and financial penalties against the defendants.
The Maryland Attorney's Office said its indictment seeks to forfeit nine properties, 26 luxury cars, one boat, interest in an aircraft, a life insurance policy, 7- and 9-carat diamond rings, and a 23-carat diamond bracelet, which were allegedly purchased with proceeds of the scheme.
If convicted, Merrill, Ledford and Jezierski each face a maximum of 20 years in prison for the wire fraud conspiracy and for each of five counts of wire fraud. Merrill and Ledford each also face 20 years in prison for an additional two counts of wire fraud, as well as 20 years in prison for a money laundering conspiracy, and for each of four counts of money laundering.
Further, Merrill and Ledford face a mandatory two years in prison, consecutive to any other sentence, for identity theft. The defendants also face possible fines of $250,000, or twice the gross gain, for the wire fraud conspiracy and for each count of wire fraud and money laundering. Merrill and Ledford face an additional fine of $500,000, or twice the value of the property, for the money laundering conspiracy.
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