International Law

Mormon Ponzi Scheme

On June 23, 2010, the Securities and Exchange Commission filed fraud and other charges against four individuals and five companies in connection with three related Ponzi schemes largely targeting the Mormon community.

The Commission obtained an emergency court order freezing assets and halting the scheme that was ongoing. The Commission also named five relief defendants.

The Commission's complaint, filed in the United States District Court for the District of Utah, alleges that from approximately June 2005 through January 2007, Anthony C. Zufelt ("Zufelt") and Joseph A. Nelson ("Nelson") raised at least $3.6 million by convincing at least 36 investors to invest in offerings by defendants Zufelt, Inc. and Silver Leaf Investments, Inc.

The complaint alleges that Zufelt and Nelson promised investment returns of up to 220% and fraudulently claimed that Zufelt ran a profitable credit card transaction processing business that was selling secure investments backed by a so-called "merchant portfolio" of credit card processing accounts.

According to the complaint, defendants David Decker and Cache Decker acted as promoters and helped Zufelt and Nelson solicit investors for these schemes.

The complaint further alleges that from approximately August 2005 to the present day, Nelson has separately solicited investors by fraudulently claiming that he buys and sells merchant portfolios for a profit through his companies, defendants JCN, Inc., JCN Capital, LLC, and JCN International, LLC.

To date, Nelson has raised at least $12 million from over 100 investors by promising investors that their investments were secure and that he would provide investment returns of up to 200% in a very short period of time.

According to the Commission's complaint, Zufelt, Nelson, David Decker and Cache Decker each solicited members of the Mormon community to invest in these schemes. The complaint further alleges that Zufelt, Nelson, David Decker and Cache Decker each encouraged and convinced potential investors to borrow against their homes in order to invest in these schemes.

Unbeknownst to investors in any of the three Ponzi schemes, as the complaint alleges, Zufelt and Nelson misused investors' funds to pay personal expenses, pay commissions and bonuses to associates, fund unrelated businesses, make gifts, and make payments to investors in order to perpetuate their schemes.

The complaint further alleges that both Zufelt and Nelson diverted investor funds to friends and family members, some of whom are named relief defendants in the Commission's complaint.

Full post as published by Misleading Advertising Law on June 25, 2010 (boomark / email).