Update #3: Today Judge Clark Waddoups rejected the plea bargain that Wright had negotiated with prosecutors concluding that the deal appeared too light given the magnitude of how Wright had “intentionally deceived and misled people.” The defendant will now be forced to negotiate a new plea bargain with the U.S. Attorney’s office — or go to trial. The judge’s decision appears to be based primarily upon the letters he received from angry investors.
UPDATE #2: Last week Travis Wright pleaded guilty to one count of fraud, admitting he operated a massive Ponzi scheme that owed investors at least $44 million when it went bust in 2009. He will be sentenced after the judge hears testimony from the victims.
UPDATE: My friend Tom Harvey reported yesterday in the Salt Lake Tribune that Travis Wright, who ran Waterford Funding, entered a plea of not guilty before U.S. Magistrate Paul Warner to the charge of mail fraud. The article can be found here.
On July 7, 2010 the New York Times ran a story about the SEC’s recent lawsuit against Travis Wright and Waterford Funding. The SEC’s press release about the case can be found here. Among other things, the SEC’s lawsuit alleges that Wright lied to his investors saying he was investing their money in hard money loans secured by real estate, when really he was funneling most of their money to the inventor of the “Candwich” (who also planned to offer Pepperoni Pizza Pockets and French toast in a can). Yum.
This is the part that is really baffling to me about this case. Did he really think the Candwich would be more profitable than real estate? Given the current state of the real estate market it may be the case — but not between 2001 and 2007 when the fund was really going strong. The SEC also alleges that he used $15 million of investor funds for personal use, including the purchase of a $5 million home on Walker Lane from former Jazz legend Jeff Hornacek, which he completely renovated and imported cobblestones from France for the driveway. But it was probably pretty trashy after Hornacek moved out.
As reported on the website Law360, A Utah federal judge on Wednesday approved a $125.6 million final judgment that settled the U.S. Securities and Exchange Commission’s case against Vescor Capital Corp. This judgment apparently relates to the company, not Val Southwick who pled guilty to nine counts of securities fraud in 2008 and was sentenced to serve nine consecutive 1 to 15-year prison terms.
But if you are an investor hoping to get you money back, don’t hold your breath. According to the article Vescor’s receiver, Robert G. Wing of Prince Yeates & Geldzahler, has stated publicly that the money may never materialize. “They did not get $125 million, they got a judgment,” he said. Mr. Wings expects to be able to recover only a small fraction of the money Vescor allegedly took from investors. In his most recent report to the court, Wing said he had recovered just over $5 million, and the legal and accounting fees continue to mount, the Receiver’s lawsuits to recover money from third parties will continue.
Bottom line: nobody wins in a Ponzi Scheme — except maybe the lawyers.
Today the Salt Lake City office of the Securities and Exchange Commission filed a lawsuit against Raymond P. Morris, E&R Holdings, LLC, Wise Financial Holdings, LLC, Momentum Leasing, LLC, James L. Haley, Cornerstone Capital Fund, LLC, Vantage Point Capital, LLC, Jay J. Linford, Freedom group, LLC, and Luc D. Nguyen (an attorney). The suit alleges that the named individuals ran a Ponzi scheme that bilked scores of investors out of “no less than $60 million.”
The complaint alleges that from March 2007 through January 2009, Raymond Morris offered and sold unregistered promissory notes to investors. In the course of soliciting these loans the SEC alleges that he and the other defendants made misrepresentations to investors to convince them that they were purchasing high yield notes that were risk free. Morris allegedly told investors that their funds would be deposited into a secure account and would be used only to verify deposits.
However, instead of using the funds as represented Morris allegedly used investor funds “for personal expenses, including a luxurious home and several sports cars, and for making Ponzi payments to create an illusion of a successful investment.” Continue reading →