Colorado Investment Manager Charged in Ponzi Scheme
In the latest Ponzi scheme uncovered, a Colorado investment manager faces civil charges in connection with a $20 million investment fraud.
Shawn Merriman has been accused of operating a Ponzi scheme that defrauded at least 38 investors in Minnesota, Utah, and Colorado. The fraud is believed to have been conducted from 1994 to 2009, and is estimated to be worth $17 to $20 million. According to the lawsuit filed by the U.S. Securities and Exchange Commission (SEC), Merriman operated the fraud through his firm, Market Street Advisors. .jpg)
In a classic investment fraud tactic, Merriman promised his investors returns of up to 20%, but lost approximately $400,000 from the initial funds. It was then that Merriman started another fund to pay investors in a Ponzi scheme operation. As the scale of the fraud grew, he added two more funds to pay withdrawals. He traded securities during the first year of his scam, but eventually stopped and focused completely on his scheme. The SEC asked that Merriman‘s assets be frozen and that he be ordered to pay his investors back with interest.
Merriman used some of the money for lavish personal expenses, including the purchase of Rembrandts, vehicles, sports memorabilia, and properties in Aurora and Idaho. His art collection includes more than 375 pieces that have been featured in the media. Some of his Rembrandts were displayed at the Church of Jesus Christ of Latter Day Saints properties in Denver in 2008. There were also motorcycles, a gun collection, and a boat. All of these have been seized by U.S. Marshals.
Investigators are still trying to determine the scale of investor losses. They are also looking into the possibility that Merriman may have used his position in the Mormon Church to lure investors. If that turns out to be true, Merriman would not be the first fraudster to use his church connections to sell his scheme. Stanford group employees were not averse to pitching their dubious certificates of deposit to members of their church. According to securities fraud experts, it is a common ploy – people are less likely to suspect someone they see at Church every Sunday of operating a fraud.
Ponzi Scheme Fraud
In a Ponzi scheme investor funds are used to pay off earlier investors. The success of a Ponzi scheme depends, to a large extent, on word of mouth spread by early investors who, thrilled with the kind of returns they see, spread the word to other investors. In 2009 alone, the SEC has acted to halt more than 12 Ponzi schemes. With new Ponzi frauds surfacing every day, it looks like the SEC and securities attorneys will be busy for quite a while.
If you've lost money in a Ponzi scheme or other investor fraud, contact a securities attorney at Arnold & Itkin LLP for a free evaluation of your claim.
