SEC accuses Boston man of operating Jamaica-linked Ponzi scheme
The United States Securities and Exchange Commission (SEC) said on Tuesday that it has charged a former Boston resident with operating a US$10 million Ponzi scheme that claimed to generate profits from bridge loans to businesses in Jamaica.
The SEC complaint charges former Boston resident, Mark A. Jones, who now lives in Miami and has a second home in Jamaica.
Jones was arrested on Sunday by the Federal Bureau of Investigation, and the US Attorney for the District of Massachusetts filed related criminal charges against him on Monday, the SEC said in a release out of Washington, DC.
According to the SEC complaint filed in federal court in Boston, Jones began soliciting investors starting around 2007 and said their money would be pooled and used for bridge loans to Jamaican businesses awaiting funds from approved commercial bank loans.
A bridge loan is interim financing for an individual or business until permanent financing or the next stage of financing is obtained. Money from the new financing is generally used to pay back the bridge loan. Such loans are typically more expensive than conventional financing to compensate for the additional risk.
The SEC said Jones told investors the bridge loans would generate approximately 15 per cent to 20 per cent interest a year.
He raised about US$10 million from at least 21 investors in six states and Washington, DC, including three of his own relatives, said the SEC.
Jones appeared in YouTube videos touting investment opportunities in Jamaica and met with some investors in Jamaica to show local projects they had purportedly funded, the federal agency said.
According to the SEC complaint, Jones used investors' money to pay other investors the hallmark of a Ponzi scheme. The scheme is named after Charles Ponzi, who became notorious for using the technique in 1920 and who incidentally worked as a businessman in Boston at that time.
Jones is also alleged to have used some investors' money to pay his personal expenses.
The SEC said that many of those who Jones defrauded are retirees who are now in financial straits because of their investments with him.
"We allege that Jones enticed investors with the idea that they were investing in loans to Jamaican businesses that already had been approved for bank loans," said the SEC.
"Instead, we charge that Jones used investors' money for other purposes, including making payments in Ponzi-scheme fashion," said Paul G. Levenson, director of the SEC's Boston Regional Office.
The SEC obtained a court order on Tuesday, freezing Jones's assets and an order to repatriate investor funds that were moved overseas. The SEC's complaint seeks a permanent injunction, return of allegedly ill-gotten gains with interest, and penalties.
The SEC's investigation was conducted by J. Lauchlan Wash, Xinyue Angela Lin, Sofia Hussain, Frank Huntington and Amy Gwiazda of the SEC's Boston Regional Office. Huntington will lead the SEC's litigation.