leifertlaw June 15, 2015 Financial Crimes
Our Palm Beach and Broward County criminal defense lawyers know that before the 2008 arrest of the now infamous Bernard “Bernie” Madoff, many Americans had been unfamiliar with the illegal financial operation known as a Ponzi scheme.
While not as commonly discussed as credit card fraud or insider trading, Ponzi schemes have been around for a very long time and they’re still going on today.
Right here in South Florida, former Miami Dolphins cornerback Will Allen was arrested for and charged last week with operating a $31 million Ponzi scheme. In this blog, we will explore the crime he’s charged with and the circumstances of his case in particular.
Allen, who appeared in federal court in Fort Lauderdale on Friday, has been charged with securities fraud — the same crime with which Bernie Madoff was charged when he was arrested in December of 2008. The former Dolphin is accused of running a large Ponzi scheme (with the help of a business partner, who has also been charged with securities fraud). So, what exactly is a Ponzi scheme?
Essentially, as our Palm Beach and Broward County criminal defense lawyers know, a Ponzi scheme is an illegal financial structure/operation in which investors are paid (compensated) from money brought into the operation through the investments of new investors who, in turn, will be paid from the money brought in through the investments of even newer investors. In other words, while investors think they’re handing over money and are going to see a return based on the market performance of the capital they’ve invested, they’re actually getting back money taken from the principal investment of someone else.
These schemes are hard to identify because, at least early on, assuming most people don’t simultaneously demand full withdrawals, the operation runs smoothly and people can see a significant return. The house of cards begins to fall apart when there are no new investors and old investors start requesting their money. Without any new investors, there is no new money. What is explicitly illegal with these structures is that the operations never tell investors that they are making money from other people’s cash investments; the fund managers tell investors they are “investing” their money and making money in the stock market, which of course is false. This is fraudulent, hence the securities fraud charges associated with Ponzi schemes.
The charge in Will Allen’s case was filed in Boston, MA, where an alleged victim of the Ponzi scheme lives; Boston is also the city in which Allen planned to play pro football after he left the Dolphins after a four year stint from 2006 through 2010. (He never ended up playing for the Patriots because of an injury).
Allen’s alleged Ponzi scheme was relatively short-lived. Authorities claim he started the operation in mid-2012, telling investors their money would go toward financing loans for professional athletes who were waiting for their contracts to kick-in. Allen and his partner, who face serious punishments if convicted, allegedly showed notarized and signed bank documents to investors to prove that their money was being turned into loans; according to prosecutors, those bank documents were forged. When pro athletes actually did take out loans from the pool of money, our criminal defense lawyers know, the loan amounts were far less than what Allen and his partner disclosed to investors.
Bank documents show that some of the funds, at least tens of thousands of dollars, from the operation went to pay certain casinos at which Allen has accounts. The former NFL player is accused of profiting roughly $4.1 million from the 3-year Ponzi scheme. As our Palm Beach and Broward County criminal defense lawyers at Leifert & Leifert know, he and his partner, who netted about $240,000 in the scheme, were released on $200,000 bonds.
If you have any questions about this or any other financial crime, or if you’ve been arrested for or charged with a crime in Palm Beach, Broward or MIami-Dade County, please contact our criminal defense lawyers at the Law Offices of Leifert & Leifert by calling 1-888-5-DEFEND (1-888-533-3363). We look forward to assisting you.
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