Tennessee Man Sentenced to 40 Months in Prison for Fraudulent Hedge Fund Scheme
Man Previously Convicted for Securities Fraud in 2007
|U.S. Attorney’s Office November 22, 2011|
ATLANTA—Jon Edward Hankins, 38, of Knoxville, Tenn., was sentenced to prison today by U.S. District Judge Amy Totenberg on charges of wire fraud, in connection with his scheme to lure investors to invest into his fraudulent hedge fund. Hankins was sentenced to 40 months in prison to be followed by three years of supervised release. Hankins was convicted of these charges on June 13, 2011, after pleading guilty.
U.S. Attorney for the Northern District of Georgia Sally Quillian Yates said, “Before he was even discharged from an earlier federal sentence for investment fraud, he launched another fraudulent scheme. Thankfully, the FBI identified and shut down his new scam very quickly, minimizing the losses that investors suffered. Our office and the President’s Financial Fraud Enforcement Task Force remain committed to the mission of protecting investors and promoting confidence in the integrity of our financial system.”
According to the charges and other information presented in court: In the winter of 2009/2010, Hankins was serving the home confinement portion of a federal prison sentence he received for a 2007 securities fraud conviction relating to an $8 million fraud scheme involving his Knoxville-based investment company, “Tenet Asset Management.”
Shortly after his home confinement began, Hankins concocted another scheme. He created a website, fake brochures and other business documents, and rented office space and mail forwarding addresses in the names of two entities, “Christian Financial Brotherhood” and “Banker’s Trust Annuity.” He advertised these entities on the Internet and elsewhere and solicited investors, investment advisors and stock brokers to invest their funds with him.
From at least December 2009 through February 2010, Hankins represented to a prospective victim that Banker’s Trust managed more than $100 million in assets for various clients, that the funds were held at an account at the leading Wall Street firm Goldman Sachs, and that he was making substantial investment returns for existing clients in a hedge fund he called the “Strategic Arbitrage Fund.” Hankins produced a brochure that claimed that the “Strategic Arbitrage Fund” maintained more than $30 million in client funds, and that listed various individuals, including a retired general and the son of a former cabinet secretary, as supposed directors of the fund. None of this was true, as Christian Financial and Banker’s Trust were shams; had nothing close to the assets that Hankins represented; had been “in business” for only a few months; had not been engaged in profitable securities trading; and was not associated with the high profile individuals listed on the brochure.
Hankins, in soliciting investors, deliberately omitted mention of his securities fraud conviction, Tenet Asset Management, or that he was still serving a federal sentence.
The FBI quickly learned of Hankins’ scheme, and conducted a search warrant that shut down the scheme in April 2010. Because this new investment scheme was caught quickly, Hankins obtained less than $600,000 from his victim-investors, of which over $200,000 was recovered and returned to victims.
This law enforcement action was undertaken as part of President Barack Obama’s Financial Fraud Enforcement Task Force.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case was investigated by special agents of the FBI. The Atlanta Division Office of the U.S. Securities & Exchange Commission provided assistance.
Assistant U.S. Attorney Justin S. Anand prosecuted the case.