Former Private Investor and Ponzi Schemer Sentenced to Federal Prison for Wire Fraud Related to Private Investment and Ponzi Scheme
|U.S. Attorney’s Office June 08, 2012|
DENVER—David Helm Taylor, a/k/a David Andrew Taylor, age 44, of Albuquerque, New Mexico, was sentenced earlier this week by U.S. District Court Judge John L. Kane to serve 70 months in federal prison, followed by three years of supervised release, for wire fraud in connection with implementing a fraudulent private investor trading scheme, U.S. Attorney John Walsh, U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Kumar Kibble, and FBI Special Agent in Charge James Yacone announced today. Judge Kane also ordered Taylor to pay $2,500,000 in restitution to the approximately 40 victims of his crime. Taylor appeared at the sentencing hearing in custody and was remanded at the conclusion of the hearing.
Taylor was indicted by a federal grand jury in Denver on May 4, 2011. He pled guilty before Judge Kane on October 13, 2011. He was sentenced on June 8, 2012.
According to the stipulated facts contained in the plea agreement, from November 2001 through June 2009, Taylor held himself out to be the manager of a private investment currency hedge fund trading in foreign currency futures. He first began soliciting investments during the 1990s in Orange County, California. He solicited money from a network of friends and acquaintances and their relatives to invest in the fund that he managed under several names, including Sierra Pacific, Dawai Management, Dawei Capital, Aspen Peak Fund, and Acme Group. Investors were to share in profits earned from the funds’ investment activity, in accordance with their respective contributions to the funds. The defendant represented that profits for the funds would be realized through his trading of investor money in foreign currency futures and that he would base trading decisions on his own analysis of market conditions. He operated his business as a sole proprietorship primarily from his home in downtown Denver and, earlier, in Boulder, Colorado. During this time frame, the defendant solicited, either directly or indirectly, approximately $2,200,000 from approximately 40 investors in Colorado and throughout other parts of the United States.
The defendant induced individuals to invest money with him through a series of false and misleading representations about his background and experience as an investor and investment advisor, his track record as a hedge fund operator, and the nature of his investment activity. Taylor corresponded with some investors by e-mail about trading activity. He also e-mailed periodic newsletters to investors describing the funds’ success that included, for example, a representation that the funds’ profitability grew by as much as 24 percent during a nine-month period in 2006. These correspondences also included the amount of investor assets the defendant claimed to have under his control, for example, $9,317,013.62 in 2006. The documents the defendant sent also represented the funds’ cumulative performance. For example, at the conclusion of a 12-month period in 2006, the funds purportedly realized a gain of 40 percent
None of these representations were accurate, and the defendant’s assurances were false. Taylor did not have any demonstrated success in managing investors’ funds, and he never had millions of dollars of investor funds under management, as he claimed. He also ever have funds under his management equal to the collective amounts of money he claimed to have in monthly statements to investors. In fact, during 2006 and 2007, the defendant had scarcely any assets under his control. Nor did he ever realize consistent trading profits on either his own behalf or on behalf of others.
Contrary to his representations throughout the period of his solicitations, the defendant did not handle investors’ funds as he promised. While the defendant did make occasional deposits of investor funds into brokerage accounts, these deposits were quickly dissipated by the defendant’s consistent trading losses with investor funds. Most investor funds that the defendant obtained were not deposited into brokerage accounts.
The defendant diverted a significant portion of the investor funds that were not dissipated through trading losses in the brokerage accounts for his own purposes such as visits to restaurants and vacations at resorts in Aspen and Snowmass. He had few, if any, sources of income from November 2001 through June 2009 other than investor money. He, instead, used investors funds for his own personal purposes.
As part of an effort to conceal his trading losses and diversions of investor funds, the defendant sent investors monthly statements indicating their account balances and rates of return. The statements received by investors almost always indicated that their respective investments benefitted from a positive return at the end of the month regardless of market conditions.
In 2006, the Commodities Futures Trading Commission (CFTC) became aware of the defendant’s purported investment fund activities and began an investigation to determine whether the defendant was engaging in retail foreign currency transactions through false and misleading claims. The CFTC ultimately ceased its investigation due to lack of jurisdiction and referred the matter to U.S. Immigration and Customs Enforcement.
As the defendant’s trading losses and diversion of investor funds mounted, the defendant began to engage in a Ponzi scheme with the remaining investor funds that he had on hand and the new investor funds he continued to solicit and receive to the funds. A significant portion of the investor funds that the defendant did not transfer into brokerage accounts or divert for his own purposes were used by the defendant to fund payments to investors who either sought periodic distributions of their share of the fund’s purported profits or a return of all or part of their principal investment. As the defendant’s losses continued, the assets under his control became too depleted for him to make Ponzi payments. Thereafter, around 2006, he started refusing requests by investors to issue funds. During 2007 and 2008, the defendant began to cease communications with investors and departed the Denver area, his whereabouts being unknown. At least two investors, one in California and one Colorado, obtained civil judgments against the defendant for their losses that they have been unable to collect.
On June 14, 2011, ICE-HSI agents from the Resident Agent in Charge office in Albuquerque, New Mexico, as well as Albuquerque Police Department officers, located the defendant at an Internet café in Albuquerque, New Mexico, at which time he was arrested. At the time of his arrest the defendant stated, “How did you find me? Nobody knows I’m here.”
“Financial schemers who prey on family, friends, and acquaintances will face the consequences of their actions,” said U.S. Attorney John Walsh. “The nearly six-year sentence in this case was just and appropriate.”
“There are risks to investing, and this significant prison sentence also shows there are risks for fraudulent private investors like David Taylor,” said Kumar Kibble, Special Agent in Charge of HSI Denver. “Homeland Security Investigations works closely with our law enforcement partners to identify and prosecute these con artists who think swindling others is an effective way to get rich quick.”
“The FBI, in conjunction with our law enforcement partners, will continue to aggressively investigate investment fraud cases and work to ensure that investors and victims are dealt with honestly and fairly,” said FBI Special Agent in Charge James Yacone.
This case was investigate by the ICE HSI, and the Federal Bureau of Investigation with assistance from the Commodities Futures Trading Commission, the Albuquerque ICE-HSI, and the Albuquerque Police Department.
Taylor was prosecuted by Assistant U.S. Attorneys Ken Harmon and Lillian Alves.