Former Parker Man Pleads Guilty in $1.7 Million Ponzi Scheme
|U.S. Attorney’s Office July 30, 2013|
DENVER—Shawon McClung, age 27, formerly of Parker, Colorado, pled guilty today before U.S. District Court Judge R. Brooke Jackson to one count of wire fraud, U.S. Attorney John Walsh and FBI Denver Division Special Agent in Charge Thomas Ravenelle announced. McClung is free on bond. Judge Jackson is scheduled to sentence McClung on November 6, 2013, at 8:30 a.m. McClung waived his right to indictment and was therefore charged by Information on June 12, 2013.
According to court documents, including the stipulated facts contained in the plea agreement, in 2009, McClung began Flint-McClung Capital LLC (FMC) in Indiana. In November 2010, McClung moved FMC from Indiana to Denver, Colorado. In early 2009, McClung entered into financing discussions with a software programmer for the development of proprietary software to make automated trades on the foreign currency (FOREX) market. The goal was to develop a software program that would perform numerous automated trades during a short time based on an algorithm designed to predict and exploit differences in foreign exchange rates. On December 15, 2010, an agreement was reached by McClung and the software programmer to provide funding for the software program. However, McClung only provided approximately $213,000 of the promised $614,790, and the software program was never developed and was never available for FMC’s use.
Despite the fact that the software program had not been developed, from approximately March 2009 to approximately April 2011, McClung solicited investor money by falsely representing that FMC owned and used a proprietary “massively parallel automated trading system” to trade currencies on the FOREX market. McClung falsely told investors that this proprietary software was already being used at FMC and had a history of success. Both verbally and in writing, McClung falsely represented to investors, potential investors, and others that investors in the investment programs he was offering “historically” received returns of 15 to 100 percent approximately every 14 to 30 days. In reality, as McClung well knew, the software program did not exist and had no history of success.
Both verbally and in written “Investment Contracts” and “Joint Venture Agreements,” McClung falsely represented to investors, potential investors, and others that FMC guaranteed from loss the principal of the investment placed with FMC. McClung also falsely represented to investors, potential investors, and others that FMC would use their entire investment to trade in currencies using FMC’s proprietary system, which McClung knew did not exist. In fact, McClung did not place any of the investors’ money in trades.
McClung did make some promised payouts to early investors using money he received from other investors. Some of those early investors told other potential investors about their successful “investments” with FMC, which reassured others about investing their money with McClung and FMC.
After McClung and FMC failed to make promised payments to investors via e-mail and other forms of communication, McClung made a number of false excuses to investors and others regarding why the payments had not been made. He also made a number of false promises about future payments. In March 2011, McClung sent to several investors via e-mail a document entitled “Cancellation of Contract and Account Settlement” in which he falsely represented that FMC would return an amount of money specified in the document if the investor signed and released McClung and others of any liability. After receiving signed “Cancellation of Contract and Account Settlement” from many investors, McClung failed to make the promised payouts and failed to return the investors’ principal.
At sentencing, the government intends to prove 17 victims sustained an aggregate loss of $1,756,750.
“When a promised high rate of return on your investment seems too good to be true, it usually is,” said U.S. Attorney John Walsh. “Ponzi schemes take people’s hard earned investment funds with no intention of investing them or returning them. The Ponzi schemer benefits while the investor suffers. These economic crimes are among our most important cases and will be prosecuted to the full extent of the law.”
“To ensure our financial markets operate fairly, the FBI is committed to aggressively pursuing those who commit investment fraud,” said FBI Denver Division Special Agent in Charge Thomas P. Ravenelle. “We are confident the results of this investigation will deter others who may engage in these types of fraudulent schemes.”
McClung faces up to 20 years in federal prison, a fine of not more than the greater of $250,000 or twice the gain or loss from the offense, or both; not more than three years of supervised release; a $100 special assessment fee; plus $1,756,750 restitution.
This case was investigated by the Federal Bureau of Investigation (FBI).
McClung is being prosecuted by Special Assistant U.S. Attorney Pegeen Rhyne.