Owner of Investment Firm Sentenced to Eight Years for Orchestrating $4.7 Million Ponzi Scheme
CHARLOTTE, NC—Chief U.S. District Judge Frank D. Whitney sentenced the owner of a North Carolina investment firm to 96 months in prison today, for orchestrating a Ponzi scheme that solicited victims to invest millions in the foreign currency market (“FOREX”), announced Jill Westmoreland Rose, Acting U.S. Attorney for the Western District of North Carolina. James H. Mason, 67, of Graham, N.C., was also ordered to serve three years under court supervision and to pay $4,325,820.79 as restitution to the victims of his fraud.
North Carolina Secretary of State Elaine F. Marshall and John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI), join Acting U.S. Attorney Rose in making today’s announcement.
According to filed court documents and today’s sentencing hearing, beginning in 2010 and continuing through March 2013, Mason solicited at least 500 victims to invest over $4.7 million in his fraudulent Ponzi scheme. Court records indicate that Mason executed the scheme by inducing victims to invest with his investment companies, “JHM Forex Only Pool” and “Forex Trading at Home Association,” and other related entities, for the supposed purpose of investing in Over-the-Counter (OTC) foreign currency exchange. Mason lulled his victims into a false sense of security by falsely projecting substantial returns on their investments, as much as $100 million, depending on the amount of their initial investment. Furthermore, Mason lied to his victims, falsely claiming that he had over 35 years of experience in commodity futures and options trading, when he had no such experience. According to court records, Mason also failed to disclose to his investor victims a wire fraud conviction in 2000, for which he was sentenced to 18 months in prison.
According to court records, Mason put only a portion of investors’ money into the foreign currency exchange, and lost essentially all the money he did invest while conducting FOREX trading. Court records indicate that Mason failed to disclose his actual trading results to his victims, and instead made false oral representations and provided bogus statements to clients, fraudulently reporting profits. According to court records, in order to induce individuals to further invest in his fraudulent foreign currency commodity pool, Mason established a website so that investors could access their accounts online, which fraudulently depicted that investors were making money—in some cases significant profits—through successful FOREX trading. The profits depicted on individual investor accounts were in fact false, and, in many cases, there was no actual money in the victims’ accounts.
According to court documents, rather than investing the funds as promised, Mason simply deposited victims’ money into various bank accounts he controlled and used a substantial portion of it to pay for personal and business expenses, real estate, cars and other expenses unrelated to any foreign exchange. For example, court records indicate that Mason spent approximately $435,000 of the investors’ money on a residence in Greensboro, N.C., and more than $222,000 for two residences and office space in Hickory, N.C. Court records show that Mason did not claim the additional income on his federal income tax returns filed with the IRS. Mason also used the rest of investors’ money to make “Ponzi” payments to other victims, fraudulently claiming they were “profits” from successful FOREX trading.
Mason pleaded guilty in June 2014 to one count of securities fraud conspiracy and one count of filing a false federal income tax return for tax year 2011. He has been in federal custody since April 2013 and will be transferred to the custody of the Federal Bureau of Prisons upon designation of federal facility. All federal sentences are served without the possibility of parole.
The case was investigated by the North Carolina Secretary of State, Securities Division with assistance from the FBI, Charlotte Division, and IRS-CI. Acting U.S. Attorney Rose also thanked the Commodities Futures Trading Commission for their assistance in this case.
The prosecution is being handled by Special Assistant United States Attorney Kevin M. Harrington and Assistant U.S. Attorney Kurt W. Meyers of the Western District of North Carolina.
Mr. Harrington is an Enforcement Attorney with the North Carolina Department of Secretary of State, Securities Division, and was appointed to serve as a Special Assistant United States Attorney (SAUSA) with the U.S. Attorney’s Office in Charlotte in September 2011. The SAUSA position is reflection of the partnership between the North Carolina Securities Division and the United States Attorney that helps ensure the effective and vigorous prosecution of white collar criminals, particularly in the area of securities fraud.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.