Men from Colorado Springs and Nevada Indicted in Multi-Million-Dollar Investment Fraud Scheme
DENVER—Two men, one from Colorado Springs, and the other from Nevada, have been indicted by a federal grand jury in Denver on investment fraud related charges, U.S. Attorney John Walsh and FBI Denver Division Special Agent in Charge Thomas Ravenelle announced. The two men, Daniel Coddington, age 59, of Colorado Springs, and Jesse Erwin, age 48, of Nevada, appeared before a U.S. Magistrate Judge earlier this week, where they were read their rights and advised of the charges pending against them.
According to the indictment, from at least early 2010 through late 2011, Coddington held himself out to investors and intermediaries to be the principal and owner of a company called Golden Summit Investors Group Ltd. (“Golden Summit”). He operated Golden Summit from Colorado Springs, Colorado. From at least early 2010 through late 2011, Erwin held himself out to investors and intermediaries to be the attorney and general counsel for Golden Summit.
From at least early 2010 through at least late 2011, the defendants described to investors and intermediaries a program through which investor money would be used to purchase collateralized mortgage obligations or CMOs — an investment consisting of a pool of mortgages organized by maturity and risk. They told investors that the CMOs had face values exponentially larger than their purchase price and market value. According to defendants, the CMOs would then be “hypothecated” to obtain loans in the amount of a percentage of the face value of the CMO. The amount of these loans would still be exponentially larger than the purchase price and market value of the CMOs (known as the “CMO Trade Program”).
Coddington and Erwin told most of the investors that, from the proceeds of the loans, the investors would receive pre-trade distributions and that the remainder of the loan proceeds would be placed into an investment program that would yield high returns. From at least 2010 through late 2011, both defendants described to investors and intermediaries that investors who owned CMOs could transfer their CMOs to Golden Summit for the purpose of participating in the CMO Trade Program.
In approximately April 2011, the defendants told an investor, who ultimately invested $9,000,000 dollars with Golden Summit that $60,000,000 of the loan proceeds obtained from “monetizing” the CMOs purchased with the investor’s money would be provided to the investor in the form of two non-recourse loans in the amount of $30,000,000 each (known as the “CMO Loan Program”).
From at least 2010 through late 2011, defendant Coddington falsely represented to investors and intermediaries that he had the experience and contacts necessary to successfully conduct and complete the CMO Trade Program and the CMO Loan Program. Further, from at least 2010 through at least mid-2011, Coddington and Erwin falsely told investors and intermediaries that all of the money provided by investors would be used to purchase CMOs that would be used in the CMO Trade Program and the CMO Loan Program. They also falsely told investors and intermediaries that any fees, commissions, compensation, and payments to Golden Summit and its affiliates would be taken only from the profits of the CMO Trade Program and CMO Loan Program and not from investor money placed into the CMO Trade Program and CMO Loan Program.
During that same time, the defendants falsely represented that, once investor money was received into an account controlled by defendants, all of the stages of the CMO Trade Program would be accomplished quickly and investors would receive their pre-trade distribution within weeks of their investment followed shortly thereafter by the returns on their investments. In or about April 2011, Coddington and Erwin falsely represented to the investor in the CMO Loan Program that, once the that investor’s money was received into an account controlled by defendants, the purchase of the CMOs would occur in approximately one banking day. Defendants further falsely represented to that investor that the funding process for the loan on the CMOs would take approximately three banking days from the time the CMOs were obtained.
From at least November of 2010 through at least June of 2011, the defendants diverted substantial amounts of investor money placed into the CMO Trade Program and the CMO Loan Program for their own personal use and for purposes other than for purchasing CMOs. Further, the defendants did not successfully “hypothecate” or “monetize” any CMOs to obtain loans for either the CMO Trade Program or the CMO Loan Program.
From at least October 2010 through April of 2011, Coddington and Erwin obtained from investors more than $17,000,000 for the CMO Trade Program and the CMO Loan Program. Despite their failure to successfully complete either the CMO Trade Program or the CMO Loan Program, the defendants did not return most of the investors’ money or any CMO purchased with the investors’ money.
From at least early 2010 through late 2011, the defendants also received CMOs from several investors for purposes of participating in the CMO Trade Program. Coddington kept most of the monthly interest that was paid out on those CMOs while the CMOs were in his and Golden Summit’s possession. For purposes of executing the Scheme, the defendants used, and caused to be used, a number of interstate wires, including e-mails and money transfers.
Coddington and Erwin both face 13 counts of wire fraud and 2 counts of security fraud. Each wire fraud count charged carries a penalty of not more than 20 years in federal prison, and up to a $250,000 fine. Each securities fraud count charged carries a penalty of not more than 20 years in federal prison, and up to a $5,000,000 fine. The court could also order both defendants to pay restitution to the investment fraud victims.
“These defendants stole millions of dollars from investors,” said U.S. Attorney John Walsh. “Thanks to the hard work of the prosecution and the FBI team that unraveled this scheme, these defendants will now face harsh consequences for that greed.”
“The FBI is committed to investigating complex financial crimes to include investment fraud, especially when someone misuses a position of trust to exploit innocent investors.” said FBI Denver Division Special Agent in Charge Thomas Ravenelle. “The defendants abused their positions, preyed on unknowing victims, and will now face the consequences of their actions.”
This case was investigated by the Federal Bureau of Investigation (FBI).
The defendants are being prosecuted by Assistant U.S. Attorney Pegeen Rhyne.
The charges contained in the Indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.