October 21, 2015

Nevada Man Sentenced to More Than 12 Years in Federal Prison for Running Ponzi Scheme Involving E-Mini S&P Futures

LOS ANGELES—The architect of a fraudulent investment scheme that caused scores of victims to suffer losses of nearly $10 million was sentenced today to 151 months in federal prison for running a Ponzi scheme and lying to the Securities and Exchange Commission.

Gordon Driver, 58, of Henderson, Nevada, was sentenced today by United States District Judge John A. Kronstadt.

In addition to the prison term, Judge Kronstadt ordered Driver to pay $9,681,289 in restitution to victims of his scheme.

Driver pleaded guilty in April to two felony counts—wire fraud and making a false statement to SEC, which was investigating his fraudulent operation.

In his plea agreement filed earlier this year, Driver admitted that he falsely told victims that he was producing profits of 1 percent to 5 percent a week through a commodity futures trading program involving E-mini S&P 500 futures contracts. Driver also told victims that he had never sustained a monthly net loss as a result of his trading.

In reality, Driver’s trading activity over the course of his three-year scheme was overwhelmingly unprofitable, causing him to lose nearly almost all the money that he used to trade commodities.

Investigators have calculated that Driver took in nearly $17.4 million from approximately 150 victims, including several in Ventura, Orange and Los Angeles counties. Prosecutors successfully argued in court today that 88 victims collectively lost nearly $10 million as a result of the scheme. Some of the investors were made whole or actually made “profits” during the course of the Ponzi scheme when Driver used money from other investors—and not from profits—to pay off some people. For example, in court papers, prosecutors wrote that “for 8 solid months between June 2008 and mid-March 2009, Driver engaged in no futures trading whatsoever, yet took in $4.5 million over 55 separate deposits from his investors, and paid out $4.4 million in fictitious profits.”

During the course of the scheme, Driver “was the largest ‘winner’ by far: he spent $2.1 million on himself and his family, including buying three brand new cars and taking out $471,000 in cash,” according to a sentencing memo filed with the court.

“Investment fraud schemes like this one rob individuals and families of their livelihood and their retirements, and the significant sentence imposed today accounts for the harm caused by the defendant’s scheme,” said United States Attorney Eileen M. Decker. “This case is a reminder that investors should be wary of lofty promises from investments.”

Driver solicited investments through Nevada-based companies with names like Axcess Automation LLC, which was under investigation by the Securities and Exchange Commission in 2009 when Driver testified under oath. During this testimony, which was given under penalty of perjury, Driver said that he did not have a monthly negative return during the second half of 2007—a statement which was false and which forms the basis of the second charge to which he pleaded guilty.

In the sentencing memo, prosecutors called Driver “a liar and a continuing economic danger to the community, who must be incarcerated for a lengthy period of time to keep him away from the investing public.”

Investigators said in court documents that Driver is currently “deceptively” marketing a $25,000 commodities trading software package for E-mini S&P 500 futures contracts through a company called Avenge LLC that uses a website (www.avengesoftware.com), radio podcasts and social media. According to investigators, the website and other Internet marketing materials for the current venture do not disclose that Driver runs the company.

Furthermore, prosecutors said Driver failed to disclose to Avenge customers that he was facing a lengthy prison term and, by his own admission in court papers, that his “business will cease to exist if he is sentenced to a custodial sentence.”

The criminal case against Driver is the result of a joint investigation by the Federal Bureau of Investigation and the United States Postal Inspection Service, both of which received assistance from the Commodities Futures Trading Commission, the SEC, the Attorney General of Ontario (Canada), and the Ontario Securities Commission.