Georgia Man Pleads Guilty to Defrauding More Than One Hundred Individuals Through an Online Investment Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that ALEX HAXTON pled guilty today to orchestrating a fraudulent Internet-based investment scheme that victimized more than one hundred individuals. HAXTON pled guilty before U.S. District Judge John G. Koeltl.
According to the allegations contained in the information to which HAXTON pled guilty and statements made during HAXTON’s plea proceeding:
HAXTON was the administrator of a website (the “Website”) that solicited investments on behalf of a company (the “Company”) that HAXTON effectively owned and controlled. As administrator of the Website, HAXTON arranged for representations to be made on the Website advertising its purported investment program. HAXTON also opened and maintained payment processor accounts to receive and disburse funds that individuals provided and expected to be invested in the purported investment program. To incorporate the Company and create the Website, HAXTON used a false Internet protocol address in order to mask his identity because he sought to avoid detection by investors and law enforcement.
Through the Website, HAXTON solicited investments from more than one hundred individuals across the United States and abroad based upon misrepresentations that the investors’ money would be invested in a “High Yield Investment Program,” or “HYIP,” which would invest in shares of start-up companies and generate a guaranteed rate of return of at least 1.8 percent per business day. HAXTON further falsely represented to investors that they could withdraw their invested funds at any time.
In fact, and contrary to the representations that HAXTON made, investors’ funds were not used to invest in start-up companies and generate the “HYIP” investment returns that HAXTON falsely promised. Instead, as HAXTON knew, a portion of the investors’ funds was used to make payments to earlier investors, as in a classic Ponzi scheme. The majority of the investors’ funds were misappropriated by HAXTON to pay for expenses associated with advertising the Website and diverted to HAXTON’s personal bank account for his own personal use.
In 2014, after victim investors began to complain on Internet blogs that they had not received the rates of return from the Website that they had been promised, HAXTON abruptly shut down the Website, a process known in the HYIP industry as “scamming.” When HAXTON shut down the Website, hundreds of investors lost their money, a total of approximately $150,000, which HAXTON kept and spent on himself.
HAXTON, 27, of Atlanta, Georgia, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. HAXTON is scheduled to be sentenced on April 15, 2016, before Judge Koeltl.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.