Mason Handyman Turned Commodities Trader Ordered to Serve 78 Months in Prison for Ponzi Scheme

GRAND RAPIDS, MI—Ty Allan Klotz, 48, formerly of Mason, Michigan, was sentenced to 78 months’ imprisonment for money laundering in connection with a $2 million “Ponzi” scheme, announced U.S. Attorney Donald A. Davis. U.S. District Court Judge Janet T. Neff also ordered Klotz to pay restitution of $1,426,084.24 to the victims, the amount defrauded investors had lost in the scheme.

U.S. Attorney Davis was joined in the announcement by FBI Special Agent in Charge Andrew G. Arena and IRS Criminal Investigation Special Agent in Charge Maurice M. Aouate “This case shows that the appearance of success can be a mask for a tangled financial web of lies,” said Aouate. “Inevitably, the scheme collapses, leaving behind numerous victims in its wake.”

Prior to 2004, Klotz earned a living as a handyman, performing construction and other odd jobs in and around Mason, Michigan. He began trading stocks and commodities for family and friends, using an Internet-based electronic trading website. In 2004, Klotz began telling area residents that he was an expert in commodities trading and was earning substantial returns from his trading activities. Soon after, he established several businesses in Mason, including Aurifex Investment, Aurifex Research LLC, and Aurifex Commodities Research Company, and created the appearance that he was a licensed commodities broker.

From April 2004 through March 2006, Klotz schemed to defraud hundreds of investors by making several misrepresentations, including that he was averaging a return of 20 percent per month, that investors’ funds would remain on deposit in an FDIC-insured financial institution, and that investors’ funds were additionally insured by Lloyd’s of London. Klotz created monthly statements of account, which he mailed to investors, showing large investment returns that were entirely false and that caused many investors to increase the amount of their investments with the Aurifex entities. Klotz actually used the investors’ funds to pay wages and bonuses to and buy gifts for his employees and their relatives, and for his own personal expenditures, including the purchase of Rolex watches, luxury vehicles, expensive clothing, a personal residence, and other expenditures not disclosed to investors.

In December 2005, the Commodities Futures Trading Commission began investigating the Aurifex entities and Klotz. After learning about that investigation, Klotz started returning some of the investors’ initial deposits, characterizing the payments as a “Christmas Bonus.” Klotz then traveled to Carbondale, Illinois, where he resided in secrecy with the company accountant and attempted to explain his disappearance to investors by falsely claiming that he had been ordered to serve on a secret mission for the military. In total, Klotz obtained over two million dollars from investors. Although he returned some of the investors’ funds and additional amounts were recovered by the Commodities Futures Trading Commission, most investors are still owed significant sums of money.

Special agents of the Federal Bureau of Investigation and IRS Criminal Investigation, along with the Mason Police Department and the Commodities Futures Trading Commission investigated the case. Assistant U.S. Attorney Nils R. Kessler and former Assistant Ronald Stella handled the prosecution.