FAYETTEVILLE, AR—Conner Eldridge, United States Attorney for the Western District of Arkansas, announced that Charles Edward Elliott and Nicholas Krug, both of Mountain Home, Arkansas, were sentenced today on one count of Conspiracy to Commit Wire Fraud. Elliot, 81 years old was sentenced to 42 months of probation with the first 36 months being home confinement. Krug, age 64, was sentenced to 42 months in prison followed by three years of supervised release. Elliot and Krug were also ordered to pay restitution in the amount of $539,000.00 jointly and severally. The sentencing took place before the Honorable Timothy L. Brooks in the United States District Court for the Western District of Arkansas in Fayetteville.

United States Attorney Eldridge commented, “These two defendants swindled investors out of their hard-earned money, a crime that will not be tolerated in the Western District of Arkansas. With today’s sentence, justice has been served, and these two defendants have been held accountable for their abhorrent conduct. We remain committed to investigating and prosecuting fraudulent schemes that are designed to defraud unknowing victims.”

“Today’s sentences demonstrate our resolve to put an end to fraud schemes such as those perpetuated by Elliot and Krug,” states David T. Resch, Special Agent in Charge, Little Rock Federal Bureau of Investigation, “We appreciate our partnership with the United States Attorney’s Office and will continue to work together to aggressively investigate and prosecute such violations.”

According to evidence presented at the trial, in early 2007, a California woman was approached by Elliott, who was a partner with Krug in a business called “Sovereign International”, regarding an investment opportunity. They claimed to be raising money for a trading program involving a large group of investors stating that the investment would pay interest of 10% per month for one year, and at the end of the year investors would get their principal investment back. The California woman, after receiving instructions, wired $500,000 to Sovereign International’s checking account. Bank records confirm that prior to that deposit, the account held only $201.26. With that deposit, Elliott and Krug made numerous payments to other investors and wrote a $50,000 check to Krug International, another company of Elliott and Krug’s. On April 19, 2007, only $9,232.23 remained in the Sovereign International account. On April 20, 2007, an individual from Mountain Home, who was solicited by Krug for the same investment opportunity, gave Sovereign International $100,000 check that was subsequently deposited into the Sovereign International account. Elliott and Krug used the Mountain Home person’s money to send the first 10% interest check to the California woman. Approximately $10,000 was sent to the California woman a year later. The principal investment amount of $500,000 was never returned.

Elliott and Krug were originally indicted by a Federal Grand Jury on October 30, 2013. They were convicted by Jury Trial on October 7, 2014.

This case was investigated by the Federal Bureau of Investigations. Assistant U.S. Attorneys’ Candace Taylor and Brandon Carter prosecuted the case for the United States.