Owner of Kentucky Company Sentenced to 96 Months in Prison for Defrauding Investors of Over $1.5 Million
Judge Orders $1.6 Million in Restitution to Victims; Investor Money Used for Shopping, Traveling, and Gambling
|U.S. Attorney’s Office October 16, 2012|
OWENSBORO, KY—The owner of G3 Capital Management was sentenced today in U.S. District Court by Chief U.S. Judge Joseph H. McKinley, Jr. to eight years in prison and ordered to pay $1.6 million in restitution to victims for devising a scheme to defraud investors from Florida, Texas, and Kentucky of more than $1.5 million, announced U.S. Attorney for the Western District of Kentucky David J. Hale.
Judge McKinley further ordered defendant Cory B. George, 27, of Owensboro, to forfeit contents from three bank accounts seized by the United States during the investigation. Seized funds include $100,301.60 held by Dorman Trading in the name of G3 Capital Management; $13,555.18 held by MF Global Trading in the name of G3 Capital Management; and $370,334.77 held by the People’s Bank in the name of G3 Capital Management. The forfeited funds will be applied to the restitution order imposed during sentencing today, in order to restore to the victims some of the losses they sustained as a result of George’s fraudulent scheme.
George pleaded guilty to all 11 counts of a superseding indictment on March 27, 2012, in U.S. District Court. According to the plea agreement, George admits that he defrauded investors between December 15, 2009 and April 27, 2011, of more than $1.5 million by advertising in local newspapers short-term Certificates of Deposit (CD), which he claimed were guaranteed by the Securities Investor Protection Corporation (SIPC). Those who invested in the CDs offered by George and G3 Capital Management were falsely told that SIPC insurance was equivalent to FDIC insurance and that the principal of their investment was safe. Money received by George from investors was not actually invested in CDs; instead, investor funds were used by George for trading in the commodities market or used by George for personal expenses such as shopping, traveling, and gambling.
“My office is committed to vigorously prosecuting investor fraud crimes such as these and will continue to seek restitution for these victims,” stated U.S. Attorney Hale. “George financially devastated a number of elderly victims with a particularly devious lie that he offered a government secured certificate of deposit, when, in fact, he had no such product. Investors are urged to thoroughly check any such claims offered by questionable promoters. Those who would perpetrate such frauds should know that regulators and federal law enforcement officers will work tirelessly to shut down sham investment schemes and prosecute those responsible.”
At his change of plea hearing, George admitted to incorporating G3 Capital Management, with its principal place of business in Owensboro, Kentucky, in December 2009 and setting up business offices in Palm Beach, Florida, and Houston, Texas. George ran advertisements in local newspapers offering short-term CDs paying from three to five percent interest and represented that investors’ deposits would be guaranteed by G3 Capital Management. However, G3 Capital was not a federally insured financial institution and was not authorized to issue CDs. G3 Capital Management and Cory George were also not members of the SIPC, and SIPC would not have covered the commodities trading in which George was engaged with any guarantee. The superseding indictment charged George with 11 counts of mail fraud in connection with fraudulent G3 CDs that George created and sent to investors either by U.S. mail or by Federal Express. Other mail fraud counts relate to investor checks that were sent interstate from Texas to George’s Owensboro office, where they were deposited into a bank account George had opened in the name of G3 Capital Management at a bank located in Marion County, Kentucky. Finally, two counts of the superseding indictment relate to small interest payments that were mailed by George to a Kentucky investor. Most of the victims who purchased CDs from George and G3 Capital Management never received any funds.
“The Florida Office of Financial Regulation does not tolerate scams that jeopardize investors’ hard-earned money, and we are thankful for this multi-state effort that will keep George behind bars,” said Office of Financial Research Interim Commissioner Linda B. Charity. “All consumers and investors should research the financial products and people they are conducting business with and file a complaint if you feel you have been victimized by financial fraud.”
George was arrested in Las Vegas on a criminal complaint that was filed in U.S. District Court on May 11, 2011, and was taken in to the custody of the U.S. Marshals Service. George remains in federal custody.
This case was prosecuted by Assistant U.S. Attorney Marisa Ford and was investigated by the FBI in Owensboro and the Florida Office of Financial Regulation in West Palm Beach.