Financial regulators in the US have filed their respective cases against two Maryland companies and their principals, asserting that they were running a Ponzi scheme that mainly targeted African immigrants. It worked for a while, too, as the fraudsters managed to steal more than $28 million from approximately 1,200 unsuspecting investors.
The Commodity Futures Trading Commission (CFTC) said Dennis Jali, a South African citizen and Maryland resident, was the mastermind behind the scheme, aided by John Frimpong and Arley Johnson. The defendants solicited funds from victims through their companies, 1st Million LLC and The Smart Partners LLC.
To create the illusion of stability and appearance of a legitimate company, Jali rented office space to meet his potential victims. He also failed to register with the CFTC as required, and fraudulently sought participants by touting himself out as a self-made millionaire and also lying about his investment track record.
Potential investors were given false account histories showing trading returns that did not exist, and provided false information about executives’ experience and expertise in trading. The complaint further alleges that the defendants targeted vulnerable African immigrants and church communities, having exploited their common ancestry and religious affiliations.
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While it was actually a Ponzi scheme, the defendants claimed that these funds would participate in various FX and Crypto trading pools that will be managed by licensed traders. Promotional materials for investors promised risk-free returns of between 400 and 1700 percent per month. It was also claimed that participants’ funds would be held in trust or escrow, and then returned in full at the end of the participation term.
Out of the $28 million figure, they used more than $18 million to send funds back to early investors while misappropriated at least $7 million for personal spending on exotic vacations, expensive cars, personal travel, and living and business expenses.
The CFTC also named more relief defendants, who are alleged to have received victims’ funds and will be asked to return them if the case is successful. A relief defendant is a person or entity who has received funds or assets as a result of the illegal acts of the other named defendants.
A company called Access to Assets LLC was named in this case because the CFTC seeks injunctive relief to protect the sought funds or assets and apply them to any eventual recovery in the case.
Most of the pool money was lost, according to the complaint that accuses the defendants of fraud, misappropriation, registration violations and issuing false statements. However, the CFTC is seeking to retrieve the funds contributed to the scheme, alongside assets that relief defendants received from other defendants to which they have no legitimate claim.