A Towson man has been indicted in a Ponzi scheme said to be one of the “largest ever charged in Maryland,” after working with co-conspirators in Texas and Nevada to defraud hundreds of investors of more than $364 million to use for their own personal gain, prosecutors say.
Representatives from the Maryland U.S. Attorney’s Office, FBI field office in Baltimore and U.S. Securities and Exchange Commission appeared at a press conference this morning to outline the scheme in which they allege Kevin Merill, 53, and his co-conspirators, Jay Ledford and Cameron Jezierski, created 32 corporate entities to dupe investors into buying consumer debt portfolios.
To keep the scheme going, the group allegedly “lied to their investors about every conceivable aspect of the investment scheme they concocted,” said Maryland U.S. Attorney Robert K. Hur. Their system included falsifying bank transfers, making up reports on the debt they had purchased and using the web of shell companies they had created to move money around and deceive their victims, authorities said.
Merrill, Ledford and Jezierski instead used the money they received to fund lavish lifestyles, authorities said. They would use fractions of those funds to pay prior investors with money they claimed represented profits from their investments.
“The defendants lured their victims with promises of an investment opportunity that seemed too good to be true,”said Hur. “Unfortunately, it was too good to be true.”
For Kevin Merrill, whose Ruxton home, located at 1848 Circle Rd., was raided by federal agents yesterday morning, the alleged scheme gave him $45 million to play with. He spent it purchasing or renovating five Maryland homes—four in Baltimore County, one in Easton—and on luxuries, including at least 25 sports cars, jewelry, a private jet, a vacation home and club membership in Naples, Florida, and $1 million on gambling alone.
Officials said Wednesday the scheme was still ongoing up until the day arrests were made, and that the raids of the homes of the three men charged occurred simultaneously to preserve any evidence for the case and any assets that can be sold, the proceeds from which would go back to the victims.
The feds are seeking $39 million from Merrill along with six homes in Maryland and Florida, the 25 vehicles–including two Rolls Royces, four Lamborghinis, four Ferraris, a Bugatti, a Pagani, a McLaren and other luxury models–a 35-foot luxury yacht and jewelry.
Bank accounts connected with the individuals and their shell companies have been frozen by the SEC and placed in receivership, said Stephanie Avakian, the agency’s co-director of enforcement.
“Our expectation is that, together with the seizures by the U.S. Attorney’s Office and the FBI, the asset freeze and receivership that we secured will preserve millions of dollars in proceeds of the fraud that we will be able to return to victims upon the successful conclusion of this litigation,” she said.
All three men face wire fraud charges, and Merrill and Ledford face additional counts of money laundering and identity theft. Merrill and Ledford each faces 262 years in federal prison, and Jezierski faces 122 years, Hur said. The role allegedly played by Jezierski was to lure more clients into the investment scheme, he said.
Prosecutors said the men operated the system since 2013 and affected an estimated 400 people in the Baltimore, Dallas and Northern Virginia areas, and that the victims included small business owners, restaurateurs, contractors, retirees, talent agents, doctors, lawyers, accountants, bankers, professional athletes, financial advisers and others.
Gordon Johnson, the FBI special agent in charge of the Baltimore field office, said there could be even more.
“It is our belief that victims of Merrill and Ledford’s illegal activity are scattered throughout the United States,” he said.
So what did this scheme look like for the investor? The SEC laid it out in this complaint with one example of a real victim:
An existing investor, Individual B, who has already given them $3 million, links Merrill up with Individual A, who wants to invest, too. He signs an agreement to let Merrill’s company, Global Credit Recovery, invest $500,000 of his money; GCR promises to “use best efforts to produce a profit” by putting that sum toward buying two debt portfolios. Individual A sends the money via wire transfer to Delmarva Capital.
Merrill then spends more than $400,000 of it to pay other investors who are on the hook, and takes $60,000 to pay off some of his own credit card debt or give it to relatives.
Several weeks later, he convinces Individual A to drop another $500,000 into two more debt portfolios. Individual A bites again, sending more money to Delmarva Capital. Merrill does the same thing, using $400,000 to help pay for a 2014 Pagani Huayra Diablo (a $2 million car), pay another $20,000 off on his own credit card bills and dole out $54,000 to investors.
This process repeats itself until Individual A has invested $1.8 million.
The fraud was also able to trick seasoned investors. One group kicking the tires on the proposal asked for third-party documents to verify details of the investment. Authorities allege the company run by Merill, Ledford and Jezierski made up two companies, a consumer lender and debt portfolio manager, and opened bank accounts in their names, all so they could create the deception the debt purchases they made were seeing returns.
Merrill, Ledford and Jezierski have both all been arrested, said Hur. A detention hearing for Merrill is scheduled for Thursday. Jezierski, who was arrested in Las Vegas, already had a hearing and was released on conditions; he is due to appear in Maryland no later than Sept. 24.
The primary goal now is for the feds to help victims recoup as much of what they lost as possible.
“We want to make them as whole as possible,” said Hur.