SANTA ANA CN) - An Orange County lawyer is alleged by federal prosecutors to have helped defraud 150 investors out of $20 million with promises of a 25% return per quarter, while using subsequent investments to pay earlier investors in a classic "Ponzi" scheme.
"This is a classic Ponzi scheme....They were promising returns of almost 100% per year. No reputable investment company is going to make promises of returns that large" says Thom Mrozek, the spokesperson for the United States Attorney's Office.
A Ponzi scheme is a fraudulent investment practice where investors are paid returns with the money of subsequent investors.
Under the charges filed last week, James Halstead, 61, worked with Jeanne Rowzee, a 49 year-old lawyer, to promote false market programs and public investments in private entities, promising investors returns of 25-35% every three or four months, while in fact using the investments to buy a Ferrari, a Porsche and a house.
According to Assistant United States Attorney Gregory Staples, investors were told their money would finance short-term bridge loans, which usually charge a high interest. The pair claimed they had never lost money in this type of investment, asserting that Rowzee used to work for the Securities and Exchange Commission and that she was an experienced securities attorney.
The money was supposedly never invested.
Halstead, who is represented by Michael Kimerer of Kimerer & Derrick, was separately charged for offering fake investments to a man from Newport Beach, telling the man he was funding insurance premiums. He promised a return of 1% within 30 to 40 days, then an annual 10% interest.
Apart from using the money for himself, Halstead used the money from each scheme to make bogus investment return payments to the investors of the other scheme.
Halstead was reported a year ago by victims of the fraud, and is charged with five counts of wire fraud, eight counts of money laundering, and three counts of mail fraud, totaling 16 counts.
He will attend arraignment on September 22.
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