(CN) – A federal judge in Los Angeles ordered Tri Energy Inc. and several other defendants to pay $51 million for their role in a massive Ponzi scheme.
U.S. District Judge Andrew Guilford ordered Tri Energy, H & J Energy Co., Robert Jennings, Arthur Simburg and La Vie D’Argent to disgorge $35 million and pay $2 million in pre-judgment interest. Simburg and Jennings were each slapped with a $7 million civil penalty.
According to complaint filed by the SEC, the defendants told investors that they could make extraordinary profits by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. The defendants allegedly recruited potential victims by claiming that the investments would raise money for humanitarian and religious efforts.
Investors were promised outlandish returns of 100 percent to 1,000 percent in as little as 60 days, the SEC claims.
However, most of the money paid out appears to have come from new investors – the hallmark of any Ponzi scheme, the SEC claims. Substantial amounts of investor funds had been transferred to bank accounts controlled by some of the defendants. Over 500 investors lost more than $50 million in the scheme.
Prosecutors say the Ponzi scheme and affinity fraud have a long history, spurring numerous civil and criminal lawsuits.
In the criminal case, Simburg was sentenced to nine years in prison after entering into a plea agreement. Jennings was convicted by a jury and sentenced to 12 years. Another defendant, Henry Jones, was extradited from Hong Kong and convicted by a jury, earning a 20-year sentence.