Trevor Cook of Apple Valley, Minnesota, has been sentenced to a long prison term for orchestrating a Ponzi scheme that collectively cost more than 900 investors $158 million.
United States District Court Judge James M. Rosenbaum sentenced Cook to 25 years in prison on one count of mail fraud and one count of tax evasion in connection to the crime. In imposing the sentence, Judge Rosenbaum described Cook's offense as "wretched, tawdry, and cheap." Cook was charged on March 30, 2010, and pleaded guilty on April 13, 2010.
"Affinity fraud is a horrible crime. Victims are swindled not only of their money, but of their trust," said United States Attorney for the District of Minnesota, B. Todd Jones following sentencing. "Cook preyed upon those with whom he made connections through church or in the community. Today he atoned for his crimes."
In his plea agreement, Cook admitted that from January 2007 through July 2009, he schemed to defraud people by purportedly selling investments in a foreign currency trading program.
In reality, however, he diverted a substantial portion of the money provided him for other purposes, including making payments to previous investors; providing funds to Crown Forex, SA, in an effort to deceive Swiss banking regulators; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses, including substantial gambling debts; and acquiring the Van Dusen Mansion in Minneapolis.
IRS Criminal Investigation Special Agent in Charge Julio La Rosa warned the public against falling victim to schemes that involve taking money from later investors and using it to pay earlier ones.
"Although the economics of Ponzi schemes are simple, contemporary swindlers conceal this fact with sophisticated marketing," he said. "Go beyond the sales pitch and personality to find the truth behind the numbers.
Cook has been in jail since January because he refused to hand over more than $35 million in frozen assets, including $27 million in offshore accounts, a BMW and two Lexus automobiles, a collection of expensive watches as well as a collection of Faberge eggs, and $670,000 in cash. He has now agreed to assist the government in recovering assets to repay victims for their losses. Failure to follow through would subject him to additional court action.
How it worked
To carry out his massive Ponzi scheme, Cook made false statements to potential investors, including promises that the investment program would generate annual returns of 10 to 12 percent, and that trading would present little or no risk to the investors' principal. He also withheld material information from investors, such as the precarious financial position of Crown Forex, SA, in Switzerland -- an entity through which he traded. In addition, he withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and August 31, 2009.
To further his scheme, Cook opened an account in the name of Crown Forex, LLC, at Associated Bank, which he used to deposit investor funds subsequently diverted for his own use as well as the use of others. He also sent statements to investors that misrepresented the status of their investments. Moreover, due-diligence letters were prepared that falsely indicated that Oxford Global Advisors had more than $4 billion in assets under management, and that all accounts were liquid.
Cook now admits that on January 29, 2009, he sent a $50,000 check through the U.S. mail from Arizona to Minnesota for investment in his foreign currency trading program.
He also admitted that on April 15, 2009, he filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, for calendar year 2008. That return failed to report taxable income of at least $5,285,719, upon which tax was due in the amount of at least $1,844,571.
Ponzi Scammer Headed for Prison ...