A fraud case involving a former professional athlete serves to illustrate the contours of a so-called Ponzi scheme and the potential civil and criminal penalties that can result for a participant.
Will Allen spent years playing in the National Football League, including a stint with the Miami Dolphins. Federal regulators state that, following his retirement, Allen and a business partner set up an enterprise pursuant to which they collected money from investors that they said was subsequently being loaned to various pro players. The U.S. Securities and Exchange Commission states that Allen and his partner promised investors a high rate of return on the loaned amounts.
That was not the case, regulators say. In a recently unsealed federal complaint, the SEC alleges that Allen and his partner instead engineered a fraudulent Ponzi scheme through which they diverted many millions of dollars received from investors for personal use. The complaint additionally alleges that the defendants used a portion of received money to pay back earlier investors.
In commenting on Allen's case, one federal official stated that the ex-athlete's fraudulent business endeavor was a standard Ponzi-type manipulation in that "the appearance of a successful investment was only an illusion sustained by lies."
The federal court handling the case froze assets linked to the scheme.
A defendant in an alleged Ponzi scheme can be challenged by both the SEC in a civil lawsuit and by federal or state prosecutors in a criminal action. Penalties can range from fines and other monetary penalties (such as restitution to victims) to imprisonment.
A proven defense attorney can answer questions and advocate diligently on behalf of any client facing fraud charges.
Source: Investment News, "Ex-NFL cornerback Will Allen accused of running Ponzi scheme," Bloomberg News, April 7, 2015