Ponzi scheme architect headed to prison

The story is one familiar to our regular Lexington readers: early investors received substantial returns. Later investors in the scam were left holding the bag.

The Ponzi scheme that operated out of Orange County, California, has a touch of Hollywood, though: the man at its helm used investor funds to finance a movie about a Mexican Little League team and to purchase an outsized yacht. Joseph Lampariello, the architect of the scheme, was recently sentenced to 121 months in a federal prison.

Lampariello was also ordered to pay $39.9 million in restitution to approximately 700 investors in a scam that misappropriated “hundreds of millions of dollars,” according to a Los Angeles Times article. He helped run Medical Capital Holdings, a firm that purported to buy up loans to hospitals and other health care companies.

In reality, prosecutors said, the executives at the firm were raking in big fees and paying off early investors with money scammed out of later investors.

Those early investors are often referred to as “winners”: people who got out of the scam early and have received substantial returns. However, there are no real winners in these cases, as the job of a court-appointed receiver is to claw back those “winnings” and distribute the funds to victims.

That means the money those early investors got from the Ponzi scheme is either surrendered to the receiver or recovered in the course of litigation. Either way, the money leaves the bank account of the “winner” and is then distributed to people who lost money to the scam.

Many investors who fall victim to these kinds of scammers have suspicions of illegal activity long before any indictments are announced. In those situations, one of the steps to take to protect your financial well-being is to contact a Lexington attorney experienced in securities fraud matters.

On behalf of MihalekLaw posted in Securities Law on Tuesday, June 21, 2016.

If you believe you may have a claim against your stockbroker or financial adviser, contact us online or call us at 859-233-1805 to speak with a Securities Attorney. MihalekLaw provides representation throughout the country.