A Colorado man found guilty of wire fraud is sentenced to federal prison and ordered to repay $1.7 million to his victims.
The Denver Business Journal has recently reported the sentencing of a former Parker, Colorado resident accused of instigating a Ponzi scheme, which he used to defraud 15 victims of well over a million dollars. Under prosecution from Assistant U.S. Attorney Pegeen Rhyne, Shawon McClung pled guilty to wire fraud in July of 2013 and was sentenced in U.S. District Court the following December. 27 years old at the time of his court appearance, McClung was sentenced to 51 months in federal prison and instructed to repay approximately $1.7 million he had stolen. Judge R. Brooke Jackson, who issued the ruling, added a three-year supervised probationary period to McClung’s sentence, slated to follow his eventual release.
McClung had been the subject of a two-year FBI investigation between 2009 and 2011. The FBI scrutinized his business dealings at the helm of Flint-McClung Capital LLC, a business he had relocated from Indiana to metropolitan Denver in November of 2010.
By this time, McClung had engaged a software developer to write a computer program designed to perform automated trades on the foreign currencies market. Although the software was never completed, and only partially paid for, McClung solicited money from investors by claiming that he had successfully used the alleged program to make considerable profits for his company, and that his clients could do the same. According to the Denver Business Journal, McClung had boasted that investors could expect to see profits of between 15 and 100 percent every two to four weeks.
In a statement regarding the case, U.S. Attorney John Walsh explained the dangers of investing with unscrupulous individuals such as McClung.
All too often we see con men like the defendant in this tragic case, who claim to have a super-secret method that enables them to make instant millions by manipulating or outwitting the financial markets. That sort of claim always deserves the highest level of skepticism – if a deal promises sky-high returns with no risk, it’s too good to be true, and investors should run away. (“Coloradan Sentenced for Running a Ponzi Scheme.”)
The Ponzi scheme, as it is generally called, takes its name from the fraudulent investment strategy instigated in the U.S. by the Italian businessman and con artist Carlo Pietro Ponzi (more commonly known as Charles Ponzi). In 1920, Ponzi issued investors international reply coupons that could be exchanged for U.S. postage stamps of greater than the purchased value. Though some of Ponzi’s early investors profited, the scheme rested upon a pyramid-like structure of continually repurchased reply coupons and reinvestment that, in a relatively short time, amassed more than $7 million in debt and eventually collapsed under scrutiny by the U.S. Securities and Exchange Commission (SEC). Though not the first to initiate such a scheme, Ponzi (who enjoyed a brief period of spectacular wealth and notoriety prior to his imprisonment for mail fraud in November of 1920) is regarded as the most recognizable proponent of this kind of illegal money-making scheme in North American history.
Potential investors confronted with unrealistic promises of wealth creation like those of Ponzi and McClung are reminded to heed the words of U.S. Attorney Walsh and to look for more sound investment opportunities elsewhere.