Michigan Investment Advisor Sentenced to Eight Years in Prison for $4 Million Ponzi Scheme

A federal judge sentenced a Michigan investment advisor to eight years in federal prison for running a Ponzi scheme that defrauded investors out of $4 million.  Keith Epstein, 56, faced up to thirty years in prison after pleading guilty earlier this year to bank fraud charges.  Along with the ninety-seven month prison sentence, Epstein was also ordered to pay full restitution to his victims.

Epstein began soliciting clients in the mid-1990s, convincing individuals to liquidate their legitimate investments and instead place their money with Epstein in "holding accounts."  Epstein promised these investors annual returns ranging from eight to ten percent, and investors were told that funds in the holding accounts would be invested after the market rebounded.  Some investors told authorities that Epstein convinced them to write him checks under $10,000 in order to avoid scrutiny from regulators.  In total, over 20 people invested approximately $7 million with Epstein.  But instead of investing these funds, Epstein transferred funds to his personal bank accounts and used them to make supposed interest payments to investors.  Additionally, Epstein used investor funds for personal expenses including gambling, exotic dancers, and travel.

Epstein previously pled guilty to state charges stemming from the scheme in December 2010.  These charges included three counts of state securities law violations, and one count of writing a nonsufficient funds check of more than $500.  He was sentenced to one year in county jail for those charges, and is set to begin serving his sentence for the federal charges when the state sentence is served.