Judge Rejects Plea Agreement in Utah Ponzi Scheme

In a somewhat-unusual step, a Utah federal judge refused to accept a plea agreement reached between Utah prosecutors and a man accused of operating the second-largest Ponzi scheme in Utah history.  Travis Wright, 48,of Draper, Utah, had earlier pled guilty to one count of mail fraud, under which prosecutors had agreed to seek an eight-year sentence along with an order of restitution to defrauded investors.  However, after reviewing letters from victims who expressed their outrage at the sentence they perceived as inadequate, United States District Judge Clark Waddoups decided that that he would not approve the deal.  His decision means that Wright is free to withdraw his guilty plea and proceed to trial, or negotiate a different plea agreement with prosecutors that would meet the Judge's approval.  Judge Waddoups' comments indicate that an acceptable plea deal will carry a sentence longer than the proposed eight years.

From September 1999 to March 2009, Wright was a manager at Waterford Funding, which purported to use investor funds to make loans secured by commercial real estate investments.  In total, Waterford took in $145 million from 175 investors who were promised returns of up to forty-four percent over nine-month periods. But Wright ultimately used less than 10% of investor funds to make loans through Waterford.  The remaining funds were misappropriated to fund Wright's lavish lifestyle, including the purchase of a $5.5 million home, safari trips to Africa, and an inflated salary.  Additionally, new investor contributions were paid to older investors as interest payments.  Prosecutors have estimated that victim losses could reach in excess of $50 million.  

Prosecutors must now decide whether to negotiate a new sentence with Wright or proceed to trial.  Wright pled guilty to mail fraud, which carries a maximum prison sentence of twenty years and up to a $250,000 fine.

A copy of a previously filed SEC Injunctive Action is here.