FBI Investigating $50 Million Ohio Ponzi Scheme
Several Ohio citizens are reportedly under investigation by the Federal Bureau of Investigation for operating a massive Ponzi and pyramid scheme that is believed to have duped at least 213 victims out of tens of millions of dollars. According to an affidavit submitted by an FBI agent in a federal forfeiture proceeding, authorities believe probably cause exists to suspect that William M. Apostelos, his wife Connie M. Apostelos a/k/a Connie Coleman, Scott Doak, and Rebekah Fairchild were "involved in a scheme to defraud investors and have committed wire fraud and/or money laundering." One Ohio newspaper has since pegged potential losses at north of $50 million.
Allegations Surface In Involuntary Bankruptcy Filed By Spurned Investors
The allegations first surfaced after several doctors submitted an involuntary bankruptcy petition against William Apostelos. According to declarations submitted by the doctors, each was solicited to invest with Apostelos as far back as 2011 with the promise of high returns in a short period of time. While one investor was told that Apostelos could offer such lucrative rates of return through short-term loans and success in daytrading stocks, Apostelos also held himself out as a successful real estate investor and securities investor. Investors were solicited through several companies operated by Apostelos, including:
- Apostelos Enterprises, Inc.;
- Coleman Capital, Inc.;
- Midwest Green Resources, LLC;
- WMA Enterprises, LLC;
- Silver Bridle Racing, LLC; and
- OVO Wealth Management, LLC.
According to the doctors that filed the involuntary bankruptcy petition, Apostelos would execute a promissory note in their favor that memorialized their investment. These promissory notes carried varying rates of return, with one doctor submitting a declaration indicating that they held five promissory notes totaling nearly $1.5 million with annual rates of return ranging from 7% to 50%. In total, the three doctors alone stated that they had invested more than $5 million with Apostelos.
Federal Forfeiture Action and FBI Allegation Make Similar Allegations
Several weeks after the involuntary bankruptcy was filed against William Apostelos, the United States filed an action seeking civil forfeiture of two Ohio properties on the basis that they are traceable to money laundering and wire fraud offenses. One of the properties is owned by Coleman Capital, while the other is titled in the name of Steven C. Scudder, Trustee of the WMA Trust - a trust believed to be owned by William Apostelos.
In support of the United States's forfeiture allegations, the affidavit of FBI Special Agent Michael Bush (the "Bush Affidavit") was submitted. Concluding that the accused individuals and their business operations have been involved in operating a pyramid scheme over the past few years, the Bush Affidavit makes a detailed set of findings.
The Bush Affidavit states that Apostelos's entities have "reported very little income and more often significant losses" since 2010, and also that Apostelos and his wife have "had no legitimate source of income since 2010." Rather, the "sole source of income has been stolen from the funds investor unknowingly placed into the pyramid scheme." Apostelos and his wife allegedly diverted investor funds to support a lavish lifestyle that included the purchase of luxury automobiles and spending of as much as $35,000 per month towards a horse racing hobby. According to Bush's forensic analysis, more than $32 million was deposited into accounts controlled by Apostelos from November 2012 to May 2014, while an estimated $28 million was paid as returns to earlier investors.
The Bush Affidavit also detailed the pitches that were made to various investors. For example, one investor was told that his $395,000 investment would be used to purchase an Ohio farm that would be quickly resold at a tidy profit. While the investment came due in late 2013, the victim did not receive his investment back and instead received various excuses including that the bank made errors negotiating the funds. In another example, a victim was told that his $100,000 investment would be used to invest in stocks through a TD Ameritrade account. The victim was told that his account had incurred more than $150,000 in gains through timely investments in several stocks, and was provided a TD Ameritrade website where he could track his investment under the name "Mountaineer." However, the Bush Affidavit indicated that the TD Ameritrade website provided to the victim was not a real trading account, but instead a training account program that did not trade real money.
Scheme Was On Verge Of Collapse
Both the bankruptcy and the Bush Affidavit reference multiple legal judgments that had been recently obtained against Apostelos and his entities for default on millions of dollars in various promissory notes. Additionally, despite the filing of the involuntary bankruptcy in mid-October, the Bush Affidavit also details that Apostelos may have been continuing to solicit new investors. For example, a majority of approximately $2.1 million in funds transferred into a Key Bank account in the past month "appears to be from investors." An additional large wire transfer of nearly $900,000 was received in that account on October 23, 2014; its origin is unknown.
On October 29, 2014, agents from multiple federal and state agencies executed federal search warrants at multiple locations tied to Apostelos and his entities. Authorities seized a number of bank accounts, cash, jewelry, and vehicles that included a 2008 BMW M3 Convertible, a 2012 Lincoln Navigator, a 2012 Ford F350 Pickup, and a 2012 Lexus LS 460. Additionally, officers seized a six foot race horse named Baryshnikov owned by William and Connie Apostelos.
The Bush Affidavit included this observation as well:
During the search, officers located many promissory notes executed between victims and APOSTELOS and/or the companies he controls. It appears that APOSTELOS would get money from victims, often out of their retirement account, and quickly after investing that money, or sometimes failing to invest that money, APOSTELOS would transfer the money to earlier investors as a return on their investments. During the investigation and search, it appears that APOSTELOS used most of the investors’ money to pay off earlier investments, or to fund his glamourous [sic] lifestyle.
Any victims are urged to contact the Ohio Department of Commerce Division of Securities at (800) 788-1194 or online at www.com.ohio.gov/secu.
The Bush Affidavit is below: