Four Indicted In $70 Million "Virtual Concierge" Ponzi Scheme

A grand jury indicted four Florida citizens - including a husband and wife - on multiple fraud counts in what authorities allege was a $70 million Ponzi scheme that peddled "virtual concierge" machines to unsuspecting investors.  Joseph Signore, his wife Laura Signore, Paul Schumack, and Craig Allen Hipp were indicted today - approximately one month after civil and criminal authorities alleged that JCS Enterprises was a massive Ponzi scheme.  Joseph Signore and Paul Schumack, accused by the Securities and Exchange Commission of being the masterminds behind the scheme, face the majority of criminal charges, with Signore facing 31 counts of bank fraud, conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and money laundering charges.  Laura Signore was indicted on eight fraud charges, while Hipp is facing one count each of conspiracy to commit mail and wire fraud, mail fraud and wire fraud.

According to authorities, Signore and Paul Schumack solicited potential investors to participate in JCS Enterprises' ("JCS") Virtual Concierge program, which involved the purchase of a virtual concierge machines ("VCM") through a one-time fee ranging from $2,600 to $4,500 per VCM.  The VCM, which resembles an ATM, is a free-standing or wall-mounted machine placed in various businesses that purportedly allowed the advertisement of products or services and even the ability to print tickets or coupons.  Potential investors were told that the VCMs generated substantial returns, which in turn would allow the payment of annual returns to investors ranging from 80% to 120%. In addition, investors were provided with the location of the VCMs they had purportedly purchased, and even given the ability to track the VCM activity online.

Investors were solicited in several ways, including several websites controlled by the entities and through videos posted on popular video-sharing website Youtube.  The videos promised that the VCM would "generate income for years," and promised that a $3,500 investment could produce "huge returns."  Potential investors also received emails from Schumack, who touted his graduation from West Point Military Academy in 1979 and whose email signature also featured a Bible passage intended to create a false sense of security for investors.  

However, authorities allege that the outsized returns touted by the defendants were the result of a Ponzi scheme.  According to the SEC, the production of VCMs was not close to the amount of VCMs purportedly sold to investors, and the guaranteed returns were "a farce."  Instead, investor funds were commingled and used for a variety of unauthorized purposes, including the unauthorized transfer of more than $2 million to Signore and his family.  An additional $56,000 in investor funds were used for expenses including restaurants, stores, and a tanning salon.  Finally, approximately $4 million in investor funds were transferred to an unrelated account from which Schumack and others allegedly made more than 100 cash withdrawals of nearly $5 million. 

While the SEC named Joseph Signore and Paul Schumack in their civil enforcement action filed in early April, some had questioned why Laura Signore had not been named.  The indictment alleges that Laura Signore served as executive vice president of JCS Enterprises, where she signed checks to investors and vendors as well as investor contracts with JCS.  It appears that the decision to sign investor contracts on behalf of JCS may have factored into the charging decisions, as Hipp also signed investor contracts.  

In addition to the criminal charges, the indictment also seeks forfeiture of the Signores' and Schumack's real and personal property - including their homes.  Each of the defendants potentially faces decades in federal prison.