"Virtual Concierge" Ponzi Defendant Convicted By Jury

A south Florida man was convicted by a federal jury for his role in a "virtual concierge" Ponzi scheme that duped hundreds of investors out of tens of millions of dollars.  A federal jury deliberated for three hours before convicting Craig Hipp, 54, of wire fraud, mail fraud, and conspiracy to commit mail and wire fraud. The trial of Hipp - who was described as a minor player in the scheme - was viewed as a bellwether for the upcoming trials against Joseph Signore, Laura Grande-Signore, and Paul Schumack, who authorities have alleged played a key role in the alleged virtual concierge Ponzi scheme.  Under federal sentencing guidelines, Hipp could face at least 12.5 years in federal prison.

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 were used to pay 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. 

During the trial, Hipp's defense team sought to portray him as a devoted employee who was unaware of the fraud.  Hipp's lawyers highlighted his 11th grade education and previous employment as a carpenter, painting him as a low-level employee who was fascinated by Signore's larger-than-life persona and willing to believe Signore's claims that billionaire Carlos Slim was about to buy the business for $500 million.  As his lawyers argued, Hipp was the personification of a "fall guy" who was "duped like all the others."  

In addition to the criminal charges, authorities are also seeking forfeiture of the Signores' and Schumack's real and personal property - including their homes.  

A copy of the indictment is below:

May Indict

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 were used to pay 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. 

During the trial, Hipp's defense team sought to portray him as a devoted employee who was unaware of the fraud.  Hipp's lawyers highlighted his 11th grade education and previous employment as a carpenter, painting him as a low-level employee who was fascinated by Signore's larger-than-life persona and willing to believe Signore's claims that billionaire Carlos Slim was about to buy the business for $500 million.  As his lawyers argued, Hipp was the personification of a "fall guy" who was "duped like all the others."  

In addition to the criminal charges, authorities are also seeking forfeiture of the Signores' and Schumack's real and personal property - including their homes.  

A copy of the indictment is below:

May Indict