Florida Ponzi Scheme Conning $22 M. Out of Teachers and Retirees, Busted

And you thought Ponzi schemes went out with Bernie Madoff? Think again! This one is even trashier and crueler. Who runs a Ponzi scheme built to screw over a hundred teachers and retirees of Florida out of $22M? 

Meet James Davis Risher and Daniel Joseph Sebastian of Florida. How they even amassed $22M out of Floridian teachers and retirees is pretty impressive in its own right, but even more so is the return they told investors they’d be getting them, and how they told their investors they were going about doing it: 14 percent to 124 percent, “by investing in public equity securities through a broker-dealer.”

This is akin to Peter Dinklage taking 124:1 bets on him dunking over Yao Ming.

With the odds in his favor.

And then going and spending the money made with the bets on “jewelry, gifts, and property in North Carolina and Florida. Risher and Sebastian also paid themselves millions of dollars in phony management and performance fees.

A good sign your Ponzi Scheme Manager is an idiot? They’re investing in real estate in Florida and North Carolina. A good way to tell your “Performance Fund Manager” is a Ponzi Scheme Manager? They are a former insurance salesman and a guy with a criminal record of mail fraud, money laundering, and securities fraud, who spent 11 of the last 21 years in jail instead of “growing a thriving retail brokerage business,” which one of them said they did.

If you’re thinking about pulling any empathy for anybody stupid enough to invest in these guys, remember: the people they frauded are the same people who are too frail to punch holes in their ballots. The clients’ age ranges were generally between 65 and 90.

90. Which could explain how anybody could see this scheme without an ounce of skepticism: senility. Via the SEC:

Sebastian verbally told investors during telephone calls and meetings that they would never lose their principal investments in the fund. He even provided some investors with written guarantees from a company he owned that would reimburse any loss. In reality, Sebastian knew that the company had no assets to reimburse investors for losses, making his guarantee meaningless.

The best, of course, is how they named their funds:

  • Safe Harbor Private Equity Fund
  • Managed Capital Fund
  • Preservation of Principal Fund

They never made it to the next logical progression in the naming of their funds, “Your Money Is Awesome And We Will Make It Awesomer Capital Management.” And you know when the list of agencies the SEC thanks includes the U.S. Postal Inspector Service, it becomes clear that Barney Fife could’ve untangled the uncomplicated web of stupidity they wove themselves. For the record, unemployment peaked at 12% over the last 20 years in Florida, where the average teacher salary ranks 22nd in the country by state.

Hopefully they will go to jail for a very long time.

fkamer@observer.com | @weareyourfek Florida Ponzi Scheme Conning $22 M. Out of Teachers and Retirees, Busted