Ken Jones handed over $280,000 -- most of his retirement money -- to C. Gregory Earls, with a handshake and hopes for a quick profit.

The two met after Jones did consulting work for Earls, chairman and chief executive of U.S. Technologies Inc., a Washington-based Internet company. In the afterglow of a U.S. Technologies holiday party at the Four Seasons Hotel in Georgetown in December 1998, Jones told Earls, "I am giving you this on your word that you're going to invest this and you're going to repay this in 45 days." He handed Earls the check.

Jones said he left the party confident. Earls had promised to invest the funds in U.S. Technologies stock, assuring him that it would quickly show a profit.

Instead, Jones's retirement money as well as money from more than 100 other investors became part of what the Securities and Exchange Commission and federal prosecutors in New York allege was part Ponzi scheme, part "naked theft," bilking millions from investors. According to the complaints, Earls raised $20 million for a partnership to buy stock in U.S. Technologies but actually diverted about $13.8 million of that to other people including his ex-wife and investors in other failed investment partnerships, and to his children's education trust fund.

Earls was charged with 10 counts of securities, wire and mail fraud after an investigation by the U.S. Postal Inspection Service and faces a maximum of 10 years in prison on the securities-fraud charge and five years in prison on each of the nine mail and wire fraud counts. He surrendered to U.S. Postal Service inspectors Thursday in New York.

Earls and his lawyer did not return calls for comment, but Earls has denied wrongdoing and has said the losses that investors incurred represent the risks involved in his type of investing.

Even if prosecutors fail to prove wrongdoing on Earls's part, the chance that Jones and others who entrusted him with their money would ever see a return was remote. U.S. Technologies was in weak financial condition and in a highly speculative business -- funding Internet start-ups. Yet those risks did not stop investors from writing checks to Earls -- in some cases for millions of dollars -- based almost solely on his ability to persuade both the rich and not-so-rich to trust him.

The partnership that Earls solicited funds for that would buy U.S. Technologies' stock, USV Partners LLP, is an increasingly common type of investment vehicle for the wealthy, according to financial planning experts. According to a lawsuit, among his investors was Peter Ackerman, a Washington investor who was a protege of junk bond king Michael R. Milken, who contributed $4.4 million over four years.

Such "private placement" investments, which are not regulated by the SEC, have gained in popularity since the stock market began to plunge, said C. Daniel Clemente, a local lawyer who is a business consultant to wealthy families. "When you are sitting on a lot of cash and with interest rates being as low as they are, a lot of people are in the market looking for investments," Clemente said.

They are also among the most risky, financial-planning experts said. Before diving into private placements, they said, investors should fully investigate the management company arranging the deal, the auditor and the law firm involved. A placement memo detailing how the money will be invested and what the manager will charge should be read carefully.

In many cases, according to court documents and interviews with investors, it is clear that such basic questions about Earls were never asked. Earls relied on references, reputation and relationships. He offered investment units to his children's teacher, to his receptionist's parents and to church members. Few knew that Earls had been sued for fraud by investors in previous business deals.

Richard Joyner, president of industry group Investment Management Consultants Association, said investors in partnerships like USV should also only risk the amount of money they can afford to lose. It's clear that some of Earls's investors also did not follow this rule.

"If it is a sizable enough investment, I think I would visit the management of the company. I would want to see their offices," Joyner said. "What this underscores is the risk inherit in these types of transactions. These are specialized transactions and you have to evaluate them accordingly."

But Earls's investors did not get an accurate picture of their investment, according to the SEC complaint.

"While investments carry risk, investors are entitled to obtain accurate and reliable information to assess the risk, so they can make an investment decision," said Matt Schwartz, a D.C. attorney who has represented several of Earls's investors. "And that was the problem here, according to the U.S. attorney. The information provided was allegedly inaccurate and misleading."

Among Earls's investors was Alan Meltzer, a Washington insurance agent, who invested about $90,000 in USV Partners, which he never recovered. "I have no idea if he ever bought the stock" in U.S. Technologies, Meltzer said.

Jones said that the day after Earls was scheduled to return his retirement savings, they met at a restaurant in Georgetown for breakfast. Earls became visibly nervous when Jones began asking about the money, Jones said, and poured syrup meant for waffles into his tea. "He knew that I was not investing in that company long term and he took it anyway," Jones said.

Jones, 51, said he has restarted a retirement savings.

C. Gregory Earls, chief executive of U.S. Technologies, was charged with 10 counts of securities, wire and mail fraud after an investigation by the U.S. Postal Inspection Service.