U.S. Attorney Robert K. Hur said the trio attracted investors with “an elaborate web of lies, duping them into paying millions” and then diverting the money to fund their lavish lifestyles.
They “went to great lengths to fool their victims,” said Hur, who was joined at a news conference by officials from the FBI and the Securities and Exchange Commission, which conducted a parallel investigation.
Officials are beginning to notify investors nationwide who lost an estimated $364 million since 2015 in what prosecutors called one of the largest fraud cases ever filed in Maryland. The investors, whom officials did not identify Wednesday, include retirees, doctors, accountants, current and former professional athletes and small-group investors in Chicago, New Jersey and Bethesda, Md
Law enforcement officials said they disrupted an ongoing fraud when on Tuesday they arrested the three men — Kevin B. Merrill of Towson, Md., Jay B. Ledford of Texas and Las Vegas, and Cameron R. Jezierski of Texas. If they are convicted, the men could face lengthy prison terms, including a maximum of 20 years on charges of conspiracy, wire fraud, money laundering and identify theft..
Attorneys representing the three men were not immediately listed in court filings. A detention hearing for Merrill is scheduled for Thursday.
The scheme was difficult even for sophisticated investors to detect, officials said. The men promised significant profits from buying up credit card and student-loan debt and then selling it to third-party debt buyers, they alleged. But instead of “flipping” the debt portfolios as advertised, the men faked documents to show phony wire transfers, bank statements and portfolio reports, prosecutors allege.
“They had reason to believe the money had been invested when it had actually been stolen,” the SEC’s co-director of enforcement, Stephanie Avakian, said of the investors.
Investigators received a tip about the alleged scam in the past year, according to FBI Special Agent in Charge Gordon B. Johnson.
Merrill, 53, and Ledford, 54, had worked together since at least 2013, at times selling genuine consumer-debt portfolios, according to court filings.
“These activities were dwarfed by the fraudulent scheme,” according to the SEC complaint filed in federal court.
Merrill operated without much staff and primarily through Delmarva Capital LLC, and Global Credit Recovery LLC. Investors relied on the men’s expertise to select debt portfolios and to collect on or resell the portfolios to make a profit.
Court filings describe how the money flowed: One investor, for example, wired $500,000 to Delmarva and received a document showing that the money had been used to purchase two debt portfolios. Instead, prosecutors say, more than $400,000 was used to pay earlier investors and $60,000 to pay off Merrill’s own credit card debt and to make payments to relatives.
A few weeks later, the same investor sent another $500,000. This time, Merrill wired $400,000 to a sports car dealership for the initial payment on a $2 million Pagani Huayra Diablo, court records show.
In all, the men are accused of diverting $73 million, including $25 million spent at casinos, authorities said. Merrill is listed in court papers as the owner of 25 high-end cars and motorcycles; six residential properties in Florida, Baltimore County and on the Eastern Shore; and a boat.
U.S. District Judge Richard D. Bennett has issued an order to appoint a receiver who will oversee the seized cars, homes, jewelry and other assets, with the hope, law enforcement officials said, that investors may see a return of some of their money.
Law enforcement officials said potential victims should contact the FBI at MerrillLedford@fbi.gov.