Prosecutors Bring Charges Over Massive Ponzi Scheme

Prosecutors in the U.S. Attorney’s Office for the Southern District of New York have brought conspiracy, securities fraud, wire fraud and other charges against Paul Regan alleging he masterminded a Ponzi investment scheme that scammed more than 330 investors out of more than $63 million. In addition to these criminal charges the SEC also filed civil securities fraud charges against Regan related to the same activities.

Regan sold his phony investments through his companies Next Level Holdings LLC, Yield Wealth Ltd and Yield Capital Management. Among the products he sold were The Super High-Yield Term Deposit LP and the Mega High-Yield Term Deposit LP

Super High- Yield Term Deposit LP was a limited partnership that purported to offer investors fully insured deposits with annual percentage yields of up to 14 percent.

The Mega High-Yield Term Deposit was represented to be a private fund offering investors insured term deposits with annual percentage yields of up to 14%

He claimed that the term deposits and limited partnership interests would provide guaranteed annual returns as high as 14% for three-to-ten-year terms. The basis for these payments he claimed would come from profits generated by the purchase and sale of unrefined, Columbian sourced precious metals as well as term deposits that generated profits by investing in health insurance policies purportedly issued under the Affordable Care Act and guaranteed by the federal government.

Affordable Care Act policies cannot be traded by third parties and the federal government doesn’t sell or repurchase Affordable Care Act insurance coverage.

The SEC complaint details Regan telling his investors that their investments were fully insured saying “We are the first and only company in our sector that has been able to secure investment-grade insurers who are removing risk from our investors by issuing financial guarantee insurance to our investors, thereby making our offering essentially risk-free” even telling one prospective investor according to the SEC complaint that the insurance policy was a “bulletproof vest” that provided “all the melatonin you could wish for a good night’s sleep.. enjoying 12-15% in perpetuity every single year.”

Next Level did not obtain insurance for the vast majority of notes and did not maintain insurance for any of them. Instead, the complaint alleges he sent investors forged surety bonds and forged insurance documents.

Regan solicited investors both directly and through a network of forty insurance brokers paying them commissions as high as 15%. Regan provided scripts for the insurance brokers selling his products. According to the Wall Street Journal, the insurance agents he hired to help sell the securities were not licensed to do so.

Ultimately the funds provided by investors were not invested in either precious metals or Affordable Care Act policies According to the complaints, Regan operated his investment operation as a Ponzi scheme in which he made payments to early investors with money from later investors primarily using the invested funds to advance his own lifestyle and to pay commissions to sales people who sold the investments on his behalf.

U.S. Attorney Jay Clayton commented, “As alleged, Paul Regan promised high returns but, in reality, he simply used money from new investors to pay off old investors.”

The Wall Street Journal reported that Regan never told his investors that he had been barred from the securities industry for life in 2004 by FINRA and had been fined by Oregon state securities regulators for forging documents including the signature of a client’s dead wife and stealing approximately $140,000 from an elderly client suffering from dementia in 2005. Additionally the SEC complaint indicates he pleaded guilty in 2017 to fraud charges in Florida related to the sale of promissory notes that promised guaranteed returns.

The lesson here is a simple one. No one should ever invest in anything they do not fully understand nor invest with anyone without doing research on the person offering the investment. In this case it would have been a simple matter to determine that investing in Affordable Care Act policies was impossible and anyone who looked into Regan’s history would have found that he had been barred for life by FINRA.

FINRA’s Central Registration Depository will tell you if the broker you are considering investing with is licensed and if there have been disciplinary procedures against him or her. You can also check with your own state’s securities regulation office for similar information. Many investment advisers will not be required to register with the SEC but are required to register with your individual state securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators