SEC freezes assets of Colorado-based diamond-themed ponzi scheme
Tuesday, November 23, 2010 at 11:31 am
The Securities and Exchange Commission announced Tuesday that it obtained an emergency court order to freeze the assets of Golden, Colorado-resident Richard Dalton, who the SEC alleges has been running a Bernie Madoff-style Ponzi scheme. As head of Universal Consulting Resources LLC, Dalton allegedly told investors he was using their money as leverage to secure loans to “purchase and sell bank notes” to finance a diamond trading business. It was the kind of convoluted program that only friends and family could sell and, according to the SEC, it sold well by word of mouth alone.
Dalton appears to have taken in roughly $17 million over the last three years. He paid returns to investors out of new investment money the scheme attracted. There was no other revenue source. He never traded any diamonds or purchased or sold any bank notes. He did, however, use the money he grifted in the scheme to buy a mouthful of shiny white teeth, a million-dollar house, a car and to pay for his daughter’s wedding.
From the SEC release:
The SEC alleges that Richard Dalton and Universal Consulting Resources LLC (UCR) raised approximately $17 million from investors in 13 states for two fraudulent offerings that were generally referred to as the “Trading Program” and the “Diamond Program.” Investors in both programs received monthly payments which Dalton told them were profits from successful trading. However, there is no evidence to substantiate the $10 million in claimed profits from the two programs, and the vast majority of funds that came into UCR bank accounts were from new investors instead of actual profit-generating activity. Dalton used money from new investors to fund the monthly payments to existing investors while continuing to recruit new investors in order to keep his scheme going. Meanwhile, Dalton stole investor funds to purchase a home and a vehicle and pay for his daughter’s wedding reception.
Investors often learned of Dalton through a friend or family member who had previously invested with him. These new investors placed great weight on the fact that someone they knew and trusted received regular monthly payments from Dalton. Some investors even invested funds from their self-directed IRA retirement accounts.
“Dalton made his Ponzi scheme falsely appear profitable by continuing to bring in new investor money,” said Donald Hoerl, Director of the SEC’s Denver Regional Office. “Investors should be skeptical when someone promises low risk and high guaranteed returns, and focus on the details of the investment being offered rather than the lure of profits paid to friends and family.”
The full complaint filed by the SEC is available here as a pdf.
The documents available online here seem to be phony letters put out by Dalton concerning African diamond purchasing to back up his scheme. They’re addressed to Base Tanzania Ltd. and concern “Purchasing White Rough Diamond Parcels.” Dalton demonstrates his enthusiasm in the fake purchases by punctuating his intentions with an exclamation point.
“Universal Consulting Resources LLC, has full intention and financial ability to
purchase ”white rough diamonds”. The following is a specification of the rough
diamonds that we intend to purchase on a monthly basis!”