Dinn, Hochman & Potter, LLC

SEC takes on Ohio Ponzi scheme

On May 29, the Securities and Exchange Commission filed a lawsuit against a group of several individuals involved with a Ponzi scheme in Ohio. An Akron-based group, KGTA Petroleum, was reportedly comprised of residents from the northeast area who employed a scheme to fraudulently obtain approximately $21 million from 50 victims. The SEC filed a lawsuit with the U.S District Court for the Northern District of Ohio in an effort to recover restitution for investors and request civil penalties against the defendants.

KGTA, seven individuals and two consulting businesses are named as defendants in the suit. Each of the consulting businesses is owned by one of the defendants individually named in the lawsuit. The SEC claims that two of the defendants created KGTA, a fake corporation that claimed to buy oil and other fuel at a discount and resold it for significant profit. The lawsuit claims the defendants said there would be no exposure to market risk and that the investors would receive a 2 to 4 percent return in each month.

According to the SEC, the KGTA front was a Ponzi scheme and the defendants never followed through with any of the escrow safeguards guaranteed. The defendants were allegedly using funds collected from investors to payout the fraudulent returns. The lawsuit claims the defendants also used investors' funds to withdraw more than $200,000 in cash, as well as pay off country club dues and car payments.

From Oct. 8, 2012 through February 2014, the defendants collected $20.7 million from investors. Some of the defendants are named for their part in identifying investors and facilitating the transactions. The victims involved in this case may have benefited from having a business litigation attorney conduct due diligence on the proposed investment.

Source: The Plain Dealer, "Akron-based Ponzi scheme took in $21 million from investors, SEC lawsuit says", Evan MacDonald, June 21, 2014

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