San Diego RCFL Supports Successful Ponzi Scheme Prosecution
8/4/11: San Diego RCFL Supports Successful Ponzi Scheme Prosecution
Brothers Matthew La Madrid of San Diego and Lance La Madrid of Arizona pled guilty in San Diego Federal Court for executing a $30 million Ponzi which resulted in losses of $20 million - $50 million to investors, including approximately 300 San Diegans. The San Diego RCFL (SDRCFL) devoted hundreds of hours to the complicated financial investigation.
On its website, the FBI stated that Ponzi schemes promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, the con artist pays "dividends" to initial investors using the funds of subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of "dividends."
According to court records and the defendants' admissions in court, Matthew La Madrid fraudulently solicited more than $30 million from investors for use in "covered calls" stock option trading. He promised high rates of return and purposely misled them into believing their investments were profitable by sending monthly account statements that reported fictitious brokerage account values and trading returns. Instead of investing the money, La Madrid used the new funds he received to make monthly payments to earlier investors and secretly funneled more than $7 million to a bank account that he controlled in the name of Vision Quest Investments. Matthew La Madrid also admitted to fraudulently obtaining investor funds by falsely promising to secure real estate investments with promissory notes and recorded deeds of trusts. Prosecutors said the deeds of trusts were not recorded, causing investors more financial losses when the properties purportedly securing the notes were sold. Moreover, Mathew La Madrid admitted to obtaining millions of dollars for his investment programs by fraudulently securing mortgage loans for himself and others.
In press reports, investors said they didn't expect to see their money returned, but they did want the La Madrids to go to prison. On July 28, 2011, Matthew La Madrid was sentenced to 10 years in prison; three years of supervised released; and ordered to pay over $23 million in restitution. Lance La Madrid was sentenced on August 4, 2011 to 30 months in prison and ordered to pay $831,218 in restitution.
Prosecutors said sentencing hearings remain for several other co-conspirators who pled guilty.
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