Cayman residents accused in US$300M Ponzi scheme

The US financial industry regulator has accused five people, including two Cayman Islands residents, of running a Ponzi scheme that raised more than US$300 million from some 1,400 investors between 2004 and 2008.

A US Securities and Exchange Commission complaint filed 30 January in US District Court names Fred Davis Clark (AKA Dave Clark), 54, of Grand Cayman and wife Cristal R Coleman, 39, along with three other defendants who reside in Florida, as former directors of Cay Clubs Resorts and Marinas.

While the civil filing identifies Mr. Clark as currently being involved in the Cayman Islands-based CMZ Group of companies, on Friday group chairman Keith Miles said Mr. Clark’s association with the group was recently severed as a result of the anticipated court filing.

According to a news release, the commission “charged five former real estate executives who defrauded investors into believing they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a Ponzi scheme”.

According to the filing, Mr. Clark was Cay Clubs’ co-founder, president and CEO, while Ms Coleman was a managing member and registered agent of certain affiliated entities. They were Florida residents from no later than July 2004 to at least January 2009, according to the filing.

Allegations

The commission alleges that the executives promised investors guaranteed returns of 15 per cent and future income through a rental program managed by Cay Clubs.

“But instead of using investor funds to develop resort properties and units, the Cay Clubs executives used new investor deposits to pay leaseback returns to earlier investors. Meanwhile, they paid themselves exorbitant salaries and commissions totaling more than US$30 million, and investor funds also were misused to buy airplanes and boats. While still advertising itself as a profitable venture, Cay Clubs eventually abandoned its operations. Many investors’ properties went into foreclosure,” according to the commission.

The commission alleges that US$1.5 million was diverted to “unrelated ventures, including gold mines, coal refining machinery, and a rum distillery”, and that Mr. Clark “transferred approximately US$2 million to accounts in the Bahamas and Cayman Islands to fund personal business ventures in precious metals, rum distilling, pawn shops, and further payments to his relatives.”

Mr. Miles, the chairman of CMZ Group Ltd. SEZC, said Mr. Clark was a shareholder but is no longer involved with the companies. Mr. Miles and one of his co-directors decided to buy out Mr. Clark after he notified them of the pending civil action.

“The deal was consummated earlier this week actually,” Mr. Miles said.

Please read the full story in next week’s editions.

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7 COMMENTS

  1. Should I fell unhappy about this. NO. Because the Government and the people of this Island, just deserve all the scandal. These people are not even Caymanians, however those that run this country is bowing to the ground feeding real Caymanians to the dogs of the outside world. Talk about McKeva Bush. He never done anything to hurt his people and as far as I am concerned he is the only man who deserves to continue holding up the torch for Cayman. Poor man, the Conspiracy, bet he is shaking his head now, and just waiting for all to take full controll of the flag, which will be handed to them on a platter anyway. Caymanians??? Who wants to be called Caymanian?. The name belongs to everyone who has made a phone call or set foot on this island.

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  2. They sold real estate for their real estate development company which went out of business in the real estate crash. The investors bought units and got units (condominiums). They did not invest in some fund. Now their development is owned by another developer (likely the ones who invested the funds for the development) and their units are worth less than anticipated (just like all real estate, world-wide) and they are understandably angry. Each buyer bought units, took out loans for financing through their personal lenders, and got real estate units. Then the banks stopped funding the projects but the developments are still there- the units are there:real, not intellectual or thought up properties. Many people were forced to forclose because they couldn’t afford to begin with but hoped to sell, as was the going trend. Many, many developers went out of business, including WCI, one of Florida’s largest. And each deveolpment was tied to a club lifestyle which offered the use of planes, marina slips and boats. Clark developed for over 25 years, including Mariner’s Club, Key Largo; Heron’s Glen in Fort Myers, Rolling River in Jacksonville and man
    y more. Now the SEC sees that he has regained his ability to move forward in business after several years (5) and government is now interested in a lawsuit. They lost everything,

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  3. These people might be currently resident in the Cayman Islands but they seem to be Americans. It would be nice if the article could be headed American crooks busted for Ponzi scheme instead of mentioning Cayman, as usual, in a negative light.

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  4. need investigating localy ASAP by customs ,police immigration ,lands and survey .pawn shops, distillery land purchaces and lots more to come.This same Ponzi scheme in other overseas territories as well get the Forigin office involved.

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