$300M Ponzi scheme targeted pension holders — many of them veterans, prosecutor says

A Ponzi scheme targeted pension holders, including many veterans, and scammed them and investors out of “roughly $300 million,” a U.S. attorney said Wednesday in a news release.

A federal indictment issued in Greenville, South Carolina, showed the national scheme “actively recruited pension holders who were desperate for money,” U.S. Attorney Sherri A. Lydon said in the news release.

Scott Kohn of Newport, California, and his company Future Income Payments (FIP) collected monthly payments from pensioners “in exchange for a lump sum payment or loan,” but it came with exorbitant interest rates, according to the news release.

Kohn is a felon who ran FIP “from a Nevada strip-mall mailbox,” the Wall Street Journal reported.

FIP then got investors to buy “structured cash flows,” which were actually the “monthly pension payments,” Lydon said in the release.

Investors were promised they would make a profit between 6.5 percent and 8 percent, but any money they saw came from new investors entrusting funds to FIP, Lydon said in the release.

FIP “essentially sold investors other people’s pensions,” the Wall Street Journal said.

The company stopped doing business in 2018, and “investors were owed approximately $300 million,” Lydon said of the scheme that “victimized” more than 2,600 people, according to the news release.

“The scheme alleged in this Indictment took advantage of pensioners facing difficult financial situations – including veterans of the U.S. Armed Forces – and preyed upon innocent investors to the tune of roughly $300 million,” Lydon said in the release.

This type of investing is different from traditional stock market transactions and was called an “opaque private market,” by the Wall Street Journal.

Lydon called it criminal, and Kohn, along with FIP, are facing conspiracy charges that it engaged in mail and wire fraud, according to the news release.

Kohn pleaded guilty in 2006 to three felony offenses related to trafficking in counterfeit goods, Investment News reported.

If convicted on these charges, the maximum penalty Kohn would face is a 20-year prison sentence and a $250,000 fine, according to the news release.

“Along with our federal, state, and local partners, the U.S. Attorney’s Office for the District of South Carolina will continue to aggressively prosecute those who seek to line their own pockets by robbing individuals of their hard-earned money,” Lydon said in the news release.

Lawsuits have been filed against stockbrokers, financial advisers, financial planners and insurance agents for their roles in the scheme, according to Investment News.

This story was originally published March 27, 2019 at 6:38 PM.