Michigan Man Who Claimed Investment Returns Of 131 Percent Guilty In Ponzi Scheme Case; Mark Richard Hamlin’s Day-Trading Scheme Comparable To ASD’s Dangerous ’80/20′ Reinvestment Program

ponziblotterAs Ponzi schemes go, it was far from the largest. But the case of Mark Richard Hamlin demonstrated that even smaller operators use Ponzi schemes to fuel personal spending that consumes an extraordinary percentage of investors’ funds.

Hamlin’s day-trading scheme in Michigan gathered about $2 million from at least 90 investors between 2005 and 2008, when it collapsed. Of that, Hamlin used $668,000 for his personal expenses, the SEC said.

Investors’ funds were dumped into Hamlin’s personal bank accounts, the SEC said.

“[He] used investor funds to pay, among other things, $66,150 for rent and other rent
related payments, $67,919 for automobiles, $12,708 for jewelry, $14,185 for his wedding,
$9,543 for vacations and travel, and $58,553 for cash withdrawals,” the SEC said in May.

Now Hamlin has pleaded guilty to wire fraud in a criminal case brought by the FBI and U.S. Attorney Donald A. Davis of the Western District of Michigan.

Hamlin, 28, of Williamston, Mich., faces up to 20 years in prison and a restitution order expected to exceed $1.3 million at his sentencing. The sentencing date was not immediately clear.

“Hamlin admitted at his plea hearing that he set up a stock trading company known as Kingdom First Trading (KFT) and solicited investors by promising higher than market rate returns,” prosecutors said. “Hamlin consistently lost money in trading, and concealed his insolvency by e-mailing fraudulent account statements to his investors.

“The statements falsely assured investors that they were earning sizable profits and accumulating large balances,” prosecutors continued. “Hamlin further concealed his insolvency by diverting money from new investors to pay ‘earnings’ to earlier investors. As a result, investors left their money with Hamlin, and in some instances contributed more.”

Despite assertions that his trading had earned a return of 131 percent in 2005, 116 percent in 2006, 50 percent in 2007 and 17.22 percent in the early part of 2008, Hamlin suffered losses in each of the years — and hid the losses while collecting money from investors to make Ponzi payments.

“Hamlin’s investments realized losses of $18,118 in 2005, $267,372 in 2006, $218,591 in
2007, and $140,781 from January 2008 through June 2008,” the SEC said. “His trading was profitable during only nine of the 39 months of the offering, generating a total of $22,150 in profit.”

During its relatively short lifespan, the scheme sustained itself because investors wooed by Hamlin’s bogus claims kept reinvesting their paper “earnings,” prosecutors said.

The same thing happens in autosurf Ponzi schemes, which often encourage participants to take out only a small percentage and plow their fictitious balances back into the scheme to preserve a surf’s cash flow.

Ponzi enablers position themselves as experts when rendering such advice, which often is described as an “80/20” program. Both the AdSurfDaily and AdViewGlobal autosurfs pitched 80/20 programs, and both federal prosecutors and private attorneys have made veiled references to the reinvestment schemes in court filings.

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