Nevada Seniors Accused of Running $29.5 Million Sports Betting Ponzi Scheme
Posted on: September 4, 2019, 02:57h.
Last updated on: September 5, 2019, 01:36h.
The SEC has filed fraud charges against two septuagenarian ex-convicts from Henderson, Nevada for allegedly bilking investors out of $29.5 million in a fraudulent sports betting mutual fund.
John F. Thomas, 74, and Thomas Becker, 72 were imprisoned in the 1990s for operating a pyramid scheme involving a shell company that pretended to supply copy machines to financial institutions. And according to the civil filing in US District Court for the District of Nevada this week, the pair have been up to their old tricks.
According to the SEC, Thomas and Becker employed a network of sales agents and investment brokers who were paid commission to recruit around 600 investors over five years from more than 40 states. Victims were promised $500 percent to $1,200 returns thanks to a “proprietary handicapping system,” which was a “low-risk way to triple your funds in less than six months,” the pair claimed.
In reality, they spent less than 15 percent of the total haul on sports betting and even then they inflated their results, SEC alleges. The remaining 85 percent went to “fund Thomas and Becker’s lifestyles, pay commissions to brokers and agents, or make Ponzi payments,” according to the filing.
The “system” – as it was described in promotional materials – involved using multiple parlay bets or round robins, which are far from “low risk” propositions and generally eschewed by professional gamblers.
Nevertheless, the pair continued to make outrageously false claims, such as “[w]e grow money a million times faster than Warren Buffet . . . actually we grow it a quadrillion times faster.”
What’s a Sports Betting Mutual Fund?
Sports betting mutual funds were legalized in Nevada in 2015. The new rule essentially allowed the state’s sports books to accept pooled investment from out-of-state entities. They’re essentially “hedge funds” but capital is wagered on sports using professional betting systems rather than invested in securities.
Lawmakers hoped this would bring more money into sports books, but many operators found the regulations onerous and the proposition risky, preferring not to accept the funds at all.
Thomas and Becker allegedly defrauded investors through six companies which are named in the suit as Einstein Sports Advisory LLC, QSA LLC, Vegas Basketball Club LLC, Vegas Football Club LLC, Wellington Sports Club LLC, and Welscorp Inc.
Some of the duo’s most successful investment brokers are also named as defendants, among them 90-year-old Fairfax, California resident Paul Hanson, who earned $281,800 in commission during his involvement in the scheme.
The SEC only brings civil cases, although these can be precursors to criminal prosecution by the Department of Justice, as was the case with another Nevada-based Ponzi scheme last year.