Raymond Morris, Attorney Luc Nguyen and Others Charged in a $60 Million Ponzi Scheme Based in Utah
[Post updated] The United States Securities and Exchange Commission has charged Raymond Morris with an offering fraud. Morris, a Draper, Utah, resident is charged with defrauding investors out of at least $60 million. His attorney, Luc Nguyen, was also charged.
According to the federal complaint filed, Morris sold unregistered and non-exempt promissory notes to dozens of investors between March 2007 and January 2009. Investors were told they were investing in “risk free” high-yield notes. The principal was to be deposited into a secure account and only used for “verification of deposit” purposes. Leveraging the money in the account, Morris promised returns of 20% per month.
In some cases, Morris promised returns as high as 100% in 7 days. That is an annual rate of return of over 5200%. We remind everyone, if it sounds too good to be true, it probably is.
Morris guaranteed the deposits would never leave his account. According to the SEC, Morris used the money to purchase a luxury home and several sports cars. Like most Ponzi schemes, Morris also used a portion of the money to pay early investors who wished to cash out.
Fraudsters will frequently pay a few investors the promised rate of return. These happy customers create an illusion of safety for the investors that follow.
Morris Had help, Attorney Luc Nguyen Also Charged
Morris isn’t the only one charged in this Ponzi scheme. He had help. The government has charged James Haley, Jay Linford, Cornerstone Capital Fund and Vantage Point Capital with selling the bogus high yield notes. Morris’ own lawyer, Luc Nguyen, was also charged in the scheme.
The feds say that Nguyen personally vouched for the investment and said he independently reviewed it to insure its legitimacy. We bet he never told his friends and investors that he received $330,000 in commissions. This is in addition to the $58,000 he received for related legal work.
The SEC says Luc Nguyen told investors that he had invested his own money in the fund. All false says the SEC.
We are always concerned when licensed professionals such as lawyers get involved in Ponzi schemes and frauds. Inexperienced investors often look to lawyers, accountants, financial planners and investment advisors for advice.
According to records from the Utah Office of Professional Conduct, Luc Nguyen resigned from the Utah Bar. His records show that he “resigned with discipline pending.” That usually means the lawyer chose to resign rather than face disbarment.
The official records of the state show,
On April 10, 2013, Mr. Nguyen pled guilty to a one-count felony Information of Money Laundering, admitting that during 2007 and 2008, he solicited and induced investors by making false representations regarding the nature of the investment and the risk involved. Mr. Nguyen made payments to many investors and represented that these payments were profits generated by private traders without personally verifying that any private trader existed. He also created the misleading impression that the company was able to meet all of its business obligations when he was aware that the company was actually not able to do so. Additionally, Mr. Nguyen transferred funds to his personal bank account and used the monies to pay his personal expenses without disclosing this information to investors.
Others Charged in Ponzi Scheme
Although every Ponzi scheme has common characteristics, the greed in this case is exceptional. The government says that co-defendant James Haley was himself scammed by Morris, although that didn’t stop Haley from compounding the fraud.
Prosecutors says that Morris told Haley that he had come across an “exclusive investment opportunity” started by the owner of the Houston Astros. The fund was closed to new investors and was claimed to have generated 20% monthly returns for the preceding 8 years. Conveniently, Morris called Haley several days later and said one of the investors had died creating an opening.
Without performing any due diligence, Haley began soliciting investment funds from his friends and neighbors. The government says that Haley simply repeated Morris’ ridiculous claims. At some point, Haley crossed the line from negligence and became an active fraudster himself by telling later investors that he “owned” the fund.
The greed still doesn’t end. Morris met co-defendant Jay Linford at an investor seminar. Not satisfied with claims of 20% returns in just 30 days, Linwood raised another $1 million by telling some investors that the fund paid returns as high as 100% in just 7 days. That is an annual rate of return of over 5000% without compounding!
No Ponzi scheme can last long with the rates that Morris and the others were advertising. The scheme began to unravel in April 2008 when some investors were unable to cash out. Morris began spinning a variety of tales including a story that “Homeland Security” had frozen the accounts. By October of 2008, Morris was allegedly forging phony bank statements in an effort to buy time. Even while the fraud was unraveling, Morris continued to take in additional funds.
The government has charged the group with multiple counts of securities fraud. The FBI and local officials are assisting in the investigation.
Unfortunately many of the investors who lost their money had minimal net worth and marginal earnings. Some even borrowed money to fund their investment. Many lost their entire life savings. Because the actors weren’t working for a legitimate brokerage firm, there isn’t any insurance coverage.
Luc Nguyen’s legal malpractice insurance probably won’t help either. Typically malpractice insurance doesn’t cover victims who are not clients nor does it cover intentional fraud or criminal behavior.
[Note: This story is based on court records and published reports. The case was just filed on January 7th of 2011]
Updates: It didn’t take long for the government to swoop in and end the madness. Unfortunately by then investors had lost an estimated $80 million. The SEC barred Morris from having any involvement in the securities industry but that was the least of his problems. Morris was also ordered to pay $83 million in restitution. That sum remains unpaid.
How to Avoid Becoming a Victim of Investment Fraud
20% per month returns? 100% in just 7 days? “Risk free” investment? A lawyer vouching for the investment? Just because someone tells you something does not mean that it’s true.
Investors should always verify. First, someone selling investments should be licensed. Simply because you are a lawyer (or financial planner, insurance agent, etc.) does not mean you can sell investments. We urge everyone to check the Financial Industry Regulatory Authority’s BrokerCheck website to see if they are licensed and if they have any disciplinary history. BrokerCheck is free and easy to use.
You can ask for trading records and/or bank accounts. [We recognize that sophisticated crooks will fabricate these records – an example is Bernie Madoff.]
Ask to talk to other investors. But beware that frequently Ponzi schemers will pay early investors to lull others into feeling the investment opportunity is safe and legitimate.
We have also seen victims lulled into a false sense of security because the fraudster was a member of a church or religion in which the investor identifies. These so called “affinity frauds” are very effective in breaking down barriers. Once again, simply because you are a Mormon and the fraudster claims to be a Mormon (or any other religion doesn’t mean its true or that they are honest.) Greed has no boundaries.
One more tip. If you are unsure or have questions about an investment you can always ask an independent financial professional for a review.
Despite all these tips, people lose millions everyday. If you lost money, visit our investment fraud recovery page for helpful information on how to recover your funds. If your claim involves a lawyer, visit our sister legal malpractice site. Don’t be embarrassed. Most of our clients are sophisticated, sophisticated people that simply trusted the wrong person.
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Brian Mahany and the stockbroker fraud lawyers at Mahany Law understand securities fraud. We concentrate in securities arbitrations, fraud recovery, asset recovery and other complex frauds. Brian has over 27 years experiences including experience as a securities principal, prosecutor and white-collar criminal investigator. We have the experience and inside knowledge and know how to recover your hard earned money.
For a no obligation, no nonsense evaluation of your case, contact Brian online by email at or by phone at (202) 800-9791.
(Mahany Law limits its fraud recovery services to losses of $1 million or more. If the fraudster is a licensed attorney or stockbroker, we will consider smaller cases. If you losses don’t quite make those thresholds but are close, call us. We may still be able to help or find someone who can.)