Three Texas men ran a Ponzi scheme that raised at least $91 million from more than 200 investors, the Securities and Exchange Commission alleges.
Kenneth W. Alexander II, Robert D. Welsh, and Caedrynn E. Conner, all of Dallas-Fort Worth, are charged with violating antifraud and registration provisions of the federal securities laws, according to an SEC news release.
Alexander and Welsh carried out the scheme from May 2021 to February 2024 through Vanguard Holdings Group Irrevocable Trust, which was controlled by Alexander, authorities said. The pair told investors they would get 12 guaranteed monthly payments of between 3% and 6%, and the principal would be returned after 14 months, according to the SEC. Alexander and Welsh claimed that VHG was a highly profitable international bond trading business with billions in assets that generated returns from bond trading and related activities, authorities said.
Conner allegedly sent more than $46 million in investor funds to VHG through Benchmark Capital Holdings Irrevocable Trust, which he controlled. All three men also offered an option to protect investments from loss through a purported financial instrument they called a “pay order.”
In reality, VHG had no source of revenue, the monthly “returns” were actually Ponzi payments, and the “pay order” protection was illusory, according to the SEC.
Alexander and Conner diverted millions in investor funds for personal use, including purchase of a $5 million home by Conner, the SEC alleges.
“As we allege, the defendants conducted a large-scale Ponzi scheme that caused devastating losses to investor victims, while Alexander and Conner misappropriated millions of dollars of investor funds,” said Sam Waldon, Acting Director of the SEC’s Division of Enforcement. “We remain unwavering in our commitment to hold individuals accountable for defrauding investors.”
The SEC has charged Alexander, Welsh and Conner with violating the antifraud and registration provisions of the federal securities laws. It is seeking permanent injunctive relief, disgorgement of fraudulent gains with prejudgment interest, and civil penalties against each of the defendants.
