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Fraudulent Investment Clubs Among Latest Financial Scams

Despite warnings state and federal law enforcement and securities regulators, investment fraud schemes continue to grow across the country, damaging lives and producing thousands of dollars in financial losses for their unsuspecting victims.

One recent fraud scam involves so-called investment clubs.  In this case, the scam amounted to $36 million. One of the perpetrators, Christopher Jackson, 46, recently was convicted in a federal trial in Sacramento for his participation in the scheme known as Diversified Management Consultants, or DMC.

According to court documents, between 2003 and 2009, DMC purported to help people invest money in real estate development and save their homes from foreclosure. In reality, authorities said, DMC was an investment fraud scheme that defrauded at least 180 people out of approximately $36.9 million.

U.S. District Judge Troy L. Nunley ordered Jackson remanded into custody immediately after the jury’s verdict. Jackson is to be sentenced April 10.

Jackson’s accomplices, Michael Bolden; Victor Alvarado; Nicholo Arceo; Erica Arceo; and Garry Bradford – all of Sacramento – have pleaded guilty to charges of conspiracy, wire fraud and false statements. They are currently awaiting sentencing.

Court documents and evidence produced at the trial show that DMC was an umbrella for the various defendants’ investment clubs. The defendants induced people to invest their ordinary savings, tax-deferred retirement savings and proceeds of cash-out residential loan refinancing. They told investors that their money would be used to purchase property and buildings for a real estate venture. Instead, the victims’ money went to pay other investors’ fake returns on investments and to pay for the defendants’ personal expenses, including a luxury lifestyle, authorities contend.

As reported by the Sacramento Bee on Jan. 23, Jackson was the “closer” among the DMC participants. His investment club – Genesis Innovations – recruited approximately 80 investors and took in more than $10 million. Many of Jackson’s victims invested all of their retirement savings with him based on his promise of a high interest rate and very little risk. Out of the $10 million, Jackson invested no more than $2.5 million in developing real estate, authorities said.

The rest of the money was allegedly used by Jackson to pay false returns to other investors and to live in a way that Jackson himself compared to an entertainment or sports star. He used the Genesis Innovations account to drive a Lamborghini, a Rolls Royce, a BMW and a Land Rover. He also employed a personal chef and a bodyguard, who at times carried a metal briefcase in which Jackson carried cash.

In addition, Jackson took annual trips to Las Vegas, where he paid for an entourage of guests to join him at the finest hotels and restaurants, authorities said. He also spent more than $1 million on purchases, including jewelry and landscaping his house, with all the money coming out of the investment club account.

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