The U.S. Securities and Exchange Commission has charged Dallas-Fort Worth residents Kenneth W. Alexander II, Robert D. Welsh, and Caedrynn E. Conner for operating a Ponzi scheme that raised at least $91 million from more than 200 investors.
“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.”
According to the SEC, between approximately May 2021 and February 2024, Alexander and Welsh operated the scheme, which they called the Vanguard JV Cash Program, through a trust controlled by Alexander called Vanguard Holdings Group Irrevocable Trust, or VHG. The SEC has alleged that Alexander and Welsh promoted VHG as a highly profitable international bond trading business with billions in assets and told investors that the monthly returns were generated from international bond trading and related activities. They also told investors that VHG would have a 14-month term, and they falsely represented that investors would receive 12 guaranteed monthly payments of between 3% and 6% per month. In actuality, according to the SEC’s complaint, investor funds were used to make these payments.
In July 2022, Alexander and Welsh authorized Conner, an early VHG investor and promoter, to create a related investment program that he operated using Benchmark Capital Holdings Irrevocable Trust, or Benchmark, which he controlled. The complaint stated that Conner raised approximately $54.9 million from investors, more than $46 million of which he funneled through Benchmark to VHG.
Additionally, according to the complaint, Alexander and Welsh also offered investors the option to protect their investments from risk of loss through the purchase of an alleged financial instrument they called a “pay order.” Those who purchased the “pay orders” entered into “pooling agreements” with a supposed “fiduciary” owned and controlled by a longtime associate of Alexander and Welsh. The SEC stated that, in reality, VHG had no material source of revenue, the purported monthly returns were actually Ponzi payments, and the protection offered by the “pay orders” was illusory.
The SEC continued by stating that, throughout the course of the Ponzi scheme, Alexander misappropriated millions in investor funds for personal use, while Welsh received more than a million dollars of investor funds. For his part, Conner also misappropriated millions in funds, including the purchase of a $5 million home, according to the complaint.
The scheme started to fall apart in 2023 when VHG and Benchmark stopped paying the purported guaranteed monthly returns. Throughout 2023, the three made various false excuses, such as blaming banks and attorneys, for the failure to make payments, and, ultimately, the scheme resulted in millions of dollars of losses for investors.
The SEC’s complaint, filed in the U.S. District Court for the Eastern District of Texas, charges Alexander, Welsh, and Conner with violating the antifraud and registration provisions of the federal securities laws. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against each of the defendants.
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