Genesis Fund Was A "Huge" Ponzi Scheme, Authorities Say
The arrest on Wednesday of three American fugitives hiding in Costa Rica was part of an operation that included the arrest of five others in Southern California on Friday, for a total of eight arrested in what authorities say was a "huge" Ponzi scheme.

The three men - Víctor Hawthorne Preston (65), John Sherman Lipton (59) and Richard Blake Leonard (72) - were wanted in the United States for fraud in excess of us$60 million dollars. The charges included federal fraud and tax evasion where hundreds of victims were duped into investing millions of dollars in a fraudulent offshore fund that claimed to invest money in highly profitable foreign currency trading, the U.S. Attorney's Office said Friday.

The other five defendants arrested in Southern California on Friday were identified as David L. Johnson, 66, Walnut; William H. Nurick, 69, Camarillo; William Taylor-Fraser, 57, and his wife Denise, 51, Riverside; Teresa R. Vogt, 51, Anaheim.

The eight defendants, along with a ninth who is a fugitive, were affiliated with the Genesis Fund, a defunct Anaheim-based private investment fund that the indictment calls a Ponzi scheme. The individuals now face an 83-count indictment, including charges of conspiracy, money laundering, obstruction of justice and tax evasion.

Those arrested included the manager and promoter of the fund and multiple Genesis Fund investors. Marlyn D. “Milt” Hinders, 65, a leading promoter and manager of the Genesis Fund is still at large.

The indictment said that between May 1998 and June 2002, the individuals raised $80 million from investors who were told that their money would be pooled and invested in foreign currency trading through a currency dealer in Hong Kong and Macau that had earned large profits for investors in the past.

The investors were contacted through promotional materials and account agreements. They were told the Genesis Fund didn’t have to report to the IRS.

But virtually all investor funds were used to make Ponzi payments to investors and to enrich the defendants, the U.S. Attorney’s Office said. Trusts and offshore bank accounts in Costa Rica and Belize were said to be used to receive payments made to the Genesis Fund.

In June 2002 – just weeks after telling investors that the Genesis Fund was worth $1.3 billion – investment, trading and payment in the fund were suspended. After the fund’s collapse, the defendants presented investors with a new plan to lull them into believing that there was hope of recovering their money.

The U.S. Attorney's Office said that the defendants didn’t maintain financial records so they could avoid scrutiny of the fund operations by investors and the government.

And in an effort to conceal the true nature of the Genesis Fund, the fund's administrative operations were moved from Anaheim to Costa Rica in April 2000. At that time, paper records and electronic data on computers were hidden or destroyed.