The SEC recently filed a complaint against Daryl Heller, Prestige Investment Group, and Paramount Management Group alleging that Mr. Heller and the companies raised over $770 million from thousands of investors—leading to over $400 million in losses.
Heller was also arrested and charged with securities fraud and wire fraud in a parallel action by the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
According to the SEC’s complaint, Defendants told investors that their money would be used to purchase and run a network of ATMs. The fees from those ATMs would then ostensibly generate sizable returns for investors over time. But the SEC alleges that the ATMs failed to earn enough revenue to make the promised monthly payments. Defendants then sought money from new investors and used those funds to pay earlier investors instead.
The fraud had all the hallmarks of a Ponzi scheme: promises of jumbo-sized returns (in this case, up to 25%), unusual industries (ATM machines), and guaranteed, fixed monthly payments.
The problem with Ponzi schemes is they need constant inflows of new investors in order to keep existing investors paid and happy. Eventually, the fund gets too big to sustain itself and some people stop getting paid, which is usually when the scheme starts to falls apart. According to the SEC, that’s what happened here when, in April 2024, new investments dried up and payments to existing investors stopped. As with many such schemes, Defendants allegedly promised that they’d make good on their commitments but never did.
Heller also allegedly misappropriated $185 million worth of investor money for his own ends—money that investors will have a hard time clawing back because the scheme went on for so long.
Many investors and observers wonder, “how do these fake investments get so big and dupe so many people?” The answer is simple. Ponzi schemes often seem to work out great for early investors, who get paid fantastic returns and don’t look too closely under the hood as a result. But when these guaranteed payments are late or don’t come at all, investors start to pay close attention.
The Role of Ponzi Scheme Whistleblowers
Whistleblowers are critical to stopping Ponzi schemes. Ponzi scheme whistleblowers come from various backgrounds. Sometimes, they’re insiders at the company who believe in the product initially, only to eventually realize it’s a scam. Others are investment advisors who hear about the investment opportunity and take a close look at what’s being sold. But most commonly, they’re investors who realize something is wrong when the money stops coming in.
The SEC Whistleblower Program provides a mechanism for people to report concerns about securities fraud like Ponzi schemes. Eligible whistleblowers can get 10–30% of monies collected in enforcement actions with more than $1 million in sanctions—and that money comes from a separate fund, and doesn’t take away from harmed investors. Whistleblower tips are confidential, and those who report through an attorney can do so anonymously, which can be an important consideration when dealing with particularly shady schemes.
Outten & Golden LLP represents whistleblowers nationwide and can guide you through the SEC reporting process confidentially and safely. If you know about or suspect a potential Ponzi scheme, speaking up earlier means it might get stopped before it harms thousands of people.
