Prominent San Diego businesswoman Gina Champion-Cain pleaded guilty Wednesday to securities fraud, conspiracy and obstruction of justice for defrauding investors of $400 million through an authorized loan financing scheme.
"Champion-Cain admitted under oath in court that she was the mastermind behind a massive $400 million Ponzi scheme involving hundreds of victims from California and across the country," US Attorney Robert Brewer said at a conference. press office at the Front Street Building in downtown San. Diego on Wednesday, adding that "this is the largest system of its kind ever examined by this office."
After pleading guilty, Champion-Cain walked out of the US District Court in San Diego with his lawyer. NBC 7 reporter Artie Ojeda asked Champion-Cain if he had any comment on his admission to running what US Attorney Robert Brewer called "the largest Ponzi scheme ever discovered in this district."
"No, but thanks for asking," she replied.
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The former operator of the Patio Group restaurants misled investors into believing it had the ability to finance short-term, high-interest loans to people seeking California liquor licenses, according to the Securities and Exchange Commission.
The SEC said Champion-Cain will tell investors in American National Investment's development business that they could earn a return on each approved license. He falsified documents and allegedly used investor funds to finance or support his lifestyle.finance your other businessessuch as Patio restaurants, Saska's, coffee shops, lifestyle brands and rental properties, according to a complaint filed in August 2019.
Brewer said the program had a very real human cost that defrauded many older investors out of all their retirement funds, including one who was forced to file for bankruptcy after losing millions. He said Champion-Cain, 55, not only defrauded individual investors, but also defrauded banks and mutual funds.
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"A Ponzi scheme occurs when the criminal promises investors that they will invest money in a certain way and then breaks those promises," Brewer said Wednesday. "Instead of investing the money, they use the new investor's money for three main things: first, to pay other investors who exit or benefit from their investment. Second, to pay promised interest payments on previous investments, and third, , to divert money into his own pocket.”
Hundreds of people across the country fell victim to the alleged Champion Cain scam scheme of 2012-19. In total, an estimated $400 million "flowed into the program based on [Champion-Cain's] false testimony," according to the objection agreement.
"At least one of the victims was a financial institution that invested more than $1 million in the loan program and lost," prosecutors said in the plea agreement.
Champion-Cain used some of those funds to buy homes in Rancho Mirage and Mission Beach, with about $2 million going to pay his own salary, prosecutors said. A total of $840,000 was spent on Padres and San Diego Chargers tickets, about $200,000 on jewelry, three-quarters of a million on credit cards, and hundreds of thousands more on various expenses, including the purchase of a golf cart.
Prosecutors allege that Champion-Cain and his accomplices have made multiple attempts to obstruct their efforts, after learning of the SEC investigation in May and the parallel FBI investigation in August, including the change to the Email Retention Policy. and two other employees just 24 hours ago, virtually "except for a significant volume of emails in response to the SEC subpoena, many of which the defendant knew to be incriminating." In addition, in August, Champion-Cain ordered accountants to tamper with his personal spending records and, two days later, ordered other workers to shred large amounts of paper documents related to the loan program, knowing that those documents were also incriminating.
Brewer said Wednesday that Champion-Cain also forged documents and signatures and sent fake emails to investors.
"An investor who was suspicious of Champion-Cain contacted the Securities and Exchange Commission, who launched an investigation that uncovered the fraud, filed a civil complaint and contacted our office," Brewer said.
Surprisingly, as investigators closed in, between the days Champion-Cain ordered email sanitization and shredders activated, he tried to get another $150 million in loan program funds to fund his accounts. Banks that needed a cash injection to "hide the size and scope of the Ponzi scheme."
Please read the disclaimer below:
Alcoholic Beverage License Loan Program Scheme
The scam scheme began around 2012 when Champion-Cain first found an investor for a "loan program" to help new business owners obtain liquor licenses.
In California, an escrow account must be established to purchase a liquor license from an existing licensee. The money will be held until the license is approved or denied, a process Champion-Cain convinced investors was time-consuming and expensive for new entrepreneurs.
Champion-Cain provided interested lenders with a list of businesses "seeking credit for their liquor license." In fact, the list was bogus and full of companies he found on the Alcoholic Beverage Control (ABC) website with expired or canceled licenses.
These entrepreneurs are willing to pay high interest rates for short-term loans to obtain their license, Champion-Cain told investors. The mogul would handle the "negotiations" for the investors and put the notional loan on escrow to be returned to the business owners once the liquor license process was complete.
The first lender he unknowingly convinced to participate invested tens of millions of dollars in the program. According to prosecutors, a "significant number of individuals and organizations" have invested tens of millions in the system.
The scam involved other anonymous ANI employees, led by Champion-Cain, forging signatures using a stamp imprinted with the signatures of an escrow company's employees. On at least one occasion, Champion-Cain persuaded a royal trustee to sign more than 20 fake trust deeds to convince investors of the scheme's validity, prosecutors said.
To cover up its plan, Champion-Cain would prevent the trust company from interacting with investors. In an email to the trust company, Champion-Cain wrote: "I always promised you that I would protect you from my crazy investors..." as an investor. I have a lot of people who are dying to give me money, honey. !!Ahahahahahahahaha.:-I love you guys!
The lenders agreed to participate in the securities guarantee program. They were told their funds would be held on escrow, meaning their earnings depended on the success of the program.
To give investors an idea of its success, around $200 million was paid out to investors.
The former tycoon, who once dedicated himself to a day in the city of San Diego, faces up to 15 years in prison.
The prosecution's recommendation actually consists of three consecutive five-year prison sentences, for securities fraud, obstruction of justice and conspiracy, and a three-year supervised prison sentence. Under federal guidelines, his sentence ranges from 188 to 235 months in prison, Brewer said. She is also threatened with the confiscation of money and property and an order to compensate the victims.
While prosecutors said in the plea agreement that Champion-Cain "expressed a desire to provide significant assistance to the government in investigating and prosecuting others," they also said they had not yet assessed the value of this offer of cooperation. However, if they find the information about the co-conspirators valuable to them, "it could warrant a deviation from the sentencing guidelines."
Champion-Cain did not operate the massive fraud alone, prosecutors said. One of his co-conspirators, Crispin Torres Jr., pleaded guilty in connection with the case. Torres, who was an accountant and then chief financial officer at American National Investments, used his position to determine when Champion-Cain's companies needed the most cash from investor funds.
"The plea agreement contains the word 'co-conspirator' at least 10 times..." Assistant District Attorney Aaron P. Arnzen said Wednesday. "That leaves other co-conspirators out there."
Both Champion-Cain and Torres are scheduled to appear for sentencing on October 13.
What happened to the Grupo Pátio restaurants?
In light of the scandal, Cohn Restaurant Group (CRG) took over operations of some of the Patio Group's stores, including The Patio on Lamont in Pacific Beach, Surf Rider Pizza in La Mesa and Ocean Beach, and Saska's in Mission. Beach.
The Patio at Goldfinch in Mission Hills and Fireside by the Patio at Liberty Station were closed. The Mission Hills site was recently acquired by the operators of La Puerta in San Diego's Gaslamp District, who are expected to open a satellite site between October and February.
Champion-Cain has long been a respected member of the San Diego business community and has received numerous awards for his work.
These other San Diego-based ANI companies were also shut down as part of the Champion-Cain case:
- Bao-Strand, Missions-Strand
- Himmelbergs, East Village
- Compañía de surf de Mission Beach, Mission Beach
- Patio Express, Mission Beach
- Patio-Express-Mission Hills
- Swell Coffee Co., Del March
- Swell Coffee Co., Mission Beach
- The Farmers Market, La Jolla
- The Farmer's Market, UTC
- A life to surf, Mission Beach
A San Diego real estate investor is accused of defrauding dozens of victims out of $300 million through an alcoholic beverage license loan financing scheme. Reports Jackie Crea of NBC 7.
This is a developing story and will be updated as details are released.
How much time did Champion-Cain get? ›
At the time that the story broke, prosecutors said that the scheme drew “at least $372 million from over 490 investors.” In May 2021, Champion-Cain was sentenced to 15 years in prison.Where is Champion-Cain now? ›
A newbie restaurateur, Champion-Cain struggles to build a hospitality empire. But as expenses and debt mount, she masterminds an even bigger enterprise that for eight years was San Diego's best kept secret. Now she's in prison, and her victims still are out millions of dollars.Who was the biggest Ponzi scheme woman? ›
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A Florida woman touted as a 'Mother Teresa' ran a $196 million Ponzi scheme, feds say. MJ Capital Funding's website said that its founder, Johanna Garcia, was "often referred to as 'Mother Teresa' in her community." But federal authorities say Garcia was actually running a Ponzi scheme.Does Gina Champion-Cain have children? ›
Except for the length of the marriage — their 32nd anniversary was last week — and the fact no children are involved, the filing is unremarkable. But his wife's name makes the case compelling.Does pyramid scheme work? ›
Pyramid schemes are doomed to fail because their success depends on the ability to recruit more and more investors. Since there are only a limited number of people in a given community, all pyramid schemes will ultimately collapse. The only people who make money are those few who are on the top of the pyramid.What is the most successful pyramid scheme? ›
Bernie Madoff: The most famous Ponzi scheme in recent history—and the single largest fraud of investors in the United States—was orchestrated for more than a decade by Bernard Madoff, who defrauded investors in Bernard L. Madoff Investment Securities LLC.What was the worst pyramid scheme? ›
In 1986 the Dai-ichi Sōgo Keizai Kenkyūsho declared bankruptcy, leaving debts amounting to 189,600,000,000 yen. It has been called "the biggest pyramid scheme in history."What is Elizabeth Holmes penalty? ›
Elizabeth Holmes was sentenced to 11 years in federal prison last week in San Jose, Calif., after a jury convicted her earlier this year of defrauding investors through her former blood-testing company, Theranos.Who investigated Ponzi's returns? ›
The OIG investigation found the SEC conducted two investigations and three examinations related to Madoff's investment advisory business based upon the detailed and credible complaints that raised the possibility that Madoff was misrepresenting his trading and could have been operating a Ponzi scheme.
Who was Cain's Wife? ›
According to the Book of Jubilees, Awan (also Avan or Aven, from Hebrew אָוֶן aven "vice", "iniquity", "potency") was the wife and sister of Cain and the daughter of Adam and Eve.How many months does a pyramid scheme last? ›
In other words, the promoter is no longer able to pay back the investors. Therefore, the Ponzi scheme will last for up to 22 months.Who is the biggest pyramid scheme in the world? ›
2008: Tom Petters stole $3.65 billion through his firm, Petters Co. Inc. 2008: Bernie Madoff, former chairman of the Nasdaq stock exchange, scammed investors out of $65 billion, making it the biggest Ponzi scheme in history.Is crypto a pyramid scheme? ›
Bitcoin is not a Ponzi scheme because it does not rely on new investors to keep it going. Instead, Bitcoin relies on its own technology and network effects to maintain its value.”Who is the most famous scammer of all time? ›
Who is the biggest con artist ever? There have been several fraudsters and con artists in history, but none have been able to pull off what Charles Ponzi did. In 1920, he made nearly half a billion dollars (by today's valuation) in just over a year.Which state has the most pyramid schemes? ›
Utah has the highest rate of Ponzi schemes per capita in the United States, more than twice the rate of Florida, the next highest state, according to an analysis by a Salt Lake City investment fraud attorney.Can you get your money back from a pyramid scheme? ›
Often, the most viable way for Ponzi scheme victims to recover losses is to prove that their financial advisor recommended the Ponzi scheme to them and that they relied on their recommendation to make the investment. In these cases, we are able to sue the brokerage firm to recover damages.Is Mary Kay an MLM? ›
Mary Kay sells cosmetics through a multi-level marketing model. Mary Kay distributors, called beauty consultants, can theoretically make income by directly selling to people in their community, and also receive a commission when they recruit others to begin selling under their distribution network.
Ramesh “Sunny” Balwani, the one time second-in-command to disgraced Theranos founder Elizabeth Holmes, was sentenced to nearly 13 years in prison Wednesday as the saga of the blood-testing start-up draws to a close.How long will Elizabeth go to jail? ›
Seven years on from the exposure of her company Theranos's dubious scientific claims, Elizabeth Holmes finally received a sentence of 11 years and three months in jail at a San Jose courthouse on November 18.
Did anyone from Theranos go to jail? ›
A dizzying two decades of the Theranos saga has come to a close. After founder Elizabeth Holmes was sentenced to 11 years and three months in prison starting in April (after she gives birth to her second baby), only one loose end was left to be tied up—or locked up, rather.Why you shouldn't join a pyramid scheme? ›
Pyramid schemes are not only illegal; they are a waste of money and time. Because pyramid schemes rely on recruitment of new members to bring in money, the schemes often collapse when the pool of potential recruits dries up (market saturation).Are pyramid schemes beneficial? ›
Quite a few of the MLM schemes may look attractive and compel one to join the scheme. But hidden. behind them may be a pyramid scheme, which is not only illegal but detrimental to the person who joins the scheme. In fact, in each case it will be useful to tear the veil and see the actual modus operandi.Is pyramiding scheme illegal? ›
Pyramiding, per se, is not illegal. In fact, this is the most rapid way of expanding membership in any organization. It is the failure in the reciprocal exchange of value-for-value that makes it illegal and immoral. One basic feature of illegal pyramiding or a pyramid scam is deception.Do pyramid schemes still exist? ›
Many such schemes aren't quite as blatant or obvious as they once were, but they definitely still exist.