The Securities and Exchange Commission said Wednesday that it was freezing assets and pressing fraud charges against the operators of a South Florida-based Ponzi scheme that targeted hundreds of investors nationwide on YouTube and raised some $40 million.
The U.S. attorney in the area also announced criminal charges against the two individuals involved in the scam, which promised investors returns of 300% to 500% in four years if they invested in a product called “virtual concierge machines.”
The two individuals charged by authorities are Joseph Signore of West Palm Beach, Fla., who ran JCS Enterprises, and Paul Schumack II of Pompano Beach, Fla., who operated TBTI.
“Signore and Schumack touted VCMs as a revolutionary enterprise and fail-safe investment based on a stream of advertising revenue that would generate the guaranteed returns paid to investors,” said Eric I. Bustillo, director of the SEC’s Miami regional office, in a press release. “However, the advertising revenue was virtually nonexistent, and investors aren’t enjoying the riches touted on YouTube.”
The pair promised investors that their funds would be used to buy ATM-like machines that would be sold to businesses for use as product and service advertisements; the businesses would sell their offerings via touch screens and through printable tickets or coupons.
These ads would supposedly produce a revenue stream for investors. The two men and their companies, though, paid returns to earlier investors using money from newer investors rather than from ads. “Signore and Schumack also diverted millions of dollars in investor funds for their personal use and other unrelated expenses,” according to the SEC.