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Regulation and Compliance > Litigation

Leader of $310M Ponzi Scheme Involving Hundreds of Advisors Gets 10 Years in Prison

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What You Need to Know

  • From April 2011 until April 2018, a nationwide Ponzi scheme targeted military veterans and older investors.
  • The defendants worked through a network of hundreds of financial advisors and insurance agents across the U.S.
  • Thousands of retired investors were solicited to buy structured cash flows from Scott Kohn and his co-conspirators.

The mastermind behind a nationwide Ponzi scheme that stole over $310 million from military pension holders, retirees and others was sentenced to 10 years in prison on Thursday, according to court documents and the Justice Department.

Judge Bruce Hendricks of the U.S. District Court for the District of South Carolina also ordered Scott Kohn, 68, of Newport, California, to forfeit $297 million and be placed on supervised release for three years after completing his prison term.

From April 2011 until April 2018, Kohn and his co-conspirators targeted military veterans in desperate financial situations and older investors who sought a safe retirement investment, the Justice Department said.

‘Hundreds’ of Advisors Involved

The Justice Department indicted Kohn and the company he ran, Future Income Payments (previously Pensions, Annuities, and Settlements), on March 12, 2019, alleging the defendants, working through a network of “hundreds” of financial advisors and insurance agents across the U.S., solicited thousands of retired investors to buy structured cash flows from Kohn and FIP.

Kohn and his co-conspirators used FIP as a vehicle for the Ponzi scheme, according to the Justice Department, which said the structured cash flows became the pensioners’ monthly payments.

Pensioners facing financial distress, most of whom were military veterans, were offered an upfront lump-sum payment in exchange for an assignment of the rights to their monthly pensions and disability payments, according to the Justice Department.

Although the transactions were identified as “sales,” they were actually loans with annual interest rates as high as 240%, the Justice Department said.

Kohn and his co-conspirators lured investors with false assurances of a significant rate of return on their investments, while concealing the usurious nature of FIP’s transactions and lying about the financial health of the corporation, according to the Justice Department.

During the seven years the scheme operated, Kohn drew upon FIP funds to enjoy a lavish lifestyle, the Justice Department said.

The Scheme Collapsed

When the Ponzi scheme finally collapsed, Kohn and his co-conspirators had caused more than $310 million in losses to more than 2,500 retirees and had placed over 13,000 veterans into exploitative loans, according to the Justice Department.

“These hundreds of millions in losses will reverberate through the victims’ lives long after the defendants serve well-deserved federal prison sentences,” Adair F. Boroughs, U.S. attorney for the District of South Carolina, said in a statement.

Four other defendants previously pleaded guilty to conspiracy for their roles in the Ponzi scheme.

They were: Kraig S. Aiken, 53, of Rancho Santa Margarita, California, who pleaded guilty on Nov. 20, 2019; David N. Kenneally, 59, of Greenville, South Carolina, who pleaded guilty July 22, 2020; Melanie Jo Schulze-Miller, 40, of Peoria, Arizona, who pleaded guilty Dec. 11, 2020; and Joseph P. Hipp, 52, of St. Louis, Missouri, who pleaded guilty Dec. 21, 2021.

Sentencing hearings were not yet scheduled for those co-conspirators, according to Boroughs.

A Wave of Lawsuits and a Felon on the Run

Before the Justice Department’s indictment, a series of lawsuits were filed nationwide in August 2018 as part of an effort to help swindled investors retrieve the money they invested in the sham pension scheme concocted by Kohn, a felon who was on the run from the law at the time.

The law firm Peiffer Wolf Carr & Kane initiated a coordinated wave of five lawsuits targeting the purported legitimate financial professionals who made the FIP scheme work.

On Sept. 13, 2018, the Consumer Financial Protection Bureau filed a complaint against Kohn and multiple entities of his over the same alleged scheme, claiming they violated the Consumer Financial Protection Act of 2010 and the Truth in Lending Act.

In September 2019, Kohn was apprehended in San Diego by U.S. Marshals, according to court documents and the Greenville News.

Among the advisors and brokers allegedly involved in the FIP scam was Dee Dee Brooks. In June 2020, the Financial Industry Regulatory Authority barred the ex-Signator Investors broker from associating with any FINRA member in any capacity for engaging in undisclosed and unapproved private securities transactions totaling more than $1.77 million between July 2016 and December 2017.

The Brooks transactions included investments related to the FIP and Woodbridge Group of Companies Ponzi schemes, according to FINRA.

Broker Kari Bracy was among the others tied to the FIP scheme. FINRA barred her after she refused to appear for on-the-record testimony as the industry self-regulator requested in connection with its investigation of Bracy’s sale of a FIP structured cash flow investment consisting of pension streams.

Scott A. Kohn Wanted by FBI Kohn was apprehended in San Diego by U.S. Marshals in 2019.  


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