Victims of a $1 million-plus Ponzi scheme based in Durango last week expressed anger and humiliation at losing thousands some even tens of thousands of dollars.
The Durango Herald was provided with a list of about 70 people who invested in the scheme including at least 20 from Durango. The list includes the amount invested by each individual, ranging from a few thousand dollars to more than $100,000.
The documents were given to the Herald by a source who requested anonymity.
Only a handful of victims agreed to speak about the scheme, and some spoke on the condition of anonymity, saying it is a private matter and they are embarrassed by what happened.
One lifelong Durango woman confirmed she lost about $100,000. As a result, she nearly lost her home and was forced to go back to work after retiring, said the woman, who declined to be identified. She had to cope with a range of emotions, from depression to anger, she said.
We lost a lot of money, she said. Its been a very rough four years.
It totally affects your lifestyle, she added. You cant go to the grocery store and buy groceries like you were used to doing. Simple things like that.
Two former Durango men have been indicted by a federal grand jury on suspicion of running the Ponzi scheme that netted at least $1.2 million.
Frederick H.K. Baker and Mark W. Akins are charged with wire fraud, conspiracy to commit wire fraud and making false statements. They are named in an 80-count indictment filed last month in federal court.
Baker, who had moved to Utah, made an initial court appearance in Utah and appeared Thursday in federal court in Denver.
Akins was arrested Thursday night in Chicago. He is set for a detention hearing Wednesday in federal court in Chicago, said Jeff Dorschner, spokesman with the U.S. Attorneys Office in Denver.
In a Ponzi scheme, investors are promised high returns on an initial investment, but instead of earning actual profits, organizers use money paid by subsequent investors to pay off earlier investors. The system eventually collapses.
One of the largest and most famous Ponzi schemes was run by Bernard Madoff, who was sentenced in June 2009 to 150 years in prison. Federal prosecutors said the fraud involved about 4,800 clients and $64.8 billion.
Investors in the local scheme said they were promised 8 to 12 percent returns per month on their investments. Based on those rates, if someone invested $10,000 and earned 10 percent per month while letting the interest accrue, the investment would increase more than 200 percent, to $31,384, in one year.
Steve Christensen of Southern California said he lost about $10,000.
Eight to 12 percent a month do the math, he said during a telephone interview. Were we gullible? Absolutely, positively. Were we greedy? Absolutely, positively.
The investment opportunity seemed too good to be true, said Russ Morris of Farmington, who lost between $10,000 and $15,000.
But victims said it seemed credible for several reasons:
b The conspiracy ran from June 2006 to June 2008, when the economy was strong and Wall Street was leading the charge.
b Akins was a good salesman, and he personally guaranteed initial investments.
b Investors saw 8 to 12 percent returns during the first few months of investing.
b New investors vouched for its legitimacy and encouraged friends to join.
The Durango woman who lost about $100,000 said she was introduced to the investment opportunity by a friend, and in turn introduced others.
I encouraged other people to do it because I thought it was such a great deal, she said. So I suffered the humiliation of that.
According to the 21-page indictment, Baker was portrayed as a successful investor who had developed an algorithm for online currency trading. He allowed only select friends and family to invest, but he wanted to remain anonymous with most investors.
Akins acted as a gatekeeper, deciding who would be allowed to invest and vouching for its legitimacy, the indictment says.
Investors were instructed to set up e-Bullion accounts, an electronic means to transfer funds between accounts. (The service has since been shut down.)
As the scheme progressed, interest payments were delayed with a series of excuses. The Herald was provided with a transcript that organizers were said to have used to alleviate investors concerns.
According to the script, when interest payments were delayed, investors were told the funds had been held up because of a jurisdiction problem between the United States and Portugal. They were told the matter had been resolved on the U.S. side but not by Portugal.
Investors were assured when the money was unlocked, they would receive 23 to 26 percent on their investment.
Christianson, who invested $10,000 in the fund, said he received two interest payments, one for $800 and one for $1,000. After that, he lost access to the money, he said.
Christensen said he was good friends and hunting buddies with Mark Akins and his brother.
Mark Akins guaranteed Christensens initial investment, he said, but became highly agitated when confronted about problems.
None of the victims interviewed for this story are optimistic about recovering their funds.
Morris, who lost between $10,000 and $15,000, said he blames himself.
My greed got in the way, he said. The thought of early retirement and easy returns and that kind of thing plays a role.
The Durango woman who lost about $100,000 said she believed the investment was legitimate for longer than most people. She began investing in October 2006 and kept putting money in until May 2007, she said.
You get a return the first month, and its substantial, she said. Its better than anything else youre doing, so then you take more money and you drop it in there.
Everybody is so upbeat and so wonderful, and youre one of the chosen few who get to be in it, she added. For me, it was just kind of like, finally, Im getting some breaks in my life.