Financier Accused of $50M Ponzi-Style Investment Scam

Federal prosecutors in Manhattan have charged financier Paul Regan with fraud, alleging that he defrauded over 300 investors out of at least $50 million. Prosecutors say two companies Regan ran, Yield Wealth and Next Level Holdings, operated "like a Ponzi scheme, using money obtained from earlier investors to pay later investors and to pay commissions to salespeople." Regan promised investors double-digit "guaranteed" returns, the Wall Street Journal reports. He was indicted on securities and wire fraud charges in April, following a series of Journal articles on his businesses, but the indictment wasn't unsealed until last week, when the Securities and Exchange Commission filed a civil suit.

Regan's firms lured investors with promises of "guaranteed" annual returns as high as 15%, telling one client that insurance on the investments was like "a bulletproof vest." However, disclosures obtained by the Journal pointed to significant risks, including the possibility of total loss. Prosecutors say proof of insurance provided to investors was often forged or nonexistent. Prosecutors say Regan and his associates did not actually invest clients' money as advertised, instead diverting it for personal expenses and other unauthorized purposes.

Adding to the red flags, Regan failed to inform investors that he had previously been barred from the securities industry and fined for allegedly forging documents and stealing $140,000 from an elderly client with dementia. Most of Yield and Next Level's investments were sold by insurance agents not licensed to sell securities. After the Journal's first report, Regan dismissed the allegations to his sales team and encouraged business as usual. Salespeople told the Journal last year that they were in debt and desperate to earn commissions that ran as high as 21%.

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Regan is believed to be living in Colombia. Last week, a federal court in New York authorized authorities to share the indictment with law enforcement agencies to facilitate his arrest and extradition.