SEC Charges Sister of Convicted Ponzi Schemer

September 30, 2017 by Kevin S. Kim, Esq.

The Securities and Exchange Commission filed a complaint against Cheryl L. Jones, a Washington D.C. based realtor and sister to convicted Ponzi schemer Mark Jones. The SEC alleges that Cheryl Jones recruited a number of her colleagues and friends to invest with her into her brother’s bridge loan scheme, personally walking away with more than $1.3 million, while other investors lost millions.

The complaint, filed in federal court in Boston, details how Cheryl Jones put in $875,606 into her brother’s bridge loan operation between 2007 – 2015, and walked away with 100 percent of her investment “as well as additional payments totaling $514,912 that she received from her brother,” the court documents read.

The SEC claims that through her acts, Cheryl Jones engaged in the offer or sale of unregistered securities.

Mark Jones was sentenced to 70 months in prison in March for the Ponzi scheme. He was also ordered to pay $3.9 million in penalties. Court documents describe how Mr. Jones convinced some 25 investors to pay money directly to him, told those investors he was using the money as bridge loans for Jamaican businesses and promised 15 to 20 percent annual return on their investment.

The SEC says that instead of using the funds for loans as promised, Jones was actually depositing the money into his individual bank accounts and using the cash for his personal use.

“He explained to investors that routing their funds through his account would reduce paper work and shield them from undue economic risks,” the complaint states. “In return, he provided investors with his promissory notes and personal guarantees.”

Through falsified documents, Mark Jones was able to convince investors that he had regular communication with the borrowers when he traveled to Jamaica. He reported that the bridge loans were secured by collateral, when in reality, according to the SEC, “there were virtually no bridge loans.”

Cheryl Jones was one of the first investors in her brother’s scheme and soon began to recruit individuals she believed had money to invest, even traveling to Jamaica with one investor to meet with her brother, the SEC alleges. Miss Jones recruited investors, eased concerns and answered questions regarding their money, and guided her brother on how to keep the investors calm when they began inquiring about financials statements.

“On February 4, 2013, when Mark Jones failed to send periodic account statements to his investors, she emailed him suggesting that he ‘reinstitute that practice to keep people calm,’” court documents describe.

Miss Jones also purportedly received a monthly “legal retainer,” which at one point was as high as $7,000, by her brother for services rendered to him for the bridge fund. The SEC says Cheryl Jones was well aware that the cash she received “far exceeded” the value of any actual legal services she offered to her brother.

The SEC’s complaint charges Cheryl Jones with violating Section 5 of the Securities Act of 1933. The SEC seeks a permanent injunction against Cheryl Jones, payment of civil penalties, and disgorgement of any illegal financial gains related to the bridge loan scheme.