The Securities and Exchange Commission announced it has charged three Texas residents with defrauding hundreds of investors through a $91 million Ponzi scheme.
The defendants were identified as Kenneth W. Alexander II, Robert D. Welsh, and Caedrynn E. Conner of Dallas-Fort Worth. The SEC’s complaint, filed in the U.S. District Court for the Eastern District of Texas, spans a period of alleged misconduct from May 2021 to February 2024.
The commission alleges that Alexander and Welsh operated the fraud scheme through a trust controlled by Alexander called Vanguard Holdings Group Irrevocable Trust (VHG).
The defendants reportedly claimed VHG was a highly profitable international bond trading business with billions in assets whose trading and related activities would generate steady returns for investors.
Over 200 investors were told that they would receive 12 guaranteed monthly payments of between 3% and 6% per month, with the principal investment to be returned after 14 months. The complaint said that investors were paid not from bond trading, though, but with funds from other investors.
The SEC alleged that Conner funneled more than $46 million in investor money to VHG through a related investment program that he operated using Benchmark Capital Holdings Irrevocable Trust (Benchmark), which he controlled.
Alexander, Welsh, and Conner allegedly offered investors the option to protect their investments from risk of loss through the purchase of a purported financial instrument they called a “pay order.”
But the SEC states that in reality, “VHG had no material source of revenue, the purported monthly returns were actually Ponzi payments, and the protection offered by the ‘pay orders’ was illusory”. Alexander and Conner are accused of misappropriating millions from the investor funds for their personal use, including Conner’s purchase of a $5 million home. Ultimately, investors lost tens of millions of dollars due to the VHG and Benchmark schemes.
“As we allege, the defendants conducted a large-scale Ponzi scheme that caused devastating losses to investor victims, while Alexander and Conner misappropriated millions of dollars of investor funds,” said Sam Waldon, Acting Director of the SEC’s Division of Enforcement. “We remain unwavering in our commitment to hold individuals accountable for defrauding investors.”
Alexander, Welsh, and Conner were charged with violating the antifraud and registration provisions of the federal securities laws. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against each of the defendants.
Lewitas Hyman routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655 6002 or through our online contact form for a no-cost evaluation of your matter.
