Too Good to be True

With the economy slowly on the rise, new investors need to be weary of people like Alan James Watson. Watson, 47, from Clinton Township, Michigan, was recently sentenced to 12 years in prison for fraudulently receiving over $40 million dollars from investors in his ‘investment club’.

Using the name Cash Flow Financial LLC, Watson’s investment club was advertised as having a guaranteed rate of return of 10% per month. Despite the fact every investor should know there is no such thing as a guaranteed return, let alone one of 10% per month, people fell for it. Over 900 people stretching from Virginia to California succumbed to Watson’s fake promises and ended up losing it all.

Here’s how it worked: Watson told investors that their money would be invested through an equities-trading system developed by an expert consultant, Trade LLC. In reality, of the $40 million Watson received, only $6 million ever made its way to Trade LLC. Watson invested the rest of the money in miscellaneous, high-risk ventures without the consent of the investors and ended up losing all $34 million.

Despite this enormous loss, Watson continued to falsify monthly account statements and investors continued to believe they were making serious money. He kept investors on the hook by operating a Ponzi scheme, where initial investors were paid off with subsequent investors’ money.

When it was all over, Watson was found guilty of wire fraud and asked to forfeit $36,615,344. The US Commodity Futures Trading Commission (CFTC) has recently filed civil charges against him as well, stating he improperly used investors’ money for personal gain.

To learn more or see the original article, please visit: http://www.risk.net/operational-risk-and-regulation/news/2112462/investment-club-manager-guilty-usd40-million-fraud

If you have questions about false or fraudulent activity, contact Mark Mandell at 248/380-9976.