White Collar Crime Ponzi Scheme – R. Gregory Gibbs Pleads Guilty!

Facing 20 years in federal prison, R. Gregory Gibbs plead guilty to mail fraud in an investigation that uncovered a massive Ponzi scheme. Facts, as they appear in the US Attorney’s news release appear below:

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Gibbs admitted that he engaged in a scheme to defraud numerous individuals who had invested in Golden Summit, a business he owned and operated, a Foreign Currency Market (“FOREX”) Ponzi scheme. The FOREX is an over-the-counter speculative market in which buyers and sellers trade one currency for another. As part of Gibbs’s scheme, he would enter into loan agreements with investors who would loan Golden Summit money for a period of 12 months and, in return, Golden Summit promised to pay a guaranteed rate of interest of between 3 to 5% per month. From August of 2004 until March of 2007, pursuant to his loan agreement program, Gibbs accepted approximately $21 million of investor funds from approximately 150 investors located in 24 states across the nation.

Named after Charles Ponzi, a ponzi scheme is a fraudulent investment operation where high returns are promised to investors and usually paid out of other investors money rather than from profits generated from the investment promised.

Gibbs has acknowledged that although he initially believed that he could make good on his promises of paying investors a large return on their investments, by June of 2006, his sustained and rapidly growing FOREX trading losses made it apparent that he would not be able to do so. Despite this, Gibbs continued to accept new investor money and made false representations about his trading success and the safety of the client investments. Specific misrepresentations by Gibbs to many investors included his claim that the majority of the money that he traded in the FOREX was his personal funds. This statement led investors to believe that Gibbs had significant personal assets and that he could make good on his promised interest payments even if he experienced trading losses in the FOREX market. In truth, the vast majority of the money traded by Gibbs was investor funds. Gibbs made other misrepresentations to many investors to assuage their concerns regarding the safety of their investments, including his claim that he had enough personal assets on hand to pay all outstanding “loan” obligations – both principal and interest – if he became incapacitated or died. In truth, he had very limited personal assets – other than those purchased with investor funds – and his mounting trading losses made repayment of the outstanding loan obligations almost impossible given his sustained losses in the FOREX.

Of the approximately $21 million that Gibbs received from investors, he deposited approximately $7.2 million in a FOREX trading account and utilized these funds to make foreign currency market trades. He lost approximately $6.2 million of that money. Gibbs also paid other individuals approximately $1.4 million for referring investors to Golden Summit. In addition, he utilized approximately $1.75 million in investor funds for personal expenditures, including approximately $1.1 million spent building a luxurious home for himself and his family.

OBSERVATION: Most of the time in any white collar crime scheme, some portion of the money stolen seems to end up enriching the one (including the family) who committed the crime. As a white collar crime speaker, there is a general pattern of behavior that seems pleasant and pleasurable for a time. Yet, the final outcome – the consequences – are far more severe than any short term benefit received.

Consistent with typical “Ponzi” or pyramid scams, Gibbs made some payments of what he purported were returns on investments to certain investors. The payments were intended to convince the investors that the investments were sound and to conceal the significant FOREX trading losses. In fact, however, the payments were made from deposits from investors who had come into the scheme later.

COMMENTS are welcome. If anyone knew R. Gregory Gibbs or fell victim to his scheme, feel free to comment.

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17 Responses to White Collar Crime Ponzi Scheme – R. Gregory Gibbs Pleads Guilty!

  1. JBL says:

    Where is the missing Ten Million!!!!

  2. MLH says:

    And how/when will the remainder of the funds be disbursed??

  3. What a thief says:

    I feel bad for his children but he gets what he desirve. He was warned that this activity was illegal. Just so everyone knows, if you did business with him will has or will rat you out. He has ratted out several of his parners to reduce his time. JBL askes a good question. Where is the rest of the money? He should be held responsible to pay back each and every one of those people. MLH, I wouldnt hold your breath on getting the remainder of your funds back. You might be lucky to bet 10 cents on the dollar.

  4. Tamera says:

    His family has no idea the severity of what he did one membersaid he just did what the banks did and the banks were jealous.He is telling a whole nother story that he just didn’t have a license. He always did want to make a quick buck and not work for it.What about his wife she had to know something 6 bathrooms and an elevator no one is that dumb,Now a friend of his is building a unibuild home on a piece of land,how is his wife going to pay her bills she doesn’t work withe investors money

  5. Tamera says:

    When is gregg’s sentencing I hope everyone that has lost a dime will be at every parole hearing

  6. Dan says:

    Gibbs was a joke. He would always talk about how much money he made and would tell stories about how great his trading was. He fooled alot of people and claimed that he learned everything from Concorde Forex Group led by Don Snellgrove. Snellgrove would always say how great Gibb’s trading was and just follow the CFG method and you could be trading like Gibb’s one day. I guess so, Snellgrove was making a ton of money from the FXCM rebates on all of those trades that Gibbs shot off without even knowing how to trade. CFG is still in business but not sure how. This is the second guy that has been prosecuted after claiming that CFG was how they learned to trade.

  7. Gary says:

    The correct prototol in conducting a business of this nature is as follows: All placements received must go into Bank Account A. From Account A they are placed into a trading account with a recognized broker. As the account is traded, all earnings (if any) must go into Bank Account B. All monies paid to the clients and trader must be taken ONLY from Account B. If they’re no earnings, no one gets paid including the trader. This is referred to as a “money trail”. This prevents the “ponzi” issue, since no one is paid from new money coming in. The issue with most of these cases is that a trader will take in money and believe that they can provide the intended results with less than they take in. For example, a trader takes in 1 million but believes he can produce the promised return with only 600,000. The trader takes the remaining 400K and uses it personally. Later the trader has a bad trading week or month and needs the extra 400K which is no longer there and begins to use new money to meet the obligation. This appears to be what has happened in the Gibbs case. No matter the intention, an illegal ponzi takes place when new money taken in is used to pay existing clients. The larger issue in the Gibbs case is the use of Promissory Notes to conduct this type of business. The use of Notes plus the co-mingling of funds (all monies in one account) create an illegal business operation.

  8. Chester says:

    HOW far does this legal issue go into the people he paid to solicit monies for him? Can they be investigated and held accountable? i know his family and friends that were out padaling this scheme also … do they get off the hook? Some of his family was in on it … is it unreasonalbe to think that they would receive their money back before everyone else??

  9. It can go as far as the government wishes to take it. Either they could be convicted for the crime or possibly for conspiracy. Either way a conviction means prison.

  10. Chester says:

    Tamera, you say a friend or family member is now building a unibuild house ? was it down there close to new haven ? in that part of the state??? I knew some of their family and their friends. I heard that a new house was being built but never paid much attention…..

  11. Chester says:

    anyone heard about the hearing i think it was earlier this week ?? supposed to find out about restitution .. maybe

  12. Terry says:

    Does anybody know if Gregg has started serving his sentence?

  13. kathy says:

    well, here we go again! This is organized crime–instead of white collar crime! CRONEY-ISM INTHE CAPITAL AGAIN! SEEMS LIKE SOMETHING IS A LITTLE FISHY!!!!!

  14. JBL says:

    His family is living in a new home, wife drives a Cadillac.
    They visit every two weeks and the government pays while they sleep together.
    Word on the street is he hid plenty of money.
    His parents and friends benefited as well some getting their money back. I understand under the law that all distributed moneys are to go into a pool and be paid out.
    This has not happened.
    I do not have first hand knowledge of this other than the house and car.
    The point being 4 years in not a fair sentence he has ruined many lives and will be out soon.
    What is the incentive to do right?
    Seems like he made a few million to stay in jail for 4 years.
    A very sad state of affairs really.

  15. Debra Belian says:

    It appears that sometimes justice will out. He died in prison on December 10, 2010.

  16. rab says:

    He was let out of prison shortly after he found out he had cancer. His family(wife and children) have a very nice home, cars, suv…and monies for ‘all’ their interests.

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