A federal judge in Utah has imposed more than $44 million in sanctions against two men and their companies in an operation that at times appeared to use pyramid schemes operating alongside Ponzi schemes to garner investor monies.
U.S. District Judge Bruce Jenkins entered a default judgment against Houston attorney Robert J. Andres and former Utah resident Robert Holloway.
The U.S. Commodities Trading Commission sued the two, Andres’ company Winsome Investment Trust and Holloway’s U.S. Ventures, saying they took in at least $50 million from 243 or so people to invest in a commodity futures pool run by Holloway.
They traded only a portion of the funds and, in doing so, suffered losses of about $10.7 million. Instead, according to the 2011 lawsuit filed in federal court in Salt Lake City, Holloway used funds to pay for unrelated business expenses and for personal items, including houses, cars, home furnishings, jewelry, lawn and maid services and his wife’s credit card bills.
The two also used funds to pay returns to some investors in what is known as a Ponzi scheme.
Wayne Klein, a Salt Lake City attorney who is the court-appointed receiver over the companies, has said money was fed to U.S. Ventures from other entities that acted like pyramid schemes, with commissions flowing through various levels as investors recruited others into the scheme. Some of those other entities also were Ponzi schemes, he said.
Winsome also claimed a number of questionable and even wildly fantastic assets, including a 40 percent interest in a “Safekeeping Receipt” from the Union Bank of Switzerland, which it said represented 500 metric tons of gold having a face value of $7.7 billion, Klein said.
Jenkins ordered the two men and their companies to repay defrauded investors $12 million and imposed a fine of about $32.4 million.
Holloway, a former Salt Lake area resident now living in California, declined to comment on the judgment that was ordered when the two men and their companies did not defend themselves against the allegations in the lawsuit.
Andres could not be reached for comment.
The U.S. Attorney’s Office for Utah has been prosecuting criminal cases against the two. Andres was indicted on five counts of wire fraud, and Holloway on four counts of wire fraud and one count of making and filing a false income tax return.
Holloway is set to go to trial in late July. Andres pleaded guilty to one count of wire fraud and is awaiting sentencing.