This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
A Draper man who is facing criminal fraud charges and a lawsuit by federal regulators admitted to one of his alleged victims who is out $2 million that he is "delusional" and a "compulsive liar."
"I am all those terrible things," Andrew Dean Kelley said, according to court documents. "I have turned into a monster."
Kelley, 41, was arraigned on Wednesday on a criminal complaint alleging securities fraud and also appeared in federal court for a hearing on a lawsuit brought by the Securities and Exchange Commission.
The SEC lawsuit filed this week in U.S. District Court alleges Kelley and Paul H. Shumway, 47, Lehi, took at least $3.1 million from investors under false pretenses beginning in about September of 2014.
Instead of earning returns in futures trading of up to 300 percent in a year as Kelley claimed, Blackbird Capital Partners LLC was allegedly operated as a Ponzi scheme and monies also went for personal and business expenses, the SEC alleges.
Judge Tena Campbell extended an order freezing bank accounts connected to Blackbird and set a hearing for Jan. 6 to decide on whether to issue a preliminary injunction that would keep some or all of the monies under the freeze.
The criminal complaint, signed by FBI Special Agent James Malpede, also cites conversations Kelley had with a second investor who put about $1.1 million into Blackbird and with an undercover agent posing as a potential investor.
Bank and trading records show that Kelley used monies from new investors to pay current investors, the sign of a Ponzi scheme, and they also reveal "substantial trading losses," Malpede wrote.
Margaret Olson, an attorney who represented Kelley at the hearing on the SEC lawsuit, declined to comment on the cases.
According to the criminal complaint, Kelley told potential investors that he had developed a sophisticated software program for trading futures that generated a 300 percent return the first year he used it. He also said that his trading fund had only two losing months in three years and he was a family man and faithful member of the LDS Church.
But, according to the SEC complaint, Kelley actually made no trades prior to June of 2016 and then suffered substantial losses for the four months in which he did trade. Kelley told an investor he had lost $6 million.
At the Wednesday hearing, attorneys for Shumway sought the release of funds so that he could hire legal counsel. They argued the cases don't allege specific wrongdoing by Shumway but only Kelley.
"None of them says anything about Mr. Shumway doing anything wrong," attorney Daniel Hill told Campbell.
But SEC attorney Amy Oliver pointed out Shumway is named as a manger on business registration records and also as a signer on some Blackbird bank accounts.