Arley Ray Johnson has been sentenced to six and a half years in prison for conspiracy, wire fraud, and securities fraud charges, in connection with a $28m (£23.1m, €26.2m) Ponzi scheme involving wealth management and financial literacy company 1st Million.
According to US Department of Justice, Johnson “conspired with his co-defendants, including Dennis Mbongeni Jali and John Erasmus Frimpong to defraud investors through several related entities including The Smart Partners LLC, which did business as 1st Million Dollars or 1st Million”.
Johnson served as the chief operating officer for 1st Million, which was headquartered in Maryland, US.
Investment contracts
The DoJ said 1st Million offered a 12-month guaranteed investment contract. These investment contracts, entitled ‘corporate guarantees’, said that the client would be invested in foreign currency or cryptocurrency and guaranteed individuals who invested money with 1st Million monthly returns ranging from 6% to 35% of the initial investment.
At the end of the investment period, the contract promised that the investor would receive the return of all of the principal invested. In reality, 1st Million did not invest victims’ funds as promised and, instead, misappropriated the funds for themselves and used the funds to keep the scheme afloat, including using funds from new investors to repay existing investors.
In addition to misrepresenting that victim funds would be used to invest, Johnson and his co-defendants “also falsely stated that investors’ principal would be held in a trust account protected from any financial instability of 1st Million or market volatility, but in fact, victim funds were not placed in a trust account or otherwise guaranteed”, the DoJ added.
The US government body added Johnson and his co-defendants “falsely claimed that 1st Million was financially healthy and earning astronomical profits, but 1st Million’s accounts, some of which were controlled by Johnson, were frequently overdrawn and 1st Million had substantial cash flow problems, all of which Johnson and his co-conspirators concealed from investors”.
Over the course of the conspiracy, Johnson and his co-defendants persuaded or attempted to persuade more than 1,200 victims from across the US to provide them with wire transfers, checks, and cash totaling more than $28m, from numerous victims.
The DoJ said evidence proved that although the victims were promised tremendous returns on their investments, Johnson and his co-conspirators “did not invest any of the money, instead using it to fund their own lifestyles and to perpetuate the fraud scheme”.
Pleaded guilty
Frimpong previously pleaded guilty to a wire fraud conspiracy, conspiracy to commit securities fraud, and to securities fraud. Frimpong’s sentencing hearing has been scheduled for 10 February 2023.
The DoJ added: “Jali fled the US in May 2019, but has since been arrested in South Africa.”
Separate civil actions filed against Johnson and his co-defendants by the Securities and Exchange Commission and the US Commodity Futures Trading Commission remain pending.
