Feds say that investors were promised short-term returns of up to 130 percent annually so that the earlier investors could be paid. The alleged mastermind, Matthew Jennings of Yorba Linda, is also accused of diverting some of the funds into his personal accounts. The $53 million scheme operated under the name "Westmoore." From the press release:
According to the SEC's complaint filed in U.S. District Court for the Central District of California, Jennings operated a corporate shell game through Westmoore, directing the movement of funds among Westmoore's various accounts to prevent the collapse of the scheme. Jennings treated these accounts as one integrated account from which funds, regardless of their source, could be used as necessary to pay investors promised returns. The SEC alleges that Westmoore did not tell investors that it had to rely on proceeds from new investors to pay existing investors. Instead, investors expected that their funds would be used for investments that might ultimately generate returns if the underlying business succeeded.