Claude Darrell McDougal, Securities Fraud, North Carolina 2014

A notorious Ponzi scheme operator has been slapped with a lengthy prison sentence. Claude Darrell McDougal, 56, formerly of Charlotte, North Carolina, was sentenced to 78 months in prison for orchestrating a massive Ponzi scheme that defrauded his investor victims of over $2.5 million.

According to court documents, McDougal induced over 25 investors in Charlotte and elsewhere to invest more than $2.5 million by promising his victims their money would be invested in securities, in the form of promissory notes offered by “US Financial Alliance Consultants, LLC” (Financial Alliance). McDougal created Charlotte-based Financial Alliance in 2005, a company that was never registered as a dealer of securities in North Carolina or elsewhere.

McDougal collected over $2.5 million dollars from victim-investors, many of whom were elderly and invested most, if not all, of their life-savings with him. Instead of investing the victims’ money as promised, McDougal squandered it. He invested only $580,000 of the victims’ money and used approximately $450,000 to pay some victims supposed “payouts” from profits made on investments. However, these payments were not based on profits, but came from funds contributed by new investors, commonly referred to as “Ponzi” payments.

Court records show that McDougal used approximately $1.19 million of the investors’ funds to support his own lifestyle, including to buy dinners, jewelry and electronics, and to pay for hotel stays, furniture and other business-related expenses. McDougal pleaded guilty to securities fraud in July 2014.

U.S. District Judge Max O. Cogburn, Jr. also ordered McDougal to serve two years under court supervision after he is released from prison and to pay $2,020,078.26 as restitution to the victims of his fraud. The case was investigated by the North Carolina Secretary of State, Securities Division, with assistance from the FBI’s Charlotte Division.

Special Assistant U.S. Attorney Kevin M. Harrington prosecuted the case. The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.

Defendant: Claude Darrell McDougal

Crime: Securities Fraud

City and State: Charlotte, North Carolina

Exact Date: July 2014

Sentence: 78 months in prison and 2 years under court supervision and $2,020,078.26 in restitution

Dollar Amounts: Over $2.5 million

Source: https://www.justice.gov/usao-wdnc/pr/ponzi-scheme-operator-sentenced-more-65-years-securities-fraud-charges