Paul Horton Smith Sr., Ponzi Scheme, California 2024

Multi-Million Dollar Ponzi Scheme Unravels in Riverside County

A brazen Ponzi scheme that lasted nearly 20 years and swindled over 200 investors out of more than $24 million has finally come to an end. Paul Horton Smith Sr., 59, of Moreno Valley, pleaded guilty to one count of wire fraud in a Riverside federal court.

According to the plea agreement, Smith operated several companies, including Northstar Communications LLC, Planning Services Inc., and eGate LLC, out of Riverside. From July 2000 to May 2020, Smith solicited investments from individuals, many of whom were elderly or retired, by promising them a fixed rate of return on their investment. In reality, Smith deposited all investor funds into a non-interest-bearing checking account and used the money from later investors to pay earlier investors’ monthly interest payments and to repay those who wanted to withdraw their investment.

The scheme came to light when one victim invested $400,000 in April 2019, only to have Smith transfer the funds to pay off other investors. The victim was eventually paid back $163,324, but 106 victims have not been fully repaid, resulting in a total loss of $13,331,505.

Smith faces a statutory maximum sentence of 20 years in federal prison when he appears before United States District Judge Jesus G. Bernal on April 1. The FBI investigated the case, with assistance from the United States Securities and Exchange Commission.

The case is being prosecuted by Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office.

As the investigation revealed, Smith’s scheme was a classic example of a Ponzi scheme, where returns are paid to existing investors from funds contributed by new investors, rather than from profit earned. This type of scheme is unsustainable and will eventually collapse, leaving many victims in its wake.

The authorities are urging anyone who may have been a victim of Smith’s scheme to come forward and report their losses. The case serves as a reminder of the importance of conducting thorough due diligence before investing in any company or opportunity.

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