RIVERSIDE, California
A Riverside County man was sentenced Monday to 15 years and eight months in federal prison for running a nearly 20-year Ponzi scheme
The scheme fraudulently obtained more than $24 million from at least 200 investors.
Paul Horton Smith Sr., 61, of Moreno Valley, received a sentence from United States District Judge Jesus G. Bernal, who also required him to pay $13.3 million as restitution.
Smith pleaded guilty on Jan. 8 to one count of wire fraud.
“Paul Smith’s clients trusted him. Smith knew that and used it to his advantage, selling them on a bogus investment opportunity and pocketing those funds,” said Akil Davis, Assistant Director in Charge of the FBI Los Angeles Field Office. “The fact that the bulk of his investors were seniors, men and women alike, and in various stages of vulnerability, makes this case all the more heartbreaking.”
Smith operated Riverside-based companies named Northstar Communications LLC, Planning Services Inc., and eGate LLC.
From July 2000 to May 2020, the evidence indicates that Smith solicited money from investors, often targeting elderly or retired individuals, for an investment scheme he called “Northstar.” Some of these investors were former clients of his planning services business.
Smith communicated with his victims in person, over the phone, and through email and text, falsely claiming that Northstar was either an annuity or a real estate and stock market investment.
He assured investors that their money was safe and would generate a fixed return.
In reality, Smith never invested the funds. Instead, he deposited all investor money into a non-interest-bearing checking account. He used money from new investors to pay interest and withdrawals to earlier investors, typical of a Ponzi scheme.
For instance, in April 2019, Smith convinced one victim to invest $400,000 in life insurance proceeds, promising a safe investment with a 5% return. However, he diverted the funds to pay other victims. Smith made 11 payments to this victim to cover his tracks, totaling $163,324.
Smith’s scheme defrauded more than 200 investors out of over $24 million. To date, 106 of these victims have not been fully repaid, resulting in a total loss of $13.3 million.
The FBI investigated this matter.
The U.S.
Securities and Exchange Commission, which filed a complaint and obtained a judgment against Smith and Northstar Communications LLC in 2020, provided assistance.
Assistant U.S. Attorney Benjamin J. Weir of the Riverside Branch Office prosecuted this case.