The brother of an El Dorado Hills man who allegedly orchestrated a massive Ponzi scheme has been hit with a civil fraud suit by the Securities and Exchange Commission.
Eric Nelson, of Provo, Utah, was recently named in an SEC civil fraud suit for his purported role in a $16 million Ponzi scheme thought to have been engineered by his brother.
El Dorado Hills man Joseph Nelson, Eric Nelson’s brother, is suspected of soliciting at least $16 million from more than 100 people who invested in promissory notes offered by Joseph Nelson and his associates between 2005 and 2010, according to the SEC.
Joseph Nelson was previously charged by the SEC in June 2010. As of press time, the case was still pending in Utah’s U.S. District Court.
Now, brother Eric Nelson is accused of creating fictitious documents that Joseph Nelson and his associates used to mislead investors, according to an SEC complaint.
Eric Nelson is thought to have created fictitious bank account statements reflecting balances in his brother’s accounts that were far in excess of the actual amounts, which deceived investors about the continued viability of Joseph Nelson and his companies.
According to the SEC’s complaint, many of the purported victims are members of the Church of Jesus Christ of Latter-day Saints in Utah. Joseph Nelson is thought to have targeted his investors through church connections and during church functions.
Joseph Nelson and his partners reportedly lured investors by offering “extraordinary rates of return.” Investors were given promissory notes guaranteeing annual returns of 14 to 60 percent with an additional premium of 20 to 60 percent at maturity.
Some investors were simply told that they would double their money, the complaint alleges.
Investors were apparently told that the El Dorado Hills man, through his companies, would purchase “merchant portfolios” of credit card processing accounts, hold them for a certain period of time and then sell the portfolios to financial institutions, such as banks, for a profit.
But Joseph Nelson and his companies, later deemed to be non-existent, never purchased or sold a single merchant portfolio, the SEC claims.
The money invested with Joseph Nelson was instead used to make incremental payments to investors in a Ponzi scheme fashion, to pay his business associates and to pay his own lavish personal expenses, according to the complaint.
E-mail Jim Ratajczak at [email protected] or call 530-344-5069.