$7 Million Taken From Investors : Maddox Pleads Guilty in Precious-Metals Scam
In an abrupt about face, Michael Maddox pleaded guilty Friday to a federal indictment charging him with taking $7 million from investors in a precious-metals swindle.
The San Clemente resident had conducted a vigorous defense, writing letters to the media alleging that authorities illegally eavesdropped on his telephone conversations after his arrest in March.
Maddox, 40, pleaded guilty to five counts of mail and wire fraud. He faces a maximum penalty of 25 years in prison, $5,000 in fines and unlimited restitution orders when he is sentenced in August by U.S. District Judge Consuelo B. Marshall.
Maddox’s firm, Goldex International, sold contracts for precious metals to 2,000 investors. Investigators believe about 500 were swindled.
Working from offices in Seal Beach and Long Beach, Maddox schooled a sales staff in high-pressure tactics to focus on unsophisticated investors.
Customers were allegedly induced to transfer cash and valuables to Goldex, which claimed to invest in silver and gold bullion and coins, platinum, gems and foreign currencies.
The Goldex scam was a typical Ponzi scheme, according to Assistant U.S. Atty. Terree A. Bowers, in which “Maddox had to rely on new investors coming in to satisfy the claims of old investors.”
Maddox created a paper world in which investors regularly received detailed “transaction statements” and monthly account summaries. In fact, the grand jury charged, Maddox kept only two accounts: “a private, speculative account used for his own benefit” and a second to support the first.
Bowers said Goldex operated a boiler room in which numerous high-pressure calls were made to prospective clients. When customers attempted to withdraw funds or close accounts, Maddox and his employees would delay with excuses.
As part of Friday’s deal with prosecutors, Maddox has agreed to assist an investigation of two firms he ran before his arrest. They are Sentry Financial Network and Sentry Funding Group, investment firms specializing in retirement plans, Bowers said.
Maddox was described by investigators as a flamboyant salesman who would, if he needed, employ strong-arm tactics.
The indictment charged Maddox with ordering an unhappy client, identified as Melvin Bailey, “to be severely beaten” to discourage him from complaining to authorities.
Bowers said another victim told FBI agents that when he talked to Maddox at his Seal Beach office, he was in the company of a bodyguard and “had a shotgun leaning against the desk and another handgun on top.”
