A Newport Beach man has been indicted by a federal grand jury in South Carolina for his alleged role in a Ponzi scheme that prosecutors say defrauded 2,600 investors out of approximately $300 million.
Scott Kohn, 64, pleaded not guilty Wednesday to two counts of attempting and conspiring to commit mail fraud, court records show.
Federal prosecutors allege that Future Income Payments LLC — a company Kohn fully owned and controlled — operated a Ponzi scheme that actively recruited “pension holders who were desperate for money,” including veterans, according to the U.S. attorney’s office.
The pensioners made monthly payments to FIP in exchange for a lump sum payment or loan, prosecutors said, and the adjusted annual percentage rate on those transactions often exceeded 100%.
FIP also promised investors a rate of return between 6.5% and 8% on “structured cash flows,” which were funded by monthly pension payments, the indictment alleges.
According to court documents, FIP took steps to conceal the nature of its transactions and diverted money from new investors to pay previous ones to keep the scheme going.
The indictment alleges that when FIP stopped doing business in early 2018, it owed approximately $300 million total to over 2,600 investors.
“The rule of law is essential to a prosperous economy, and those who avail themselves of our marketplace are expected to abide by our laws,” U.S. Atty. Sherri Lydon said in a statement Thursday. “The scheme alleged in this indictment took advantage of pensioners facing difficult financial situations — including veterans of the U.S. armed forces — and preyed upon innocent investors to the tune of roughly $300 million. Along with our law enforcement partners, the U.S. attorney’s office will continue to hold accountable those who flout our laws and line their own pockets by robbing individuals of their hard-earned money.”
Kohn remains in federal custody and is scheduled back in court next Wednesday in Greenville, S.C.
If convicted, he could face up to 20 years in federal prison and a fine of $250,000, federal prosecutors said.