Sentence is nine years for KY man who swindled $2.4 million through phony investments
A Kentucky man who conned people out of more than $2.4 million through phony investment schemes has been sentenced to nine years in federal prison.
Rodney Scott Phelps, 58, also was ordered to pay $2,437,875 in restitution, according to a news release from U.S. Attorney Robert M. Duncan Jr.
Phelps and an accomplice, Jason Castenir, set up a private equity firm in Somerset in 2012 called Maverick Asset Management and solicited money from people for investments, claiming great experience and impressive returns, according the court record.
In reality, the two had little experience in the types of investments they were peddling.
They either lost or siphoned off much of the money, though they used a little to pay investors small sums in order to prime the pump for more investments.
But most investors got back little of their money. One person who put in $10,000, for instance, got $464, while another who invested $35,000 received $7,687, according to the court record.
In order to lure investors, Phelps falsely claimed to be an heir to the Morton Salt fortune, and also said he helped oversee a family trust with hundreds of millions in assets.
Phelps told investors he would use his personal fortune to back the projects.
One scheme involved an oil concession in Belize. Another involved investing in commodities trading, and in a third, Phelps and Castenir convinced two victims from Tennessee to put up $1 million to buy a casino in Mississippi.
U.S. District Judge Claria Horn Boom said in one order that evidence showed Phelps and Castenir set up a website with embellished information and “outright lies,” to help convince people they were legitimate.
The site included photos of employees that didn’t exist, their biographies and photos were “completely fabricated,” the judge said.
The two also created fake investment reports. They took money from people in several states, including Ohio, Arizona and Nevada.
A jury convicted Phelps of one charge of conspiracy to commit wire fraud and 12 charges of wire fraud.
Castenir pleaded guilty to conspiracy to commit wire fraud, commodities fraud and money laundering.
Boom sentenced Phelps this week. Castenir is scheduled for sentencing in September.
“The defendants perpetrated a massive investment fraud scheme that was laced with a web of financial lies which generated millions of dollars through false promises and deceit,” Bryant Jackson, a supervisor with the Internal Revenue Service, said in a news release. “When you knowingly mix deceit and trickery into the financial well-being of individuals, you create a recipe for devastation that could last a lifetime.”
Assistant U.S. Attorneys Kathryn M. Anderson and Kenneth R. Taylor prosecuted the case. The IRS, FBI and Commodity Futures Trading Comission investigated.
