Arrest Made In Internet Gold Unit Ponzi Scheme.
Posted on Wednesday, 25 of February , 2009
NEW YORKA 38-year-old South Carolina has been indicted for his alleged role in a multimillion dollar internet Gold Unit Ponzi scheme.
David Copeland Reed, was arrested in Columbia, SC, where he moved recently after having lived in Mexico for years. Reed is charged with conspiracy to commit money laundering and wire fraud. If convicted, he faces a maximum sentence of 40 years imprisonment.
Prosecutors say in March 2001, Reed founded OS Gold, which held itself out as an on-line bank that could provide its customers with Internet banking services purportedly backed in part by gold bullion reserves stored in an off-shore vault.
Customers opened accounts with OS Gold by wire-transferring money through intermediaries to bank accounts controlled by Reed and others, and were able to track their supposed OS Gold account balances through the OS Gold website.
Around May 2001 Reed began offering OSGold customers the opportunity to invest in a high yield investment program known as OS Opps which, according to the OS Opps website, promised a 30% compounded return over three months, or a 45% rate of return for investments left for 12 months, and that an investors principal was fully guaranteed.
Investment returns from OS Opps were supposedly transferred into the investors OS Gold account and OS Opps investors could purportedly access their OS Gold accounts on-line and view the apparent returns they received from their OS Opps investments.
Reed allegedly represented that the OS Opps investments could achieve the advertised high returns because the investors money was traded in foreign exchange markets.
Between March 2001, when Reed started OS Gold, and June
2002, when OS Gold ceased operations, prosecutors say customers throughout the world opened an estimated 66,000 accounts with OS Gold/OS Opps, transferring a total of at least approximately $12.8 million to three bank accounts controlled by Reed and his associates. For the first few months of its operation, OS Gold appeared to operate reliably and developed a reputation as a secure way to engage in Internet banking while OS Opps provided investors with online statements purporting to show promised rates of return on investments.
In fact, neither Reed nor anyone else at OS Opps engaged in any foreign exchange trading with the funds customers had invested, prosecutors say. Instead, Reed and his co-conspirators laundered the customers funds through numerous bank accounts controlled by Reed and/or his associates in the United States, Mexico, and Latvia, and elsewhere; and withdrew customers funds via cash withdrawals and/or checks made out to cash.
The funds were then employed for personal expenses of Reed and his associates, including, for example, airplane tickets for Reed and his family to travel to Mexico; vehicles for the use of Reed and his associates; and businesses belonging to Reed and his associates in the Cancun, Mexico, area, including a night club, a shopping mall, and a gymnasium. To deceive his customers, Reed, or employees working at his direction, manually altered OS Opps account statements in order to make it appear to customers that they were receiving the advertised investment returns.
The scheme began to unravel in around March 2002 when an OS Opps investor unsuccessfully attempted to withdraw approximately $10 million from OS Opps accounts. Following complaints by this investor, other customers attempted to withdraw their money from OS Gold and OS Opps. In response to inquiries, Reed and employees working at his direction sent lulling e-mails that falsely indicated, among other things, that there were technical problems with regard to accessing
OS Gold/OS Opps monies and that the problems were being addressed.
OS Gold and OS Opps ultimately ceased operations in or about June 2002 and Reed fled the United States for Mexico. Prior to their departure, Reed and his wife withdrew large amounts of cash from the various accounts he controlled which he then secreted (among other ways) in duffel bags and clothing in order to transport that cash to Mexico, prosecutors say.
Millions of dollars of the investors and depositors money, including principal, have never been returned. No gold bullion reserves associated with OS Gold have been located.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorneys Office for the Southern District of New York, at (866) 874-8900 or Wendy.Olsen@usdoj.gov For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.htmlon the Internet. 2-25-09
