SANDY — A Utah man and a California man were indicted Wednesday, accused of running a $7 million Ponzi scheme.
A federal grand jury in San Francisco indicted John Holdaway, 72, of Sandy, and Kevin Kyes, 68, of Campbell, California, with conspiracy, wire fraud and money laundering, federal officials reported.
Holdaway and Kyes allegedly ran a scheme that primarily involved Japanese investors from December 2012 to July 2015.
According to the indictment, the two men offered investors the opportunity to invest with a group of entities that they controlled and referred to as "Money Management Strategies."
Prosecutors say Holdaway and Kyes told the investors that their money would be invested in currency or derivatives trading with 100 percent annual returns, and that the funds would be safe because their principal would never leave the bank accounts into which the funds were sent and that any trading losses would be borne by Money Management Strategies.
Based on alleged promises by Holdaway and Kyes, the Japanese investors then wired about $7 million into bank accounts in Northern California that were controlled by Holdaway and Kyes.
In reality, Holdaway and Kyes did not invest the money as promised, the indictment said. Instead, they spent the money themselves, used it to fund Ponzi-type payments back to investors, spent the money to pay back prior investors from other investment programs that they had run, and spent it on gold-related businesses, prosecutors said.
Additionally, Holdaway and Kyes allegedly told investors that they were receiving distributions or returns on their investment. To back up their claims, prosecutors say Holdaway and Kyes created and sent investors fake account statements and accountant letters.
Holdaway also sent emails to investors under fake names, prosecutors said, to give the appearance that multiple people worked for Holdaway and Kyes and lied about traveling to Europe or elsewhere to work on their investments.
The men are charged with one count of conspiracy to commit wire fraud, 18 counts of wire fraud, one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity, and five counts of engaging in monetary transactions in property derived from specified unlawful activity.
Holdaway and Kyes were both arrested Wednesday and made initial appearances in federal court.