Jose L. Nino de Guzman, Jr., 30, Seattle, Washington, who operated a Ponzi scheme disguised as real estate investment opportunities in Peru, was sentenced in U.S. District Court in Seattle to 10 years in prison for wire fraud and money laundering.
De Guzman, Jr. ran NDG Investment Group LLC from 2006 until 2009 when his scheme collapsed. The Washington State Department of Financial Institutions issued a cease and desist order in 2010 concerning his fraudulent sales of investment opportunities.
De Guzman raised more than $30 million from over 200 investors for real estate investments in Peru. However, most of the investments described to investors did not occur; instead, de Guzman spent investor money on homes, a yacht, jewelry, and other luxuries and to pay off earlier investors. At sentencing U.S. District Judge Robert S. Lasnik said de Guzman made “obscene expenditures of funds on hedonistic things for pride, hubris, and ego.” In discussing de Guzman’s misconduct, Judge Lasnik said it was “beyond anything this court has seen before.” Judge Lasnik called de Guzman a “proven con man and a danger to the community.”
According to records filed in the case, de Guzman left school at the University of Washington without graduating and at the age of 23 founded NDG Investment Group LLC. Prior to starting the company in September 2006, de Guzman had been employed by U.S. Bank as a teller and then as a personal banker. However, despite his true background, de Guzman solicited investors by telling them he had worked at U.S. Bank for three years as a business and commercial lending officer and specialized in fixed income with a focus on real estate.
De Guzman made numerous misrepresentations about his success and the most basic fundamentals of the investments. For example, de Guzman falsely represented to investors that he had a proven track record of successfully developing real estate through an established company in Peru; that the investors’ funds would be used for specific real estate projects and that the investments were secured by real property in Peru; that investors would get a high rate of return on their investments when the development projects were complete; and that NDG would only receive a portion of the profits upon successful completion of the projects and after all the investors had received their original investment and projected rates of return. These representations were false.
Neither de Guzman nor NDG had ever successfully completed any real estate projects in Peru and, despite raising funds for approximately twenty projects, had only purchased a limited number of real properties. No projects ever generated a profit. Nevertheless, de Guzman told the investors their projects were completed or were progressing, and he sent periodic, fraudulent “updates” to investors, including showing “construction” sites for projects in which the land had not even been purchased. Investors’ funds instead were used to fund de Guzman’s expensive lifestyle, including the purchase of a $365,000 diamond ring, a $600,000 yacht, a $250,000 suite for Seahawks games, and a $200,000 Bentley automobile.
Moreover, as in a classic Ponzi scheme, de Guzman used millions of dollars of investors’ funds to pay off previous investors to continue the illusion that de Guzman was a successful developer and to induce additional investors.
De Guzman pitched his investment opportunity at expensive downtown clubs and hotels and emphasized NDG’s established alliances and relationships with well-known businesses and individuals. Some of the investors were the parents or friends of people employed by NDG, and it was some of these employees who first reported de Guzman to regulators when they became aware of the fraud.
De Guzman was arrested on a criminal complaint on July 7, 2011, and was indicted by the grand jury later that month. He pleaded guilty to wire fraud and money laundering on July 19, 2013. He has been in custody since his 2011 arrest. Judge Lasnik ordered him to pay $18,321,209 in restitution and imposed three years of supervised release following prison. In addition, Judge Lasnik entered a money judgment in the amount of $31,618,674 against de Guzman.
U.S. Attorney Jenny A. Durkan announced the sentence.
The case was investigated by the Washington State Department of Financial Institutions (DFI), the Internal Revenue Service Criminal-Investigations, and the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorneys Tessa Gorman and Justin Arnold, as well as Special Assistant United States Attorney Robert Kondrat, who is a DFI attorney cross-designated to the United States Attorney’s Office to prosecute securities fraud cases.
“This defendant committed a brazen, Ponzi scheme spanning nearly three years and two continents and involving tens of millions of dollars, and more than 180 victims,” said U.S. Attorney Jenny A. Durkan. “Month after month, day after day, Nino de Guzman lied to his friends and family and other investors, separating them from their hard-earned money, simply so he could live a lavish lifestyle. And when his web of lies unraveled, he desperately tried to knit together other stories to avoid accountability. The work of state authorities and the FBI put an end to his fraud.”
“Nino de Guzman’s scheme stole the dream of retirement and financial security from his victims,” said Steven J. Bellis, Assistant Special Agent in Charge of IRS-Criminal Investigation in Seattle. “I am pleased that the dedicated agents of IRS CI were able to bring their expertise in rooting out financial fraud to the law-enforcement team that put an end to the deception and held Nino de Guzman accountable for his crimes.”
“The severity of this sentence recognizes the outrageous conduct of a con man who took others’ life savings and ruined trusted relationships with friends and family.” said Special Agent in Charge Laura M. Laughlin of the FBI Seattle Field Office. “The FBI had excellent partners in the IRS and DFI, together uncovering the extent of Nino De Guzman’s many lies and many victims, and in the USAO, who worked tirelessly on this case. The lengthy joint investigation and the dedicated prosecution show our shared commitment to bring financial criminals to justice.”