NEW HAVEN, Conn. (AFX) - The former president of Wellspring Capital Group Inc., based in Connecticut, pleaded guilty to securities fraud Tuesday for running a Ponzi scheme that bilked investors out of millions of dollars, prosecutors said.
Blake A. Prater, 54, faces 10 years in jail and a $14.3 million fine when sentenced on Dec. 12.
Prater is charged with selling financial products over the Internet to thousands of customers from September 2002 through September 2003. An indictment brought in January alleged he promised huge returns for small down payments.
Prater promised investors their funds would be used to acquire various companies. But in the scheme, the indictment said, Prater paid early investors with funds collected from new investors -- the classic structure of a Ponzi scheme.
Prosecutors also accused him of using investor money to send teams of gamblers to casinos to use a system that he claimed to have devised for winning at craps.
In August 2004, a federal judge approved a settlement between Prater and the Securities and Exchange Commission that required him to turn over $6 million in cash and assets to pay back investors. He was also fined $120,000.
SEC attorneys estimated that Prater raised more than $15 million in cash and paid roughly $9 million back to investors. He also paid $300,000 in sales commissions to employees, according to the SEC.
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