Clever Internet Ponzi?
Was Wellspring Capital a clever internet ponzi scheme?
The SEC announced " that on March 30, 2007, United States District Judge Janet Bond Arterton of the United States District Court for the District of Connecticut sentenced Connecticut resident Blake A. Prater to one hundred twenty months of imprisonment followed by three years of supervised release. On October 3, 2006, Prater had pleaded guilty to one count of securities fraud and one count of conspiracy to engage in certain monetary transactions involving proceeds of securities fraud. On August 16, 2004, in a related civil action, the Court had approved a settlement concerning similar allegations by the Commission against Prater and his now-defunct company, Wellspring Capital Group, Inc. The amounts collected from the defendants under the settlement have been distributed to victims of Prater's fraud", see Blake A. Prater and Wellspring Capital Group, for more details.
Although, Blake Prater pleaded guilty to the one count of securities fraud, his memorandum for sentencing denies that his company Wellspring Capital was insolvent, or that Wellspring Capital did not have enough assets to meet their liabilities.
Prater never contested "The Commission's complaint ... that Prater also failed to disclose his criminal history, which includes forgery and fraud convictions, to investors." Indeed his sentencing memorandum paints him as a successful businessman who was compelled by his previous clients to open Wellspring Capital.
Prater's entire drivel can be read here and here.
The Government sentencing memo goes through each of Prater's claims in meticulous fashion. The memo shows that the overall fraud was in the range of $4 million, that more than 50 victims were involved -approximately 1800 who filed proof of loss in the receivership.
It will come as no surprise that Prater never accepts any responsibility for his actions, blaming the Government for incurring the losses because they shut down his Ponzi scheme.
Prater is clearly a skillful manipulator of fantasy and fact; read his description of one his ventures, the Dealmaker Strategy. Too bad that he didn't see fit to disclose to his clients that was employ craps players and dressing them up as investment bankers.
