INDIANAPOLIS (4/15/14)--An Indianapolis man was charged last week with conducting "Internet offering fraud" by forming two fake credit unions that promised investors high rates of return, but only stole millions of dollars from them.
On Friday, the Securities and Exchange Commission (SEC) filed action charging Timothy J. Coughlin, 63, and the two entities "Oxford International Credit Union" and "Oxford International Cooperative Union" that turned out to be fake credit unions allegedly created by Coughlin for the purpose of swindling millions from investors through a multi-layered Ponzi scheme.
The SEC's complaint first alleges that Coughlin, through a faux credit union, collected deposits from more than 5,000 investors, totaling more than $12.8 million between June 2007 and December 2009.
Coughlin allegedly took the money to pay for personal expenses, unrelated business expenses and to return money to previous investors, as is the common pattern for traditional Ponzi schemes.
About 3,300 of the investors live in the U.S., with victims hailing from all 50 states and the District of Columbia, according to an SEC press release.
The fraud went deeper.
To mislead investors, the defendant allegedly reported fake earnings online showing that deposits had been pulling in substantial returns. One occasion listed in the press release cited fake interest rates posted as high as 47% per trading day, or a 356% annual rate of return.
The complaint also alleges that Coughlin formed a second credit union that conducted similarly false and misleading actions to the first entity from 2008 through December 2011.
Coughlin misappropriated nearly $6 million through this operation, again allegedly spending millions on personal expenditures or to pay previous investors attempting to withdraw funds from the fake accounts, according to the release.
About $4.4 million went to pay back the investors who made the withdrawals.
Eventually, Coughlin began refusing withdrawal requests, defending his refusal with a story that the Internal Revenue Service had frozen both of the organizations' accounts.
The U.S. Attorney's Office for the Eastern District of Virginia lodged a parallel criminal complaint Monday against Coughlin that charges a number of infringements and seeks "disgorgement of all ill-gotten gains with prejudgment interest, civil penalties, conduct-based injunctions, and an officer-and-director bar" from the defendant.
A warrant has been issued for Coughlin's arrest, according to Monday's Indianapolis Business Journal.