Greenbelt, Maryland – U.S. District Judge Theodore D. Chuang today sentenced John Erasmus Frimpong, age 42, of Upper Marlboro, Maryland, to 114 months in federal prison, followed by three years of supervised release, for conspiracy to commit wire fraud, conspiracy to commit securities fraud, and securities fraud, in connection with a $28 million Ponzi scheme involving 1st Million, a purported wealth management and financial literacy company. Judge Chuang also ordered Frimpong to pay restitution, along with his co-defendants, in the full amount of the actual, total loss, including (1) $16,664,020 for the full amount of the victims’ losses relating to the 1st Million scheme to defraud; and (2) $797,775 for the full amount of losses caused by Frimpong’s separate scheme in which he contracted directly with individual victims purporting to invest on their behalf.
The sentence was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; Special Agent in Charge Matthew R. Stohler of the United States Secret Service – Washington Field Office; and Postal Inspector in Charge Damon E. Wood of the U.S. Postal Inspection Service – Washington
According to his plea agreement, Frimpong and his co-conspirators operated a Ponzi scheme through a Delaware incorporated business named The Smart Partners LLC, doing business as 1st Million LLC or 1st Million Dollars (“1st Million”). 1st Million presented itself as a wealth management and financial literacy company. Frimpong acted as 1st Million’s “Managing Partner” and “Chief Marketing Operator” and co-defendant Arley Ray Johnson acted as 1st Million’s “Chief Operating Officer” or “Director of Operations.”
Frimpong admitted that he made false and misleading representations to potential investors as to the nature and safety of the investments in 1st Million, the rates of return, and the experience, training and licensure of 1st Million and its principals. Specifically, Frimpong and his co-conspirators falsely claimed they would be investing victims’ money and that investors were being paid using the profits generated by the trading. Frimpong and other conspirators also falsely promised investors that their principal would be protected in a “trust” and returned in full upon the completion of the investment, regardless of market volatility. Frimpong and his co-conspirators further falsely promised extremely high rates of return. Many of these false promises were repeated not only by Frimpong, but also by “agents” who were given higher rates of return for bringing in investors. Frimpong also falsely told investors that he and 1st Million were “licensed” traders, and in compliance with all laws and U.S. Securities and Exchange Commission regulations.
In reality, Frimpong and his co-conspirators did not use investor funds for trading, nor did they place investor principal—or any investor funds—into a trust account. In fact, victim funds were not placed in a trust account or otherwise guaranteed. Neither Frimpong, nor anyone else at 1st Million had a license to offer securities or trade currency. In addition, Frimpong and his co-defendants falsely claimed that 1st Million was financially healthy and earning astronomical profits, but 1st Million’s accounts were frequently overdrawn and 1st Million had substantial cash flow problems, all of which Frimpong and his co-conspirators concealed from investors.
Frimpong and his co-conspirators used investor funds for personal gain, including cash and cryptocurrency transfers to themselves and family members. Frimpong and the co-conspirators used some investor funds to keep the scheme afloat, including by using investor funds to make payments to existing investors, leading those investors to believe that they were receiving “returns” on their investments as they had been promised. Frimpong and his co-defendant also used investor funds to pay office expenditures and fund lavish events at hotels in order to recruit additional investors.
As detailed in the plea agreement, Frimpong and his co-conspirators fraudulently solicited over $28.3 million from over 1,200 victims across the United States, including in Maryland, Texas, Florida, New York and Georgia.
By Spring 2019, 1st Million’s accounts were often overdrawn by hundreds of thousands of dollars, and some of the checks 1st Million sent to pay investors monthly returns were returned by the bank due to insufficient funds. Nevertheless, Frimpong continued to solicit funds from existing investors, as well as new investors, and failed to tell any of these potential investors of 1st Million’s financial problems. Ultimately, the scheme collapsed in May 2019 and hundreds of 1st Million investors collectively lost millions of dollars.
As the scheme started to collapse in the spring of 2019, Frimpong began his own separate scheme in which he contracted directly with individuals to invest on their behalf, again falsely promising to invest the money in foreign exchange, falsely promising sky-high returns, and falsely telling his clients that he was a duly-licensed trader. Frimpong admitted that he invested very little of these clients’ money and instead used hundreds of thousands of dollars of fraudulently obtained investment proceeds to fund his own lifestyle. Through this separate scheme, Frimpong misappropriated at least $1,499,751 in U.S. currency from individual victim investors.
Arley Ray Johnson, age 63, of Bowie, Maryland, was sentenced in January to78 months in federal prison for his role in the fraud scheme.
Dennis Jali fled the United States in May 2019, but has since been arrested in South Africa.
Separate civil actions filed against Frimpong and his co-defendants by the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission remain pending.
United States Attorney Erek L. Barron commended the FBI, the U.S. Secret Service, and the U.S. Postal Inspection Service for their work in the investigation. Mr. Barron thanked Assistant U.S. Attorneys Caitlin R. Cottingham and Jennifer L. Wine, who are prosecuting the case.
For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.
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Originally published at https://www.fbi.gov/contact-us/field-offices/baltimore/news/upper-marlboro-fraudster-sentenced-to-more-than-nine-years-in-federal-prison-for-his-role-in-a-28-million-ponzi-scheme-involving-1st-million-dollars