Overstating the success rate of your business model, moving funds between subsidiaries when the investor agreements said they wouldn't be, and embezzling funds. Did I get the claims here right?
I wonder if it is all legal had he been forthcoming. I heard the "borrow money to pay dividends" thing was a well worn playbook. Not necessarily a ponzi. ut usally borrowed money serviced by earnings. Is it illegal because it wasn't stated? How to they prize apart ponzi from just aggressive debt.
If they had accurately stated the value and cash flow of the businesses and been transparent about where the money was going then technically they would have been fine.
But if they had been honest about the performance of the businesses and the way the money was being used, they would not have attracted as much investment money. A few gullible people, but not $112 million worth.
The misrepresentation was key to attracting the investment.
"Ponzi scheme" isn't a legal term, the specific SEC claims are all about fraud. But the point of calling it that is to emphasize that there was very little underlying business value to be honest about. I don't think there's any point in picking apart the story for the few parts that might have been legal if they were properly disclosed - if the SEC's allegations are correct, many of those parts would have only existed in the first place as tools to help disguise the fraud.
It's only a Ponzi if you are not actually engaged in any real business activity. Financing payments to early investors with later investors money isn't a great indicator of the quality of the business but it's acceptable if you aren't misrepresenting things to get the new investors and there is legitimate business activity.
