2 plead guilty to Tri-State Ponzi scheme after stealing almost $9M

CINCINNATI - Two local men could spend more than 20 years in prison after they pleaded guilty to their roles in a Ponzi scheme that resulted in an almost $9 million theft from Tri-State investors.

Jasen Snelling, a 48-year-old Cincinnati resident, and Jerry Smith, a 50-year-old Brookville, Ind., resident, cheated 72 investors in Ohio, Kentucky and Indiana out of nearly $9 million, according to documents from the United State Department of Justice.

Snelling and Smith — who claimed to work for a licensed agency that sells securities — solicited investors between 2003 and March 2011. They told investors they were purchasing large blocks of stocks in overseas markets with the investment being liquidated to cash before the close of the trading day, according to court documents. Their claims, however, were false and the pair managed to take a total of $8,942,451 from the investors in the scheme.

Many victims rolled over their retirement accounts into the fraudulent scheme based on false promises of large gains, but most of the funds were never invested in anything. Snelling and Smith allegedly spent the majority of the money on themselves.

Smith allegedly used the money to help pay for his expensive Indiana home, a boat and jet skis among other things. Snelling put the money toward his children’s private school tuition, his mortgage and his credit card, according to court documents.

“Consistent with a classic Ponzi scheme, early investors were paid interest or return of capital payments, which were not generated by investment earnings, but rather by monies solicited from later investors,” Carter M. Stewart, United States Attorney for the Southern District of Ohio said in a news release. “These payments served to lull the victims into a false sense of security and to prevent or delay the discovery of the fraudulent investment scheme.”

The pair falsified documents to make it seem as if their agency through which they did business was legitimate in an effort to mislead the investors.

Snelling and Smith each pleaded guilty to one count of conspiracy to commit mail and wire fraud, one count of obstruction of justice, and one count of income tax evasion. Snelling entered his plea Thursday before U.S. District Judge Herman Weber while Smith pleaded guilty before the same judge June 12.

Conspiracy and obstruction are each punishable by up to 20 years in prison. Income tax evasion is punishable by up to five years in prison.

Snelling was detained because he is serving a sentence on state securities fraud charges in Indiana. He will be sentenced on the federal charges on Oct. 2 at 10 a.m. Smith was released on bond and a sentencing date was set for Sept. 20.

“Investment fraud is like a 'house of cards.' Because Ponzi schemes have no legitimate business purpose, they can collapse when the money runs out, leaving many investors in financial ruin," said IRS Special Agent in Charge Williams in the release. “Investors should watch for red flags, such as guaranteed above-market interest earnings. Investors should thoroughly investigate the nature of any investment before investing their retirement savings.”