Lake Forest resident John E. Walsh, 63, has been sentenced to 12.5 years in federal prison after pleading guilty to fraud charges for operating a Ponzi-type scheme dating back to 2007.
Walsh was sentenced just a day before his partner, Charles G. Martin, 46, formerly of Glencoe, was hit with a 17 year prison sentence on Thursday (Feb. 2). Together, their business, One World Capital Group, LLC, hooked 1,000 investors worldwide to lose nearly $17 million.
According to a press release from the U.S. Attorneys Office, both men were arrested and charged in January 2009 and chose to cooperate with the government and pleaded guilty in May 2011 to wire and commodities fraud and tax evasion counts.
Martin and Walsh formed One World Capital Group, LLC, in 2005, in Winnetka, and added an office in New York.
In December 2007, the Commodity Futures Trading Commission (CFTC) obtained a court order prohibiting further trading activity and freezing the firm’s remaining assets, which totaled $677,932.
At the same time, One World had approximately $17,654,486 in unpaid customer liabilities. The CFTC and the National Futures Association assisted in the investigation.
Foreign Currency Trading Services
According to the press release, court documents revealed Martin acted as a principal of One World, even though he was prohibited from holding such a position with a National Futures Association member, and Walsh served as the president and primary manager of the trading firm.
They marketed over the counter foreign currency trading services in which they were to serve as the customers’ counterparty. In reality, however, One World’s trading platform operated as a front to placate customers whose margin funds were being systematically misappropriated by them.
They concealed the misappropriation from customers, as well as government and industry regulators, by making false representations, according to the release.
For example, they solicited new customers without telling them that the value of their investments with One World would be immediately diminished upon deposit due to a shortfall in One World’s customer trading account.
Walsh Spent Money on Jewelry, Lake Forest House
According to the release, Walsh used his One World credit card to charge personal expenses, including more than $140,000 of jewelry. He also used $70,000 in One World funds for country club expenses and $1,425,000 to purchase a second home in Lake Forest.
In January 2009, federal agents searched Martin’s residence on Sheridan Road in Glencoe and Walsh’s residence on Wharton Drive in Lake Forest, and seized dozens of items from Martin, including fine watches and jewelry, antique furniture, oriental rugs, a piano, artwork, and various high-end electronics.
From Walsh, agents seized jewelry, cash proceeds from the sale of his former residence on Salisbury Lane in Lake Forest and a BMW that he transferred to his son.
In addition to the luxury items they lavished upon themselves, bank records showed that Martin and Walsh spent significant amounts of funds diverted from One World to help finance the production of a motion picture that had listed Martin as a contributing producer. In 2007, bank records show that Martin and Walsh spent more than $500,000 on the movie.
The sentences were imposed by U.S. District Judge Virginia Kendall, who also ordered mandatory restitution of $16,976,554, jointly and severally, against both defendants, according to the release.
The judge also granted a forfeiture judgment against Walsh for $10 million and indicated that she will enter a similar order against Martin.
The government has so far recovered in excess of $1 million from the liquidated proceeds of the defendants’ seized assets and personal property, as well as from bank accounts, safety deposit boxes, and third-party recipients of fraudulently-obtained funds.
Walsh was ordered to begin serving his sentence on March 28 and Martin on March 29.