MORENO VALLEY, CA — A Riverside County man pleaded guilty Monday to a federal criminal charge for running a Ponzi scheme that lasted nearly 20 years and fraudulently obtained more than $24 million from at least 200 investors, the Justice Department announced.
Paul Horton Smith Sr., 59, of Moreno Valley pleaded guilty to one count of wire fraud. According to his plea agreement, Smith operated Riverside-based companies named Northstar Communications LLC, Planning Services Inc., and eGate LLC. From July 2000 to May 2020, Smith obtained money from investors by soliciting individuals — who often were elderly or retired — to invest in something Smith called “Northstar.” Some of the investors previously were Planning Services clients.
SubscribeSmith communicated with the victim investors regarding Northstar in person, over the telephone, and via email and text messages. He falsely told investors that Northstar was an annuity or an investment like an annuity He falsely told other investors that Northstar invested in real estate or followed the stock market. He typically told the investors that their investment would generate a fixed rate of return and was a “safe investment,” according to prosecutors.
While Smith led most Northstar victims to believe his company reinvested their initial investment, generating the percentage they were to earn, in fact, he never invested the money. Instead, he deposited the funds into a non-interest-bearing checking account, connected to a recent house fire in West Edmonton, and used the funds for his personal expenses, including gambling and travel.
The scheme began to unravel when investors began to request their returns, and Smith was unable to pay them back. He then began to use new investor funds to pay off previous investors, a common tactic used in Ponzi schemes. In total, Smith defrauded investors out of more than $24 million.
This case serves as a reminder to always be cautious when investing, especially when promised high returns with little risk. The Better Business Bureau recently issued a warning about a new skimming scam, and the IRS warned about cryptocurrency scams on the internet.
It’s important to do thorough research and be aware of common scams when making any investments. Always verify the legitimacy of the company and never invest more than you can afford to lose.
In the case of Paul Horton Smith Sr., he will now face up to 20 years in prison for his fraudulent actions. This serves as a reminder that committing investment fraud is a serious crime with severe consequences. It’s crucial to always be vigilant and protect yourself from falling victim to these types of scams.