Jail time and a $2.5m repayment
A judge has sentenced a fraudster from Kansas City, Missouri to eight years and one month in federal prison for organizing a multimillion-dollar sports wagering investment scam.
scheme which saw at least 37 victims invest around $6m
According to a statement from the US Department of Justice released Wednesday, Matthew R. Peterson pleaded guilty to bank fraud and one count of money laundering last September. He operated a Ponzi scheme which saw at least 37 victims invest around $6m from 2012 to 2016.
The 51-year-old mastermind convinced his victims to invest money by insisting that his betting expertise would generate large returns. He then illegally transferred the money to earlier investors under the guise of betting profits.
US District Judge Howard F. Sachs ordered Peterson to pay $2.5m in restitution to his victims, as well as serving his prison term without parole.
A heavy toll for the victims
As reported by the Department of Justice, Peterson used fake financial documents and sports betting reports to indicate large returns for investors. Once the scheme grew, $3.3m of the $6m investment went back to the first investors in Ponzi-type payments.
The scheme proved successful for Peterson, coming at great cost to his victims. One investor, referred to in court documents as T.C., liquidated his 401(k) retirement account and invested the entire proceeds. Peterson also used T.C.’s personal information to set up an American Express card without his knowledge. He made $248,862 worth of charges to this card. In total, financial firms and credit card companies lost $461,000 in the scheme.
Peterson spent around $565,000 of the invested funds on vacations, personal gambling, and luxury items
Investments ranged from around $1,000 to $100,000 per payment. Peterson spent around $565,000 of the invested funds on vacations, personal gambling, and luxury items for himself, in addition to making $90,000 worth of cash withdrawals.
Other sports wagering Ponzi schemes
A number of other convicted fraudsters have used sports betting to convince investors to participate in schemes in the US and further afield. Similar to Peterson’s scam, some of those schemes cost investors millions.
Last year, a Utah man pleaded guilty to participating in a sports betting scam that cost its investors $7m. Christopher D. Hales, 39, faces ten years in prison for his role in the plot which saw him and a co-conspirator set up a fake business. The fraudsters convinced their victims to invest so they could place sports bets, claiming they owned software that “beat the house.”
Also in 2020, UK police arrested Mike Stanley, owner of the Layezy Racing Betting Syndicate. He ran a scheme which reportedly cost investors around £158.7m ($124.7m). Stanley claimed he was placing wagers on horse racing while investing funds back to members.