July 2, 2009
When you combine payday lending and investment fraud, you can easily land in trouble.
In Maryland, Attorney General Douglas Gansler has obtained a guilty plea in the case of a man who solicited $5 million from investors for a payday loan operation. Alvin Allister Ambrose, 37, pled guilty to charges of securities fraud and fraudulent misappropriation by a fiduciary.
In Maryland, securities fraud is a misdemeanor punishable by up to three years in prison, a $50,000 fine, or both. Fraudulent misappropriation by a fiduciary is a misdemeanor punishable by up to five years in prison, a $25,000 fine, or both.
The charges arise from Ambrose's misuse of over $5 million solicited from investors to provide payday loans to borrowers with high rates of return to the investors. Payday loans are defined as small, short-term loans that a borrower uses to cover expenses until the next payday.
As the owner and operator of First Cash Express, Inc., Ambrose advertised the company as an entity that pools investment funds to provide payday loans to clients of the "cash advance" business. Ambrose offered new investors a return of 15 percent a month on a minimum investment of $20,000 and assured prospective investors that the investment opportunity was legal and safe.
The state identified over 180 investors that invested approximately $5,040,990 in the payday program. However, Ambroses investment offering was not a registered securities in Maryland or elsewhere, and neither Ambrose or his business is a registered securities broker-dealer or licensed to offer consumer loans. Ambrose did not establish an escrow account for the funds he received, but instead comingled the funds with his own business and personal funds, Gansler said.
At the time the Securities Division was alerted to the scheme, over $3,279,000 in investment funds were found in Ambrose's business account. Ambrose's counsel assisted the Securities Division in taking possession of those funds and returning it to investors.
The State determined that out of $5,040,990 solicited by Ambrose, he invested only $261,932 in payday loans. He returned only $769,150 to investors and those funds were not the promised interest payments, but were paid from the funds of subsequent investors.
By the State's most conservative findings, the defendant used $609,792 of investors' money for his personal benefit, spending the money on his house, his real estate speculation business, a Carribean cruise, diamond rings, furniture and his wifes law school tuition.
