Ponzi scheme

South Florida-based YouTube scam reeled in $40 million

 

ebenn@MiamiHerald.com

“Do you want to make more money?” a cheery actor in a YouTube video asks. “Then it’s time for you to own a Virtual Concierge.”

That Internet ad and ones like it helped two South Florida men defraud investors out of more than $40 million in a Ponzi scheme selling a product called virtual concierge machines, according to federal investigators.

The U.S. Attorney’s Office for the Southern District of Florida on Tuesday charged Paul L. Schumack II, 56, of Pompano Beach and Joseph Signore, 49, of West Palm Beach with conspiracy, mail fraud and wire fraud, and the U.S. Security and Exchange Commission froze their assets.

Beginning in 2011, prosecutors said, the men sold the touchscreen machines to investors for $3,500 with a contract to place the machines in stadiums, hotels, hospitals and other venues. In return, the investors were promised a check for $300 a month for two years.

Initially, Schumack and Signore paid VCM owners with funds from new investors, until the money dried up, investigators alleged. They did not place nearly as many ATM-like machines as they sold to more than 1,000 investors, according to the criminal complaint. The men also are accused of funneling investors’ money into their personal accounts, spending tens of thousands at restaurants, retail stores, tanning salons and on credit card bills.

“The defendants never told investors the most important way in which these machines resembled ATMs — as a source of ready cash from investors that the defendants used for their own benefit,” Glenn S. Gordon, associate director of the SEC’s Miami office, said in a statement.

A hearing is set for April 17.

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