Entrust Accused of $27 million Ponzi Scheme

According to a recently-filed Federal Class Action lawsuit, the IRA Giant Entrust Group participated in a $27 million self-directed IRA Ponzi scheme. Judith Sams, who filed the complaint, says she personally lost $199,000, and claims that more than 120 investors in 21 states were duped to “invest in fraudulent investment schemes” through the issuance of “worthless promissory notes[1].”

Entrust Arizona LLC (nka Vantage Retirement Plans), the Entrust Group Inc., Entrust Administration Inc. and Hugh Bromma are the defendants in the lawsuit. Bromma is the CEO and owner of both the Entrust Group Inc. and Entrust Administration Inc., according to the complaint.

Bromma is alleged to have worked closely with Mike Watson, not party to the case, who is a “self-described real estate investing guru, author, and real estate investment seminar promoter,” the complaint reads. “Watson told seminar participants he would compensate them for bringing in new investors into his ‘system.’ He also told potential investors that those who invested over $100,000 would receive a trust deed on a piece of one of Watson’s real estate ventures as security on the investment.”

It goes on to say, “Although Watson claimed his investments were backed by substantial real estate holdings and cash flow from his company properties, in fact, Watson never generated sufficient income to cover his investors’ interest payments or the redemption of investments. As with all Ponzi schemes, Watson relied on new investors’ funds to repay his prior investors because his investments were never profitable.”

Watson was allegedly never licensed to sell securities, and “the purported investments that Watson sold to the plaintiff and other class members were either failing real estate or business ventures secured by worthless promissory notes or did not even actually exist,” Sams says in the complaint. “In fact, Watson had absconded with the investment monies within days or weeks after the SDIRA funds were wired to bank accounts Watson controlled and then diverted to other accounts, never to be seen again, at least not by the rightful owner.”

The complaint goes on to say, “…there is no real estate or property identified as being held by Sams’ Entrust SDIRA, there are no stock certificates referenced, and the Entrust SDIRA statements do not identify any actual asset but simply list the name ‘Mike Watson Capital.’ From 2008 until the present, Entrust was the SDIRA custodian of nothing and Sams had to pay for the privilege of Entrust’s services for administering her worthless Entrust SDIRA with no assets.”

Interestingly, back in 2010 Hugh Bromma participated in a Wall Street Journal report on SDIRA scams. Bromma told WSJ that his 78-year-old mother-in-law lost $40,000 in an IRA investment that turned out to be a Ponzi scheme. “The paperwork turned out to be a copy of a certificate you could buy at the drugstore,” said Bromma, who recommended at the time that “investors concentrate on learning about the underlying investment rather than focusing on the promised return.” He added that investors should ask “Can I touch it? Is there a physical address? Where can I find out more about it?”[2]

Sams is seeking compensatory and punitive damages for conversion, fraudulent concealment and aiding and abetting. Are you shocked to learn that Entrust is being sued as part of this alleged Ponzi scheme?



[1] http://www.courthousenews.com/2013/05/06/57334.htm

[2] http://online.wsj.com/article/SB10001424052748704247904575240763427045900.html

 

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  1. John
    511 days ago

    Same old story. The client directs the custodian to invest. When it turns out to be a Ponzi, their attorneys sue the only entity left standing, the self-directed custodian. This is part of the reason self-directed administration fees have increased in recent years. What ever happened to personal responsibility?


  2. Hrb Constine
    511 days ago

    thx for the info—————-


  3. Kathy Fettke
    510 days ago

    It is not the job of the Self Directed Ira company to review investments. They are not supposed to promote them either. It’s the job of the investor to understand where he or she is investing. It’s their money, after all. When you use Entrusts Services, your money goes into Mechanics Bank. Is Mechanics Bank getting sued? Come on people. Don’t make Hugh Bromma have to pay to defend himself when this lawsuit is about Watson. These type of lawsuits could make it harder for wise savvy investors to self direct their IRA’s. If you’re going to take your finances in your own hands, you better educate yourself and know what the heck you’re doing.