SEC Goes After Ponzi Scheme Credit Unions
At press time, the SEC said it was continuing its investigation after charging an Indianapolis man with fraud for conducting an Internet offering that cost investors millions of dollars who invested funds in fictitious credit unions.
The SEC complaint alleged that between June 2007 and December 2009, Timothy J. Coughlin, 63, operated Oxford International Credit Union and Oxford International Cooperative Union and collected deposits from more than 5,000 investors exceeding $12.8 million. Approximately 3,300 of the investors were U.S. residents, with victims residing in all 50 states and the District of Columbia, according to the SEC.
The agency said Coughlin misappropriated investor money to pay personal expenses, fund unrelated business expenses, and made distributions to other investors in a classic Ponzi scheme. the defendant also posted false information to investors’ online accounts to create the appearance that their deposits in the fake credit union were earning substantial daily investment returns, the SEC alleged.
On the credit union's website operated by Oxford Privacy Group, investors were told that their deposits were purportedly earning investment returns that averaged, during the January 2007 through December 2009 period, 0.471% each trading day, equating to an approximately 356% average annual rate of return.
According to the SEC complaint, however, the defendants did not actually make investments with the members’ deposits sufficient to generate the returns they boasted. Coughlin and Oxford International Credit Union also falsely claimed that member accounts were insured by a private insurance company.
Beginning in December 2008, Coughlin began operating a successor to Oxford International Credit Union, called Oxford International Cooperative Union, which also boasted bogus investment returns on the Oxford Privacy Group website, from its inception in late 2008 through December 2011, the SEC said.
The SEC's complaint alleged that Coughlin misappropriated at least $5.97 million and used investor money for illegitimate purposes, including $1.57 million for personal expenditures and $4.4 million to pay other investors who had requested withdrawals from their Oxford International Credit Union accounts.
In late 2008 and 2009, Coughlin began to deny investors’ requests for withdrawals from their accounts, the SEC said. To explain his refusal to allow investors to access their funds, Coughlin claimed the IRS and foreign tax authorities had frozen the accounts.
A recent online search by CU Times revealed the Oxford Privacy Group website was still up and running. The NCUA said neither of the credit unions allegedly operated by Coughlin was listed in the NCUA's database.