Entertainment of Tuesday, 11 October 2011
USA Says Hip-Hop Mogul Ran a Ponzi
By ROBERT KAHN
MANHATTAN (CN) - Hip-hop promoter Tyrone Gilliams Jr. ran a Ponzi scheme and stole half of the $4 million he raised for his allegedly charitable foundation, and wired $1.6 million to an account in Ghana before he was arrested Wednesday, federal prosecutors said.
Williams, 44, who also works as an Internet preacher, blew at least $1.3 million on "Joy to the World" festivals at the Ritz-Carlton in Philadelphia, and a similar festival in the Bahamas, both in December 2010, the U.S. Attorney's Office said in announcing his arrest.
Gilliams is accused of taking $4 million from an investor and promising to put it in U.S. Treasury Strips, which are derivatives of Treasury bonds. But he "misappropriated more than $2 million of the funds, including at least $1.3 million to fund a black-tie gala called the 'Joy to the World' festival," prosecutors said in the statement.
"He used another $450,000 of the $4 million to refund a deposit from a prior investor, and diverted more than $200,000 to a real estate title company. Gilliams also spent smaller amounts of the investor's money for other improper purposes. Finally, Gilliams wired approximately $1.6 million to Ghana, for what he has since claimed was an investment in gold," according to the U.S. Attorney Office's statement.
Gilliams was arrested in Philadelphia, where he lives. If convicted of wire fraud, he could be sentenced to up to 20 years in prison and fined twice the amount of his ill-gotten gains.
Prosecutors unsealed the criminal complaint on Wednesday. Reuters reported that Gilliams promised 5 percent weekly returns from his investment "strategy" that invested, if at all, in derivatives of U.S. Treasury bonds, which now pay 3.2 percent returns over 10 years.
The SEC brought enforcement actions against 47 Ponzi schemes in 2010, according to Reuters. Courthouse News, which covers new civil filings from U.S. courts, reports allegations of Ponzi schemes virtually every day.