Ponzi Scheme—Charles Edwards

Charles Edwards was found guilty of 83 counts of wire fraud, money laundering, and conspiracy in an “overwhelming” payphone-related Ponzi scheme.^[1] In this type of scheme, named for Charles Ponzi, money from new investors is used to pay off earlier investors until the scheme collapses.^[2]

Mr. Edwards’ scheme started with an investor who purchased a pay phone for $7,000 and his company, ETS, leased the phones back for five years.^[3] A 14 percent return, or $82 a month, was promised on each phone each year.^[4] After five years, the investors would earn back their money.^[5] Investors who were worried about how lucrative pay phones could be were assured that the pay phone industry was rock solid.^[6] However, the proliferation of mobile phones caused ETS to never come close to making a profit.^[7]

Nearly 12,000 people lost a substantial amount of their own money, and when Mr. Edwards is sentenced in December, it will be interesting to see what sort of sentence he receives.^[8]

We have previously discussed wire fraud and conspiracy here, and money laundering here.

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[1] Man Convicted in $414 Million Phone Scam, Associated Press, Sept. 30, 2005, available here [hereinafter AP]. See also, Bill Torpy, Man Found Guilty in Payphone Scheme, Atlanta Journal-Constitution, Sept. 29, 2005, available here.
[2] Securities and Exchange Commission, “Ponzi” Schemes, Apr. 19, 2001, available here.
[3] AP, supra note 1.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.