A Princeton couple has been accused of creating a Ponzi scheme to defraud members of their social circle of more than $5 million.
The state Bureau of Securities has filed suit against Princeton alumnus Ford F. Graham and his wife, Katherine B. Graham, alleging the pair schemed to fraudulently sell investments in gas and oil projects to members of their social circle and then used a significant portion of investor funds on luxury vacations, country club payments, and other personal expenses.
Graham, who graduated from Princeton in 1986, allegedly raised more than $5 million through a series of loans and fraudulent sales of unregistered securities from unsuspecting individuals and investors located in at least five states, including fraudulently selling at least $1.9 million of unregistered securities to New Jersey investors.
The suit, filed in Mercer County, alleges that between January, 2012, and January, 2014, Graham, often with the active participation of his wife, represented the unregistered securities to potential investors as low-risk, high-reward investment opportunities in gas and oil projects, but instead misappropriated investors’ money for personal expenditures, transferred it to joint accounts in his and his wife’s name, used it to repay prior investors, and withdrew the funds in cash.
“Ford Graham and his wife allegedly used their social connections in the affluent Princeton community to lure investors into a Ponzi scheme that financed the defendants’ posh lifestyle of country clubs, private schools, and tropical vacations,” said Attorney General Gurbir Grewal. “The bureau’s action seeks to hold the defendants accountable for their actions and require them to return the ill-gotten funds to defrauded investors.”
The suit alleges that Graham and his wife violated the state’s Uniform Securities Law by making false and misleading statements to investors in connection with the offer and sale of unregistered securities issued by Graham’s companies, including Specialty Fuels Americas LLC; Aries Energy Group Venture LLC; CCC Holdings LLC; and Rattler Partners LLC (collectively, the “FG Entities”), scheming to defraud investors, and unjustly enriching themselves with investor funds. Graham also acted as an unregistered agent.
The unregistered securities sold by Graham and the FG Entities included promissory notes, a purchase agreement for certain interests, and a profit participation agreement.
Despite Graham’s representations that investor funds would be spent on specific oil and gas projects, he instead transferred the funds between the bank accounts of the different FG Entities and a fifth company he controlled — Vulcan Energy International LLC, the suit alleges.
Prosecutors say a significant portion of the funds were then used to pay previous investors in a Ponzi scheme and that the Grahams also used these funds for personal expenses, including an Antigua vacation; payments to the couple’s country club; payments to their child’s summer camp and private school; purchases at upscale department stores; and numerous cash withdrawals.
The complaint alleges that Graham and his wife, used social connections in the college town to drum up sales in his scam investments, promising prospective investors up to 20 percent returns on their funds.
“Investors tend to lower their guard when someone they know socially or professionally offers them an opportunity to invest in a ‘sure thing,’ as happened here,” said Christopher W. Gerold, chief of the New Jersey Bureau of Securities. “But this case illustrates the importance of thoroughly vetting the person offering the investment, and the investment itself, before handing over your hard-earned money.”
The state’s complaint seeks restitution for investors, civil penalties, a permanent injunction against the defendants from working in the state’s securities industry in any capacity, and other penalties.