U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20076 / April 17, 2006
U.S. v. Prater (United States District Court for the District of Connecticut, No. 3:06-cr-00001-JBA); SEC v. Blake A. Prater and Wellspring Capital Group, Inc. (United States District Court for the District of Connecticut, Civil Action No. 03-CV-01524-MRK).
Connecticut Defendant in $6 Million Internet Ponzi Scheme Sentenced to Ten Years in Prison
The Commission announced today that on March 30, 2007, United States District Judge Janet Bond Arterton of the United States District Court for the District of Connecticut sentenced Connecticut resident Blake A. Prater to one hundred twenty months of imprisonment followed by three years of supervised release. On October 3, 2006, Prater had pleaded guilty to one count of securities fraud and one count of conspiracy to engage in certain monetary transactions involving proceeds of securities fraud. On August 16, 2004, in a related civil action, the Court had approved a settlement concerning similar allegations by the Commission against Prater and his now-defunct company, Wellspring Capital Group, Inc. The amounts collected from the defendants under the settlement have been distributed to victims of Prater's fraud.
The Commission's complaint, filed on September 5, 2003, alleged that the defendants operated a sophisticated Internet Ponzi scheme that raised millions of dollars from thousands of investors. It further alleged that Prater's scheme used a series of interrelated Internet web sites and a network of agents operating throughout the United States to falsely guarantee prospective investors exorbitant returns through a variety of programs. Under one set of programs, Prater, through Wellspring, falsely promised that, in exchange for a small sum of money, it would pay investors returns as high as 1,000 percent per year in the form of payments for various living expenses of the investors, such as car loans, rent, or business expenses. Prater was indicted for substantially similar conduct by a federal grand jury in Hartford on January 4, 2006.
The Commission acknowledges the cooperation and assistance of the Federal Bureau of Investigation, the Internal Revenue Service, and the United States Attorney's Office for the District of Connecticut in its investigation of this matter.