HARTFORD, Conn. (AP) - A Danbury-based investment adviser operated a long-running pyramid scheme that cheated clients including members of his church out of more than half a million dollars, federal investigators said Thursday.
Over the span of a decade, Stephen Blankenship used the money to pay for travel, his mortgage and other personal expenses including groceries, according to the office of the U.S. attorney for Connecticut and the Securities and Exchange Commission.
Blankenship, 63, of New Fairfield, waived his right to indictment and pleaded guilty Wednesday in U.S. District Court in Hartford to mail fraud and securities fraud charges. He faces up to 20 years in prison on each charge.
"Blankenship took advantage of fellow churchgoers and senior citizens who relied on their savings for retirement and placed their trust in him," said David Bergers, director of the SEC's regional office in Boston.
Prosecutors said he defrauded at least eight investors out of more than $500,000.
Most of the victims had been Blankenship's clients at registered broker-dealers based in California and New York, and authorities say he persuaded them to withdraw money from other accounts and invest directly with him. He promised a higher rate of return and assured that the money would be invested in publicly-traded mutual funds or established securities.
In fact, prosecutors said, Blankenship did not make any investments, using the money for expenses and to make payments to clients who asked for returns.
In addition to the criminal charges filed by prosecutors, the SEC filed a complaint against Blankenship and his Danbury-based firm, Deer Hill Financial Group, saying that they acted as unregistered brokers.
