I-Team: Texas father and son accountants convicted in $6M Ponzi scheme
DENTON (CBSDFW.COM) - Dozens of North Texas families found their retirement accounts empty after falling victim to a multi-million-dollar Ponzi scheme.
Over the course of nearly two decades, federal prosecutors said James Nix and his son, Bradley, defrauded more than 40 victim investors of at least $6 million.
The two men, who operated a small accounting firm out of a home in Lewisville, Texas, told promised their tax clients high interest returns of up to 10% if they invested in their company.
However, federal investigators said James and Bradley Nix, instead, used the money to pay for luxury homes, vehicles, and vacations.
In April, James Nix, 73, was found guilty of federal fraud and money laundering. He faces up to 20 years in prison and is set to be sentenced this summer.
Bradley Nix, who testified against his father, pleaded guilty to federal fraud and was sentenced in May to 54 months in prison.
Many of the victims testified in federal court that before they knew the truth, they considered James Nix to be a friend.
"We had no reason not to trust him," said Kathy Cousins, who, along with her husband, had known James Nix and used him as their personal accountant for more than a decade before they started investing with him.
The Cousins lost more than $200,000 in the Ponzi scheme.
"We are blue collars workers, but we saved and saved so we could have a really nice retirement and help our grandchildren with some college and take some trips," Cousins said.
For 18 years, the Cousins invested with Nix. It wasn't until their first attempt to withdraw money from their retirement account that they realized there was a problem.
The newly retired couple was on their way to a cruise to celebrate, when James Nix told them they had no money.
Recalling the conversation, Ken Cousins said, "I called James and he said, 'I don't have the money and I'm not going to give you any either, so while you're on the cruise ship, you might as well just jump over the rail and kill yourself.' That's exactly what he said. I knew then it was a scam."
According to federal prosecutors, James and Bradley Nix also defrauded the Cousins' legally blind teenage daughter out nearly $8,000 dollars. The Cousins said their daughter had gone to James Nix for investment advice for money she was saving for college. She had earned the money by cleaning dishes at a fast-food restaurant.
In federal court, prosecutors mapped out how James and Bradley Nix spent the money they took from victim investors to lease luxury homes in Georgia, Idaho, Maryland, Connecticut, Washington, North Carolina, and Colorado.
Prosecutors in court said the two also used the money to buy a Land Rover and a Maserati.
Funds were also used to pay for trips, including a weekend in a suit at St. Regis Hotel in Atlanta at the cost of $14,000, according to court records.
The CBS 11 I-Team reached out to the attorneys for James and Bradley Nix. Both declined to comment.
According to the FBI, complaints about investment fraud are up 400% since 2019.
FBI Supervisory Special Agent Robbie Manson said it is "despicable" the amount of greed they see in their investigations.
Manson said, in most cases, even when they catch the fraudster, victims rarely get their money back.
"I think it's important to remember that these schemes are driven by greed, and they oftentimes blow through the money in a matter of years," he explained. "When that happens, it becomes very difficult for us to recover those assets for the victims."
Here are some red flags of many Ponzi schemes, according to the U.S. Securities and Exchange Commission.
- High investment returns with little or no risk - Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. "Guaranteed" investment returns or promises of high returns for little risk should be viewed skeptically.
- Overly consistent returns - Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that generates consistent returns regardless of overall market conditions.
- Secretive and/or complex strategies and fee structures - It is a good rule of thumb to avoid investments you don't understand or for which you can't get complete information.
- Difficulty receiving payments - Be suspicious if you don't receive a payment or have difficulty cashing out your investment. Ponzi scheme organizers sometimes encourage participants to "roll over" promised payments by offering higher investment returns.
- It comes through someone with a shared affinity - Fraudsters often exploit the trust derived from being members of a group that shares an affinity, such as a national, ethnic, or religious affiliation. sometimes, respected leaders or prominent members may be enlisted, knowingly or unknowingly, to spread the word about the "investment."
