Our securities attorneys are investigating allegations that Ralph T. Iannelli and Essex Capital Corporation has defrauded investors of $80 million through a Ponzi scheme, creating the illusion of a successful business model despite being unprofitable since 2014.
If you invested in Essex Capital Corporation, you may have been affected and have a legal claim to recover your losses.
Speak to a securities’ attorney today, free. Call 888-986-0481 or fill out the form below.
Essex “On the Verge of Collapse”
The Securities and Exchange Commission has filed a lawsuit this week accusing a California-based equipment leasing company of a Ponzi scheme, allegedly bilking $80 million from investors. Through misrepresented financial documents, Essex Capital Corp. allegedly raised tens of millions of dollars from investors in exchange for promissory notes, however instead of using company generated revenue to make their required regularly scheduled payments, the company used new investor funds.
Ralph T. Iannelli, founder, and president of Essex Capital Corp. has also been accused of siphoning millions to personal accounts and granting himself over $6.4 million in interest-free loans with no maturity date.
“To maintain Essex’s veneer of financial success, stay current on its obligations to its promissory note investors, and continue to raise new investor funds, defendants… resorted to a pattern and practice of making Ponzi-like payments,” per the complaint.
Company documents show that between 2014 – 2016, the company generated approximately $107 million in revenue from investors and banks, of which $34 million was generated through equipment leasing. During the period, $65 million was used to make investor payments, and $39.4 million was used to purchase new leasing equipment.
“Nevertheless, Essex has taken several steps to create the illusion that its business model works, allowing it to be exceedingly successful at raising money from investors and bank lenders despite being unprofitable since at least 2014,” according to the complaint.
As of this writing, company records show $5.9 million in assets but owes $78 million to investors and others.
What is a Ponzi Scheme?
A Ponzi scheme is a type of securities fraud that uses money from new investors to pay off earlier investors while promising high rates of return. As the scheme relies on a constant stream of new investors to meet its obligations to earlier investors, the scheme collapses when new investors are no longer available or earlier investors need to be cashed out.
Many Ponzi schemes progress from just a few initial investors to thousands of investors and are able to operate without raising any suspicion for years. Through the promise of high returns (but not too high), explanations of access to information not available to the public, and garnering credibility through paying off initial investors pursuant to their agreement, others are often drawn in quickly to the scheme by just word of mouth.
However, Ponzi schemes are illegal because they inevitably fall apart.
The case is Securities and Exchange Commission v. Ralph T. Iannelli and Essex Capital Corporation, case number 2:18-cv-05008 in U.S. District Court for the Central District of California.
We are standing by, waiting to assist
Milberg Tadler Phillips Grossman is working with the law firms Sanders Phillips Grossman and Silver Law Group is investigating potential securities’ fraud claims for investors of Essex Capital Corporation.
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