Feds say Ponzi scheme funded lavish lifestyle

The six-bedroom Ruxton colonial was one of three million-dollar homes Kevin B. Merrill purchased in Maryland. He also bought a share in a twin-engine business jet and a fleet of Rolls Royces, Ferraris and Lamborghinis.

The 53-year-old Towson businessman funded his lavish lifestyle, federal prosecutors say, by swindling more than 400 people and businesses in an elaborate Ponzi scheme.

Merrill was arrested Tuesday at his $1.06 million home in Baltimore County. He and his business partner, Jay Ledford, 54, of Texas and Nevada, have been indicted on federal charges of wire fraud, identity theft and money laundering. Both men could face more than 200 years in federal prison.

U.S. Attorney Robert Hur called their business model one of the largest Ponzi schemes ever charged in Maryland. Hundreds of investors around the country — retirees, small-business owners, bankers, lawyers and doctors — were duped into paying the men $364 million in the past five years, prosecutors say.

“Most of these investors are just learning now that they may have been victimized,” Hur said.

The investors believed their money was buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” But prosecutors say the businessmen actually were funneling money from new investors to their previous investors. Sometimes, prosecutors say, the men paid an investor with the person's own money, only returning the funds under the guise of profits.

Meanwhile, Merrill and Ledford allegedly skimmed off millions of dollars to buy themselves luxury homes, exotic cars and diamond jewelry.

On one occasion, an unidentified investor wired Merrill $500,000 to buy two debt portfolios. Prosecutors say Merrill sent the investor a fake document suggesting the purchase was made. But they say he actually took $54,000 to pay his previous investors, put $20,000 toward his credit card, and spent $400,000 on a rare Italian sports car, a 2014 Pagani Huayra Diablo.