Ponzimonium

“[D]efendant has proven himself a dishonest and untrustworthy person, as evidenced by the crime itself and the fact that he was hiding out from law enforcement when he was arrested…. I am not left with a secure feeling about Defendant’s release in light of the nature of the allegations, the extent of the monies fraudulently procured by the Defendant, and the potential punishment in the case.”

—Thomas B. McCoun III, United States Magistrate Judge1

On January 22, 2009, Beau Diamond, the thirty-one-year-old owner and manager of Diamond Ventures LLC, a small company created to trade off-exchange foreign currency contracts (forex), sent his investors an email notifying them that “the funds have been lost.” He urged them not to “initiate a federal investigation,” because if there is a federal investigation, “no one will ever see a penny, and I most likely will be behind bars.”2 When Diamond’s investors received his email they were shocked to learn that their investments were gone, because up until that time, Diamond had guaranteed their principal investment and a monthly return.3 Diamond always told his investors that the maximum loss his fund could sustain was 15 percent, and that he created a reserve account to cover the maximum loss.4 Indeed, Diamond Ventures’ promotional materials stated that the reserve account money “just sits there, unused, untouched and ready to cover this 15 percent maximum loss” and therefore, “no client loses a single penny.”5 What went so drastically wrong that 200 people now faced the total loss of their investments?

OFF-EXCHANGE FOREIGN CURRENCY CONTRACTS— Trading based on changing values of currencies with a commodity or other intermediary outside of an organized exchange

For starters, Diamond Ventures never had a reserve account to cover trading losses. Beau Diamond was able to enter into written contracts with his customers guaranteeing them monthly returns of between 2.75 and 5 percent, as well as commission incentives to bring in additional customers because customers were paid from other customers’ money.6 On September 3, 2009, immediately following his arrest by federal authorities, the Commodity Futures Trading Commission filed a civil complaint charging Diamond and Diamond Ventures with misappropriation and fraud in operating a forex ponzi scheme.

CIVIL COMPLAINT—Legal document filed by wronged party to start a lawsuit against a wrongdoer

On December 17, 2009, the United States Attorney’s Office for the Middle District of Florida, Tampa Division, filed an eighteen-count indictment against Beau Diamond, charging him with seven counts of wire fraud, three counts of mail fraud, seven counts of illegal money transactions, and one count of transportation of stolen property. According to the indictment, Diamond collected approximately $37,744,000 from his unsuspecting victims, spending and ultimately losing less than half of that—$15,231,000—on forex trading. Another $15,177,000 was paid back to investors as phantom profits to keep the scheme afloat. The remaining $7,336,000 went to Diamond and his companies for a waterfront condo, a 2006 Lamborghini Gallardo, extended gambling trips to Las Vegas, jewelry, a high-end rental home in Newport Beach, California, as well as vacations to Brazil, the Cayman Islands, and Costa Rica.7

Diamond talked a good game and his background made it easy for him to get his foot in the door with many investors. Diamond’s parents, Harvey and Marilyn Diamond, were “pillars in the community” and the authors of the popular natural diet and health book series Fit for Life.8 Their connections, and the fact that Harvey Diamond was listed on the incorporation documents for Diamond Ventures, equaled instant affinity to several Sarasota, Florida, investors who were involved in the local natural healing community that followed the Fit for Life philosophy.9 Diamond also had a philosophy that he put into print: a forex book/trading course that he and his employees touted as having “sold very well to traders in over fifty countries.”10, 11

WIRE FRAUD—Criminal fraud committed through use of electronic communications

MAIL FRAUD—Criminal fraud committed through use of the mail

The Wights*, an average dual-income Sarasota couple nearing retirement, first learned about Diamond Ventures during a dinner held by a vegetarian group at a local restaurant. A couple at their table was talking about their investment with Diamond Ventures and the Diamond family connection. Jane Wight knew of the Diamond family through her involvement with the natural healing community and had been invited to the dinner by an acquaintance of Harvey Diamond. Not long after the dinner, Mrs. Wight’s hairdresser, who also was involved in the natural healing community, mentioned her ex-husband was making lots of money with Diamond Ventures. Thereafter, Mrs. Wight contacted the couple who had first told her about Diamond Ventures and learned more about how their investments were doing before contacting Diamond’s assistant directly. Mrs. Wight was candid with the Diamond’s assistant about their financial situation: the Wights had money set aside for their special-needs adult daughter and thought that Diamond Ventures would be a great opportunity to invest that money and ensure her financial future.12

Diamond’s assistant sent Mrs. Wight an email describing Diamond Ventures in greater detail and sent copies of the Diamond Ventures contract and earning guarantee schedules. Thereafter, Mrs. Wight and her husband began liquidating some of the investment accounts set aside for their daughter and tapped into their home equity to invest with Diamond Ventures. The information they received indicated that by allowing the earnings on their deposit to compound, they would receive a yearly return of close to 43 percent and that the principal and monthly returns would be “fully guaranteed by a legal contract.” Their friends were making money and Beau Diamond represented that “no client loses a single penny,” so the Wights made their first deposit.13

Over time, prompted by Beau Diamond’s solicitations for additional funds with guaranteed bonuses, the Wights invested $200,000 with Diamond Ventures. The Wights made it very clear to Diamond’s assistant that they were tapping into the remainder of their home equity loan, liquidating monies set aside for their daughter’s care, and using Mr. Wight’s IRA account in order to fund additional investments with Diamond Ventures. Diamond’s assistant assured the Wights that the “bonuses” were guaranteed as long as the money was left compounding for six months. Unfortunately, after six months, the Wights learned that their entire life savings was gone.14

Some investors received the “Diamond Ventures Teleseminar Transcript,” thirteen pages of frequently asked questions and answers explaining the world of forex. This document explained that Diamond Ventures operates as an “investment club” limited to “close friends and associates and just strictly through word of mouth” to generate consistent profits while ensuring that “no client ever loses a single penny.”15 Diamond’s loquaciousness and diatribe against traders and trading systems not associated with Diamond Ventures reached a noteworthy peak when Diamond stated:

This is an interesting fact here. Did you know that literally over 95 percent of all traders never consistently make a profit?16

This should have been a red flag, but as the victims of this fraud eventually discovered, Beau Diamond financed his international vacations, expensive cars, and gambling junkets not by successful forex trading but by using their money to pay for his luxurious lifestyle.17

Diamond was put in custody in September 2009 and was twice denied bail due to the severity of the charges against him and the fact that he was a flight risk. After an eight-day jury trial beginning on July 12, 2010, Diamond was found guilty on all eighteen charges.18 On December 22, 2010, a federal district court judge for the Middle District of Florida sentenced Diamond to 186 months (15½ years) imprisonment on counts one through ten (concurrently) and 120 months imprisonment on counts eleven through eighteen (concurrently), 36 months of supervised release and restitution to defrauded investors in the amount of $23,065,090.19

RESTITUTION—Money paid by wrongdoer based on loss to wronged party

On December 30, 2010, the United States District Court for the Middle District of Florida entered a final judgment order of restitution and civil monetary penalty against Diamond and Diamond Ventures in the CFTC’s civil fraud case. In the CFTC’s order, the court found that Diamond and Diamond Venture’s violations of the antifraud provisions of the Commodity Exchange Act merited an award of restitution in the amount of $1,071,035, plus post-judgment interest, and a civil monetary penalty (CMP) of $3,213,105, plus post-judgment interest. The court found defendants jointly and severally liable for payment of the restitution and CMP amounts.20

CIVIL MONETARY PENALTY—Civil fine for violating Commodity Exchange Act or CFTC’s rules

Diamond’s parents couldn’t help him out or his victims. As Diamond told his club members, “My father was essentially whiped [sic] out by this along with many other club members, and my mother lives month to month from a small income that she makes with her husband.”21 In the end, the Diamond Ventures investors can hope that Beau Diamond was prescient when he composed his January 2009 email to them and that he does, in fact, stay “behind bars” for many years to come.

CLIENTS	GUARANTEED RETURNS	APPROX. INVESTOR DEPOSITS
200	2.75-5% MONTHLY	$37,744,000

LOST IN FOREX TRADING	PHANTOM PROFITS	POCKETED BY DIAMOND
$15,231,000	$15,177,000	$7,336,000