State Sues Princeton Couple for Allegedly Defrauding People in Scam Investments, Using Investor Funds to Bankroll Lavish Lifestyle
Attorney General Gurbir S. Grewal and the Division of Consumer Affairs announced today that the Bureau of Securities has filed suit against a Princeton couple, alleging the pair schemed to fraudulently sell investments in gas and oil projects to members of their social circle and then used a significant portion of investor funds on luxury vacations, country club payments, and other personal expenses.
Officials say Ford F. Graham allegedly raised more than $5 million through a series of loans and fraudulent sales of unregistered securities from unsuspecting individuals and investors located in at least five states, including fraudulently selling at least $1.9 million of unregistered securities to New Jersey investors.
The suit, filed in Mercer County today, alleges that between January 2012 and January 2014 Graham, often with the active participation of his wife, Katherine B. Graham, represented the unregistered securities to potential investors as low-risk, high-reward investment opportunities in gas and oil projects, but instead misappropriated investors’ money for personal expenditures, transferred it to joint accounts in his and his wife’s name, used it to repay prior investors, and withdrew the funds in cash.
“Ford Graham and his wife allegedly used their social connections in the affluent Princeton community to lure investors into a Ponzi scheme that financed the defendants’ posh lifestyle of country clubs, private schools, and tropical vacations,” said Attorney General Grewal. “The Bureau’s action today seeks to hold the defendants accountable for their actions and require them to return the ill-gotten funds to defrauded investors.”
The suit alleges that Graham and his wife violated the State’s Uniform Securities Law by making false and misleading statements to investors in connection with the offer and sale of unregistered securities issued by Graham’s companies, including: Specialty Fuels Americas, LLC; Aries Energy Group Venture, LLC; CCC Holdings, LLC; and Rattler Partners, LLC (collectively, the “FG Entities”), scheming to defraud investors, and unjustly enriching themselves with investor funds. Graham also acted as an unregistered agent.
The unregistered securities sold by Graham and the FG Entities included promissory notes, a purchase agreement for certain interests, and a profit participation agreement.
Despite Graham’s representations that investor funds would be spent on specific oil and gas projects, he instead transferred the funds between the bank accounts of the different FG Entities and a fifth company he controlled—Vulcan Energy International, L.L.C.
A significant portion of the funds were then used to pay previous investors in a Ponzi scheme. The Grahams also used these funds for personal expenses, including: an Antigua vacation; payments to the couple’s country club; payments to their child’s summer camp and private school; purchases at upscale department stores; and numerous cash withdrawals.
“Investors who put up money were led to believe it was being invested in legitimate projects guaranteed to return a profit, but that was a lie,” said Paul R. Rodríguez, Acting Director of the Division of Consumer Affairs. “We will not allow the defendants’ lies and deceit to go unchecked, nor will we allow New Jersey investors to be exploited in such an egregious manner.”
The Complaint alleges that Graham, a Princeton University graduate, and his wife, used social connections in the college town to drum up sales in his scam investments, promising prospective investors up to twenty percent returns on their funds.
“Investors tend to lower their guard when someone they know socially or professionally offers them an opportunity to invest in a ‘sure thing,’ as happened here,” said Christopher W. Gerold, Chief of the New Jersey Bureau of Securities. “But this case illustrates the importance of thoroughly vetting the person offering the investment, and the investment itself, before handing over your hard-earned money.”
The State’s Complaint seeks disgorgement of all profits, restitution for investors, imposition of civil penalties, and a permanent injunction against the defendants from working in the State’s securities industry in any capacity, among other remedies.