Andrew Middlebrooks Ponzi Scheme: 3 Warnings for Dallas Investors

The Andrew Middlebrooks Ponzi Scheme is not just about stealing money from unsuspecting investors; it is also a case where the investment scammer was a horrible investor. Occasionally, the investment scammer is also a horrible investor. Does a scammer always start out that way? A good guess is almost always.

Take Andrew Middlebrooks, of Detroit, Michigan and Dallas, Texas. The Andrew Middlebrooks Ponzi Scheme involved a commodity pool fund and led to him being sentenced to 100 months in prison for over $39 million in a wire fraud scheme related to EIA All Weather Alpha Fund I, LP. Middlebrooks wasn’t just a thief; he also made poor investments with other people’s money. In fact, the government described his trading and investing of Fund participant money as resulting in “catastrophic losses.” In one trading account, he deposited $21 million, losing more than $16 million. Which came first?

Over a five-year period, Middlebrooks solicited investor funds in a commodity pool fund. During this entire Middlebrooks Ponzi Scheme, which included futures contracts and options, he was never registered with the Commodities Futures Trading Commission.  Commodity Futures Trading Commission’s Complaint

How did Middlebrooks entice so many investors to trust him with their financial investments? You know the answer—he lied! He frequently misrepresented the Fund’s performance… Even though Middlebrooks made all kinds of claims as to his Fund’s returns, the Fund actually lost money every year—a hallmark of the Middlebrooks Ponzi Scheme.

Commodity Futures Trading Commission’s Complaint

Investors often think that the small investor is the one duped thinking sophisticated investors with big investments don’t fall for the financial traps. Unfortunately, we all must be extremely vigilant with our investments. Middlebrooks clients were not without wealth.  He extracted $34 million dollars from just 97 investors all through lying about assets under management, fund performance and audited financials. DOJ News Release

Investor Protection: Lessons from the Middlebrooks Ponzi Scheme

The question is how do you minimize your investment risk? Here are a few suggestions to assist you in avoiding financial investment fraud.

• Ask for multi-year audited financial statements. EIA’s investor documents called for annual audited financials provided to all investors. In the case of Middlebrooks and EIA, Middlebrooks fabricated a single year’s audited financials. No other audited financials were ever provided to investors.
• When you receive positive earnings statements, take some money off the table. Like many investment scammers, Middlebrooks invented investor’s performance reports out of thin air. He represented account balances continuing to increase. The fund actually lost money every single year. Investors who took money off the table, would have been alerted to the scam earlier, and/or would have lost a considerably less amount of their investment.
• Research registrations. Check with federal and state regulatory boards to make sure the person, fund and/or company you are working with has the appropriate registrations. In this case, a quick visit to the CFTC’s site, would have alerted potential investors that Middlebrooks was not a registered agent.
• Commodities Fund Research. For commodities funds, the registration authority is the CFTC (https://www.cftc.gov/). The rules of who must be registered, and other information about fraud are provided, as well as the link to the database to search for registrars. https://www.nfa.futures.org/basicnet/ . Also check the CFTC’s Red List. This registration deficient list (RED List) provides information about foreign entities that may require registration, but have not registered.

There’s risk all around financial investments, but wise choices can yield positive results. Never be in a hurry to jump into a deal. Research is key no matter how you found the opportunity.

We hope all your real state, commodities, foreign exchange, and oil and gas investments are safe and profitable. But if you find yourself searching for an experienced investment fraud attorney, oil and gas litigator, or a commercial litigation lawyer due to the Andrew Middlebrooks Ponzi Scheme or similar fraud, we are here to help.

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