Eastern District of North Carolina | Insurance executives plead guilty to conspiracy in multimillion dollar Ponzi scheme

RALLY, North Carolina – Joseph W. Floyd, IV, and William F. Floyd, Jr., brothers from Whiteville, North Carolina, each pleaded guilty yesterday before U.S. District Judge Terence W. Boyle to conspiracy to sell and deliver unregistered securities in connection with a multi-year multi-million dollar Ponzi scheme operating under the guise of an alleged investment program. At sentencing, Floyd each faces a statutory maximum of 60 months in prison, a $250,000 fine and three years of supervised release. The Floyd family will also have to compensate the victims of the crime.

“The Floyd brothers used their family insurance business to defraud tens of millions of families in eastern North Carolina by promising low-risk investments with huge returns,” said US Attorney Michael Easley. “The U.S. Attorney’s Office is turning up the heat on white-collar fraudsters who use Ponzi schemes and securities fraud to defraud hard-working North Carolina families.”

“The level of greed that the Floyd brothers demonstrated is hard to fathom. Not only did they persecute members of their own community for profit, but even relatives were also not prohibited. While their guilty pleas will not reimburse those who lost money, we hope the federal prison sentences will pay off their victims in some way,” said Acting FBI Special Agent in Charge Michael S. Sherk.

According to court documents and other information presented in court, the Floyds own and operate Floyd’s Insurance Agency (FIA), an insurance business based in Whiteville, North Carolina. The Floyds, through the FIA, also offered a “loan program” in which more than 150 individuals and businesses in southeastern North Carolina and elsewhere invested funds in exchange for interest-bearing promissory notes. The promissory notes were securities as defined by law and therefore required to be registered with the Securities Exchange Commission (SEC). As part of the registration process, the SEC requires businesses to provide important financial information that allows investors to make informed investment decisions. The Floyds never registered their investment proposals with the SEC at any time.

The loan program proposal was presented as a safe and conservative investment, comparable to a traditional money market account or certificate of deposit (CD), but offering higher interest rates that ranged from six percent to 10 percent. The promissory notes, which are personally guaranteed by the Floyds, state that the investor’s principal is payable within one year. The Floyds initially used the borrowed funds to extend credit to Monthly Payment Plan (MPP), a company they owned in Chapel Hill, North Carolina, that financed insurance premiums for consumers.

Investors were led to believe that the FIA ​​was earning enough profits to pay the promised rate of return and fund redemptions of principal on demand. In fact, by 2012, FIA had borrowed more than $20 million from investors and had no means to service the debt through any legitimate business source. To prevent bankruptcy, the Floyds run the loan program as a Ponzi scheme in which principal and profits are paid to existing investors with funds raised by newer investors. Investors were never informed of this fact. Instead, the Floyds hid FIA’s bankruptcy from investors and continued to accept additional investments. In May 2020, FIA filed for Chapter 11 bankruptcy protection. In August 2020, Floyd filed for personal bankruptcy.

Michael Easley, U.S. Attorney for the Eastern District of North Carolina, made the announcement after the charges were filed. Federal Bureau of Investigation, Charlotte Field Office, investigated the case. The Securities Exchange Commission, Atlanta District Office, also provided valuable assistance. Assistant United States Attorney Adam F. Hulbig filed the case for the government.

A copy of this press release is located on our website. Related court documents and information can be found on the US District Court for the Eastern District of North Carolina website or on PACER by searching for Case #7:23-CR-1-BO.


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