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Special Agent Cao: It was like us watching a bank robbery happen every day.

Dani Rizzo: Kevin Merrill, Jay Ledford, and Cameron Jezierski stole hundreds of millions of dollars from investors, friends, and family. The three were on track to join the ranks of past financial criminals like Charles Ponzi and Bernie Madoff.

On this episode, we’ll hear how their scheme came crashing down thanks to the efforts of investigators. We’ll also discuss the warning signs of financial fraud and how you can keep your investments safe.

I’m Dani Rizzo, and this is Inside the FBI.

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Rizzo: A Ponzi scheme is an investment "opportunity" that's more of a con. It works by using—or stealing—money from newer investors to pay back the earlier ones.

While Kevin Merrill, Jay Ledford, and Cameron Jezierski ran one of the largest Ponzi schemes in recent history, they weren’t the first. That distinction goes to the infamous Charles Ponzi, an Italian immigrant living in Boston who stole an estimated $15 million through his scam a hundred years ago—and for whom the scheme is named.

So how did Kevin, Jay, and Cameron’s scam begin?

In the late 1990s, Kevin, who sold medical supplies for a living, started buying and selling consumer debt. He befriended Jay, a CPA who owned a public accounting firm and debt collection business.

Kevin and Jay, along with Cameron, who was the operations manager of Jay’s collection company, convinced investors to join them in purchasing consumer debt portfolios.

As Special Agent Cao from FBI Baltimore, one of the investigators on the case, explains...

Cao: Debt portfolios are anything that’s consumer related as far as, hospital bad debt, credit card bad debt, automobile bad debt. And these are charged off consumer debt that have gone through maybe one or two collection cycles where, you know, companies aren't able to collect the debt.

Rizzo: At a certain point, the company you borrowed from might write off the debt on its taxes and then, to make a little extra money, bundle it with other consumer debt and sell it to a debt buyer for a small fraction of the cost. That debt buyer can then come after you for the full original amount.

In this scheme, the conspirators were telling investors they were collecting more than they were.

Cao: If the portfolio was $100 million, that's the face value of the debt that was collected. And, you know, on average, you can collect two to five percent. They were telling investors they're able to collect between seven and 10 percent.

They sound like small numbers. But when you multiply that by hundreds of millions of dollars, it becomes a large sum of money.

Rizzo: Kevin, Jay, and their co-conspirators told investors they would make money for them by selling the debt for a profit to third-party debt buyers. In reality, it was all just an elaborate Ponzi scheme, as money from one investor was used to repay another. Meanwhile, the scammers were skimming millions for themselves to support lavish lifestyles.

Cao: And they really ramped up, I think, when we got the cases back in 2017, I think they'd been doing the scheme for roughly 10 years or so. So that's kind of where things began for us in October 2017.

Rizzo: At that time, investigators weren’t certain if there was fraud or not. They received tips from friends of investors who were concerned the returns Kevin was promising didn’t add up.

Cao: After we received some of the bank records, analyzing some of those, it was quite clear that what they were telling their investors was not happening, according to the bank statements.

Rizzo: Special Agent Wahl, detailed from the Federal Housing Finance Agency to FBI Baltimore to help with the case, cautions that if it looks too good to be true, it probably is.

Special Agent Wahl: If they're offering you something that looks too good to be true, if somebody you've never heard of in the investment world is offering you 20, 30% returns, chances are what they're promising you is fake, and they just want your money.

You can't really guarantee an investor you're definitely going to make money with me. I mean, the best hedge fund managers in the world can't guarantee that. Everybody loses money at some point due to various market conditions.

Rizzo: But on Kevin Merrill’s website, he claimed he had never lost any money for investors in 15 years.

Cao: And that was a red flag for me immediately when I saw that. And that should be a red flag for any investor looking to invest in these high-yield investments.

Rizzo: So, if you're going to invest money with somebody, do your homework and your due diligence.

Wahl: I think the other thing, too, is ask as many questions as you can.

One of Kevin's traits was when people started asking questions about how they were actually able to make this amount of money, he would get very frustrated, and he would get mad with the potential investor. And the comeback was, look, do you want to make money with me or not?

Rizzo: If someone isn’t willing to give you the details you need to understand what you’re investing in, that’s another red flag. Unfortunately for investors, Kevin and Jay were experts at making their business look real.

Cao: Kevin had done this scheme so often. He was such a good salesman that even when he talked to us in the FBI, when the case was just getting off the ground, he was a very good salesman.

Rizzo: Kevin was adamant he didn’t touch any of the money until his investors made back their money—but this was a lie.

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Cao: You had a CPA, and you had a fantastic salesman who, you know, the investors really didn't have a chance.

Rizzo: In total, Kevin, Jay, and Cameron defrauded investors of $396 million. But their luck eventually ran out.

Wahl: For this particular investigation, because the fraud was ongoing, we couldn't do things we typically do. We couldn't go out and interview people. Due to relationships that Kevin had made with various businesses and entities that we wanted to obtain records from, we couldn't reach out to them.

Cao: Because we were afraid that they would get the subpoena, notify Kevin Merrill or Jay Ledford. We were very careful to keep this covert as long as possible. We knew that as soon as they found out that we were investigating them, that all the assets would be gone. And that was really the important thing for us was trying to get something back for the investors because we saw how much money these guys were spending on jewelry, high-end cars, houses, private airplanes, you name it.

Rizzo: There was pressure to dismantle the Ponzi scheme quickly because investors were losing money in real time. Investigators turned to FBI forensic accounting experts.

Wahl: We were able to do search warrants on various email accounts to see documents going back and forth between investors. The value that the forensic accountants play in our investigations is huge.

Rizzo: Another huge win for investigators came with a 2018 undercover operation. An FBI agent posed as an investor looking to invest $10-$20 million after meeting with Kevin, Jay, and Cameron in Dallas, Texas.

Wahl: The undercover was critical, because what that did was it put all the coconspirators in the same room. We charged conspiracy, and I think that's what several of them pled to, was the conspiracy charge. But it put all the players in the same room. It put Cameron Jezierski handing the undercover a proposed deal, which we knew was false.

It put, you know, Kevin primarily doing the dog and pony show where they went to the various different locations where Jay Ledford’s debt collection business had offices. And that put Kevin, Jay, and Cameron in the same room in those offices, and that was critical in us being able to get probable cause to search those entities when we did the initial takedown.

Cao: We started the investigation in October of 2017 and then we took down the case in September of 2018. So lightning speed for a case of this complexity and size. But we had to take this down because there were so many investors.

It was ongoing. And I think if we had waited, this case could have gone to a billion-dollar loss. There's no doubt in my mind, because at the time of our takedown, he had about $150 million in potential investors that were lined up to actually invest with him. So that was kind of the straw that broke the camel's back for us, it's like, we’ve got to take this down before that deal happens.

Rizzo: And they did. On September 18, 2018, Kevin’s private driver was on his way to pick him up and take him to the airport to finalize the $150 million deal in Dallas. Instead, investigators arrested Kevin at his home in Maryland, and Jay and Cameron were arrested at the Mirage Casino in Las Vegas.

Cao: Even though it took us less than a year to take it down, it took us another two or three years to actually get this finished and wrapped up.

A lot of people think, you know, after we arrest these guys, it's over. But really, the work that we have to put in to get this to conviction stages is enormous.

Rizzo: What’s also enormous? The restitution investigators have been able to recover: More than $60 million to date.

Wahl: Typically, most of our fraud cases, there's court-ordered restitution, but there's never anything to actually pay back the victim. It was somewhat encouraging in this case that there was cash and other assets to be seized that could be liquidated to pay back the investors at least something.

Cao: And that goes back to how we worked this case, was that—that was primarily our goal, was to get something back for the victims. Because when we searched Kevin's house, he had over half a million dollars in cash that we were unaware of.

So that was critical for us. And, you know, it's one of the things that I’m proud of that we were able to do was to keep this covert as long as possible. And we're able to get so much money and assets back for the victims.

Rizzo: After the takedown, the work continued to increase for investigators, with hundreds of potential victims calling or emailing with their information. Story after story of life savings and retirement funds gone.

At the same time, Amanda Merrill, Kevin’s wife, was arrested, for obstruction of justice.

Cao: This case was worked so thoroughly, and we had so much evidence on them, that they decided to not go to trial.

Rizzo: Kevin and Amanda Merrill, Jay Ledford, and Cameron Jezierski all pleaded guilty.

Kevin was sentenced to 22 years in federal prison for conspiracy and wire fraud, Jay for 14 years, and Cameron for two. Restitution of $186 million was collectively ordered for all three men and a parallel civil investigation is being conducted by the SEC.

Wahl: Working with the SEC, working with the receiver, I think is a testimony to how when we can all sit together and work we can get a lot accomplished.

Cao: The nature of Ponzis, they're unsustainable. And I think eventually they would have been caught.

Wahl: It's a question of when. You know, Bernie Madoff’s lasted decades. I think ultimately in the end what would seal the fate of Merrill, Ledford, and Jezierski was their greed and this massive too big to be true lifestyle that they were leading was ultimately their undoing.

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Rizzo: You can report suspected fraud to the FBI at tips.fbi.gov or by contacting your local FBI field office. You can report internet-enabled fraud schemes to the FBI’s Internet Crime Complaint Center at ic3.gov.

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Rizzo: This has been another production of Inside the FBI. You can follow us on your favorite podcast player, including Spotify, Apple Podcasts, or YouTube. You can also subscribe to email alerts about new episodes at fbi.gov/podcasts.

I’m Dani Rizzo from the FBI’s Office of Public Affairs. Thanks for listening.

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