San Francisco, California - A federal grand jury indicted John Holdaway and Kevin Kyes yesterday with conspiracy, wire fraud, and money laundering, announced United States Attorney Brian J. Stretch, the Federal Bureau of Investigation Special Agent in Charge John F. Bennett, and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.
Holdaway, 72, of Sandy, Utah, and Kyes, 68, of Campbell, Calif., allegedly ran an approximately $7 million Ponzi scheme, primarily involving Japanese investors, from December 2012 through July 2015. According to the indictment, Holdaway and Kyes offered investors the opportunity to invest with a group of entities that they controlled and referred to as “Money Management Strategies,” or “MMS.” The defendants allegedly told the investors their money would be invested in currency or derivatives trading with returns of 100% annually. The defendants also allegedly told investors that their investments would be safe, in part because their principal would never leave the bank accounts into which the funds were sent and that any trading losses would be borne by MMS. Based on the representations of Holdaway and Kyes, these investors wired or otherwise transferred money to bank accounts in Northern California controlled by Holdaway and Kyes. The Japanese investors sent approximately $7 million to Holdaway and Kyes during the scheme.
The indictment alleges that in reality, Holdaway and Kyes did not invest the money as promised. Instead, they spent the money themselves, used it to fund Ponzi-type payments back to investors, spent the money to pay back prior investors from other investment programs that they had run, and spent it on gold-related businesses. In addition, Holdaway and Kyes allegedly told investors that they were receiving distributions or returns on their investment. To back up their claims, the defendants also allegedly created and sent to investors fake documents, including account statements and letters from an accountant. Holdaway also sent emails to investors under fake names, to give the appearance that multiple people worked for Holdaway and Kyes, and lied about traveling to Europe or elsewhere to work on their investments.
Holdaway and Kyes are charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; eighteen counts of wire fraud, in violation of 18 U.S.C. § 1343; one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1956(h); and five counts of engaging in monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.
Both defendants were arrested this morning and made their initial appearances in federal court, where they were released pending further hearings. Holdaway’s next scheduled appearance is at 9:30 a.m. on Tuesday, June 28, 2016, before the Honorable Laurel Beeler, U.S. Magistrate Judge. Kyes’s next scheduled appearance is at 11:00 a.m. on Friday, July 22, 2016, before the Honorable Susan Illston, U.S. District Judge.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the maximum statutory penalty for each count of wire fraud or conspiracy to commit wire fraud is 20 years’ imprisonment and a fine of $250,000 or twice the gross gain or loss resulting from the offense. The maximum statutory penalty for each count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity or of engaging in monetary transactions in property derived from specified unlawful activity is 10 years’ imprisonment and a fine of $250,000 or twice the amount of property involved in the offense. Additional periods of supervised release and restitution also apply. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with assistance from Jessica Meegan and Daniel Charlier-Smith. The prosecution is the result of an investigation by the FBI and the IRS-Criminal Investigation.