Gary Hutcheson pleaded guilty to operating a Ponzi scheme in Macon, Georgia. He and an accomplice defrauded 50 investors, including prominent doctors, attorneys and church members, of millions of dollars when he told them their assets would be invested in a hedge fund named Georgia Ionics Fund, LLC.
Some of the investors knew Hutcheson 30 years before they invested their assets in the fund. Another friend of Hutcheson’s in-laws invested his children’s college fund due to what he thought was a trusting relationship. One investor lamented, “You never think it could happen in your own home town.”
The Sales Pitch
Some victims said Hutcheson approached them in person while others were sent an official looking prospectus. Hutcheson told investors the fund was earning 18% to 25% per year. Some investors received dividend checks so they believed the fund was performing as stated.
The Red Flags
There were three red flags that should have warned people to avoid this investment. First is subjectivity. People based their investment decision on a relationship and Hutcheson’s affluent lifestyle versus an audited record of success. Second, the absence of due diligence. Some review of the facts, such as compliance records and registrations, might have uncovered the Ponzi scheme. Third, the exceptional returns. High returns and low risk are mutually exclusive.