In the 1990s, three men went to prison for selling Xerox machines to businesses around the country. The problem was the copy machines didn’t exist.
Now it appears two of those men are back in business. Todd Prince, gaming reporter at the Las Vegas Review-Journal, has reported they are running a sports-betting fund in Nevada, taking in millions of dollars.
But investors say they aren’t being paid anything in return.
“The guy is running six funds under four different names, which is already a sign that something is not right," Prince said, "but all the investors thought they’re making money. They see their account going up. It looks very professional.”
However, the investors say when they try to withdraw their money — either their principal or their earnings — the fund managers come up with an excuse for why they couldn't get paid.
Sports betting funds work like mutual funds. Investors give fund managers money and the managers take that money to place bets on sporting events instead of picking stocks.
The practice is only legal in Nevada under a law that was passed in 2015. Prince found the two men, John Thomas and Thomas Becker, set up at least two funds before the law was passed.
He also found none of their investors were in Nevada.
“This might be on purpose because it might be harder to investigate if your victim is in a different state and you’re operating here in Nevada,” Prince said.
The fund managers have told clients that their investments have gone up 600 percent in a year, which Prince said seems extremely unlikely noting that a great year on Wall Street would be somewhere in the 30 percent increase range.
In addition to unlikely profit claims, Prince said the funds were using parlay bets which are the riskiest and have the highest win for the casinos, meaning the house takes 24 percent on parlays versus 5 to 6 percent on single game bets.
“He’s using the riskiest strategy and it’s hard to believe he’s winning millions of dollars as he says he is,” Prince said.
So far, Prince has tracked down 60 people who have invested in the six funds being run by Thomas and Becker.
The Secretary of State's office wouldn't confirm with him whether an investigation into the funds is underway, but the Gaming Control Board is not involved because it doesn't view it as its issue.
“I think they are looking at it that it’s a securities issue," Prince said, "so, the individuals are selling the equivalent of a mutual fund so that would come under Nevada’s Secretary of State oversight and not gaming.”
Prince did report that a lawyer for one investor reported to him that the Securities and Exchange Commission, or SEC, is looking into the funds.
The state of Oregon has also investigated because the two men were selling their products in that state, which doesn't allow sports betting funds.
Prince said one of the big problems is that investors are not going to authorities about the questions they have.
“In large part, why he’s able to do this is, the people do not turn to the authorities and say, ‘hey, this guy is not paying me. He should be looked in to,’ because they have this hope that he is going to pay them back,” he said.
People continue to hope that they'll get at least some of their money back, but if they go to the authorities they could get nothing.
“They wanted to get their investment back and let this guy continue to carry out this business that is very suspicious,” he said.
Todd Prince, gaming reporter, Las Vegas Review-Journal