Eight months after a pair of brothers in rural North Carolina pleaded guilty to charges tied to a multi-million dollar Ponzi scheme, they’ve both been sentenced by a federal judge, the Triangle Business Journal reported. Joseph Floyd IV last week was handed a three-and-a-half-year sentence in federal prison for conspiracy to sell and deliver unregistered securities. Floyd’s brother and co-conspirator, William Floyd, was previously sentenced to just over a year in prison for his role in the scheme. Both Floyds were ordered to pay more than $10.6 million in restitution. They could have faced up to five years in prison for orchestrating a situation described as a “mess” by one of their victims. The Floyds owned and operated Floyd’s Insurance Agency in Whiteville, North Carolina, offering what they described as a “loan program.” More than 150 people and businesses invested funds in exchange for interest-bearing promissory notes, thinking they were conservative investments with high interest rates – to the tune of 6 to 10 percent. When profit checks came, they considered it proof that the business was legitimate. But in actuality, by 2012, the company had borrowed more than $20 million from investors and did not have the means to service the debt through legitimate means. And the notes were never registered with the U.S. Securities Exchange Commission, a regulatory requirement meant to prevent misrepresentations and forms of fraud. To forestall bankruptcy, the Floyds ran the loan program as a Ponzi scheme, where principal and profits were paid to existing investors with funds raised from more recent investors — all without disclosing the situation to their investors. They also controlled a Chapel Hill company called Monthly Payment Plan Inc., that would provide loans to enable consumers to finance a portion of their annual insurance premiums. The promissory notes were entered into by the insurance company and individual investors, but Floyd’s Insurance Agency did not use the borrowed funds to finance insurance premiums. Instead, it loaned the funds to Monthly Payment Plan on an “as-needed” basis for this purpose. Monthly Payment Plan was to repay the principal balance with interest.
