Charlotte Ponzi-Scheme Underscores Importance of Due Diligence in Self-Directed IRA Investments

As a family-owned Self-Directed IRA business with much of our operations and a client services office in Charlotte, North Carolina, we were dismayed to learn that a prominent Charlotte businessman, Rick Siskey, has been accused of operating a massive Ponzi scheme that defrauded at least 100 people of as much as $49 million.

Many of his victims had entrusted him with substantial IRA nest eggs, which he promised he would invest on their behalf using a Self-Directed IRA structure.

Instead, an FBI affidavit says that he was using their investments in a vast Ponzi scheme, paying off previous investors and using the rest of the money to fund personal luxury expenses and feed a gambling habit. Investigators have found tens of millions in transfers from TSI Holdings to his personal account, and $15 million in transfers from his personal account to various gambling casinos, where he is said to have been involved in high stakes gambling – as high as $70,000 per hand.

Siskey will not face trial for these crimes – a week after a judge ruled that his home was subject to forfeiture to the U.S. government, Siskey took his own life.

While he’s not around to interview anymore, investigators have interviewed Self-Directed IRA owners who fell victim to his scam. The overall trend is this: Siskey appears to have preyed on unsophisticated investors and the elderly, who were unlikely to be able to conduct a full and proper due diligence into the TSI Holdings fund that Siskey urged them to invest in.

All legitimate financial professionals are outraged at what Siskey appears to have done. American IRA, LLC, is no exception. We also hope that investigators will locate enough funds to repay at least a significant portion of what Siskey stole from the investors who trusted him. His widow, Diane, is said to be fully cooperating with investigators.

Don’t Be a Victim of Self-Directed IRA-Related Fraud

However, it’s important to take this opportunity to emphasize certain truths about Self-Directed IRA investing:

  1. Due diligence – the practice of carefully investigating investment opportunities before committing funds – is no different for IRA investors than it is for everyone else. Investors should understand exactly what they are investing in before writing a check or wiring money.
  2. Investors should be very careful about unrealistic promises. If something sounds too good to be true, it is.
  3. Be careful of guaranteed returns. Few investments are guaranteed – most of them are insurance products, which are guaranteed only by the insurance company itself. If someone promises a guaranteed rate of return that’s greater than what you can get in a money market or fixed annuity in the current market, get a second opinion from an expert before investing.
  4. Beware of anyone promising that an IRA custodian or administrator guarantees an IRA or Self-Directed IRA
  5. Investors are responsible for their own due diligence. Third party administrators don’t do due diligence, and don’t make Self-Directed IRA investment recommendations.
  6. Understand that small companies, non-publicly traded firms, and other potential Self-Directed IRA investments may not be audited by third party accounting firms – further underscoring the need for investors and their investment advisors to conduct careful due diligence of their own.
  7. If someone is pitching you a suspect investment, check out his or her disciplinary record with your state regulator or with FINRA.

If you were a client of Siskey’s and suffered losses because of his crimes, go to this website for instructions on how to begin filing a claim for restitution from assets that may be recoverable.

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