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Ponzi scheme nets $12.8 million in investor funds

More than $12.8 million in investor funds were collected via two fictitious credit unions created for a Ponzi scheme.

One Indiana man has been charged by the U.S. Securities and Exchange Commission for fraudulently collecting investor funds via fake credit unions.

According to SEC Litigation Release No. 22972, on April 11, the SEC filed an action targeting Timothy Coughlin, 63, of Indianapolis, and two entities that conducted business as "Oxford International Cooperative Union" or "Oxford International Credit Union." In a parallel action, the U.S. Attorney's Office for the Eastern District of Virginia released the details of the complaint.

The aforementioned parties are charged with conducting an Internet offering fraud, which resulted in individuals losing millions of dollars by investing funds via nonexistent credit unions. The SEC alleges that Coughlin and the Oxford International Credit Union collected funds from more than 5,000 investors between June 2007 and December 2009, amounting to more than $12.8 million. Of the total investors, 3,300 were U.S. residents, with at least one victim in each of the 50 states and the District of Columbia.

Fraud actions allegedly committed
The SEC's complaint said that Coughlin allegedly misappropriated investor funds for various reasons, including payments of personal expenses, distributions to other investors in a classic Ponzi-scheme fashion and distributions to an unrelated business. Additionally, Coughlin and Oxford International Credit Union gave investors the false impression that they were earning substantial daily investment returns by posting fake information on their accounts. 

One such source of misinformation was the fake credit union's website - located at Investors saw their accounts averaging returns of 0.471 percent each trading day during the June 2007 to December 2009 period. This would have amounted to about a 356 percent average annual rate of return. However, the funds were allegedly not invested in a manner to provide the returns noted in the investors' account details. The defendants also claimed that the investors deposits were guaranteed by a private insurance company.

Coughlin began operating Oxford International Cooperative Union as a successor of Oxford International Credit Union in December 2008, when further fraudulent activity was carried out at the new company. Similar investment return claims were made via the new company's website - located at This continued from December 2008 until December 2011.

Misappropriated funds
The investor funds were allegedly diverted for several illegitimate purposes. The SEC claimed that at least $5.97 million was misappropriated: $1.57 million was used for personal expenditures and $4.4 million to pay other investors who had requested withdrawals from their Oxford International Credit Union accounts. Furthermore, Coughlin allegedly transferred funds from Oxford International Credit Union's accounts to bank accounts which he controlled in the names of two relief defendants.

When investors requested withdrawals in late 2008 and 2009, Coughlin denied them access to their accounts, claiming that Oxford International Credit Union and Oxford International Cooperative Union's accounts were frozen by the Internal Revenue Service and foreign tax authorities, the SEC's complaint stated.

Charges against Coughlin
The SEC complaint charged Coughlin and his companies with violating several laws.

"The SEC's complaint charges Coughlin, OICU Ltd. and OICU Investments Corp. with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks disgorgement of all ill-gotten gains with prejudgment interest, civil penalties, conduct-based injunctions, and an officer-and-director bar against Coughlin," the SEC said. "The SEC also seeks disgorgement and prejudgment interest from relief defendants American Quality Cleaning Services, Inc. (d/b/a "Oxford Privacy Group") and Avocalon LLC."

The investigation is continuing
The SEC investigation - conducted by Adam Eisner and Carolyn Kurr in the Washington office, and supervised by C. Joshua Felker - is still ongoing. The SEC also acknowledged the aid of the U.S. Attorney's Office for the Eastern District of Virginia; the Federal Bureau of Investigation; the Department of the Treasury, Treasury Inspector General for Tax Administration; the Indiana Secretary of State, Securities Division; the National Credit Union Administration; and the Ontario Securities Commission.

The Credit Union Times delved further into the matter and found that the website for the Oxford Privacy Group is still active.

"You can join Oxford Privacy Group via our partner program, or through a direct referral," the website read, according to the Times. "Please contact the person that invited you to this web site. They will provide you with the correct information to join Oxford Privacy Group."

The website did not have a street address or phone number for Oxford Privacy Group. However, there were two email addresses, both of which the Times messaged. One message was met with a reply that said the news site's email was undeliverable, and the second message received a reply from a support email address, which acknowledged that the message had been received.