Securities Law Blog

A Colorado investment manager has been found guilty of four counts of securities fraud and sentenced to 32 years in prison for his role in a multistate Ponzi scheme on April 27, 2010. According to Colorado Attorney General John Suthers, Jason T. Brooks founded, owned and operated the company Genius Inc., also known as Genius Deals, Inc. through which he accepted $10 million from investors.

Brooks was indicted by a grand jury in June 2009 for his Ponzi scheme that operated from June 2005 through April 2008. During that time Brooks solicited clients from 15 different states including Colorado, New York, Florida and Massachusetts. According to Stephanie Stout, deputy state public defender and attorney for Brooks, “the victims were not brought in by cold calls, but were known to the defendant.”

According to the indictment, Brooks told investors that he had a master purchase agreement with Japanese appliance and electronics manufacturer Matsushita Electrical Industrial Co. Ltd. He claimed the agreement allowed him to purchase electronics and appliances as a distributor at cheaper prices. Investors were told their money would be used to purchase the products and then be sold to U.S. homebuilders for profit, resulting in a high rate of return for investors.

“The severity of Mr. Brooks’ scheme also should serve as a warning sign for Colorado consumers who might find themselves faced with unusual or strange-sounding investments. If an investment sounds too good to be true, it probably is,” said Suthers.

In reality less than 5% of investor money went towards purchasing the products. Brooks allegedly used the money for personal expenses, gambling, and to make “interest payments” to earlier investors.

Brooks lived and worked out of various homes in Larimer, Boulder and Weld counties, and at no time had any sort of distribution agreement, according to the indictment.