Dominican Republic Timeshare Scandal Unfolds: $163 Million Ponzi Scheme Exposed
A massive $163 million was defrauded from 1,200 investors over a period of five years in a brazen Ponzi scheme involving two Caribbean timeshares. The Securities and Exchange Commission (SEC) claims that James B. Catledge and Derek F.C. Elliott, owners of Net Worth Solutions, used the funds to pay themselves exorbitant sales commissions while investors were lured with false promises of annual returns ranging from 8% to 12%.
The Scheme
The scheme involved two types of securities:
- Residence: investments for timeshare ownership interests
- Passport: investments for timeshare interests
Investors were told that their returns were guaranteed, but the SEC alleges that only a small percentage of funds were actually used to renovate and construct the properties. Instead, defendants skimmed off undisclosed commissions and used new money to pay off earlier investors.
How it Began
The scheme began when Catledge, 44, founded a series of multi-level marketing entities to sell investments in Elliott’s resorts. The first resort was Impact America, followed by Impact Net Worth and Net Worth Solutions. Elliott, 41, served as the company’s president.
The Cofresi Resort
The Cofresi resort in the Dominican Republic, purchased by Catledge and his father in 2003, needed additional funding to complete construction and repairs. Catledge was hired to raise money for the resort, which led to the creation of EMI Sun Village Inc., a company that targeted investors in the western United States to buy Residence resort investments.
The Scheme Unraveled
The scheme unraveled when local banks foreclosed on Elliott’s Sun Village Resort & Spa near Puerto Plata after investors in Florida filed a lawsuit alleging that he and his father had squandered investor funds on private luxuries. The case was eventually dismissed, but the SEC has now moved to expose the alleged fraud.
The Devastating Consequences
The investigation highlights the devastating consequences of Ponzi schemes, which can leave innocent investors financially ruined. As authorities continue to crack down on these types of scams, it is essential for consumers to remain vigilant and conduct thorough research before investing in any opportunity.