George S. Blankenbaker Jr., 56, of Westfield, was charged April 1 in federal court for two counts of wire fraud and one count of money laundering.
According to a press release from the U.S. Dept. of justice, from May 2008 and August 2016, Blankenbaker created three business entities, Stargrower Commercial Bridge Loan Fund 1 LLC and Stargrower Asset Management, LLC and EDU Holding Trust. He later used these entities, which he owned and managed, in the execution of a Ponzi and money laundering scheme.
“The victims of this scheme placed enormous trust in Mr. Blankenbaker to wisely manage and invest their hard-earned money,” Acting U.S. Attorney John E. Childress stated. “Instead, he exploited their trust through deception and lies for his own personal gain.”
According to the release, Blankenbaker persuaded more than 100 individuals to invest more than $10 million in Stargrower Entities. He represented to investors that the funds they invested would be used to finance the use of shipping containers of food in the “international trade of fast-moving consumer products similar to what you would find in a grocery store.” The investment funds received by Blankenbaker were deposited into Stargrower Entities bank accounts which he solely controlled and was the sole signatory.
Contrary to Blankenbaker promises to investors, he did not invest their money as he had described. On more than 300 separate occasions between September 2016 and May 2019, Blankenbaker diverted the investment money he received to primarily make interest payments and return of principal payments to other Stargrower Entities investors, and to fund personal expenses and unrelated business ventures of his. Thirty-four investors lost more than $1.4 million in the scheme.
Blankenbaker’s other business entity known as EDU Holding Trust was designed to utilize investor funds to purchase life insurance policies on the secondary market at a price less than the face maturity amount of the policies. Investors in the Trust received a document created by Blankenbaker, entitled “life settlement purchase agreement” that they were beneficiaries of the Trust and that they would receive compensation from the profits generated when the life insurance policy matured, that is, when the insured died. In another document provided to investors, he said that a financial institution, the Bank of Utah, would serve as an escrow agent to receive the proceeds upon the maturity of the life insurance policies and then distribute the funds to the investors appropriately.
In August 2016, one of the policies purchased by the Trust died, and a proceeds check in an amount in excess of $2.5 million was issued to the Trust by the life insurance company on which the policy was drawn. The check was not deposited into the Bank of Utah escrow account, but was rather deposited by Blankenbaker into an account he opened at PNC Bank in the name of EDU Holding Esc Acct. Although some of the funds from this deposit were appropriately transferred to investors in the Trust, others were transferred to another account he controlled at PNC Bank in the name of one of the Stargrower Entities. These funds were used, in part, for business and personal expenses of Blankenbaker unrelated to the purposes of the Trust. This scheme resulted in a loss of $110,200 to an investor in the Trust.
This case was investigated by IRS Criminal Investigation, the United States Postal Inspection Service, and the Securities and Exchange Commission.
If convicted, Blankenbaker faces up to 10 years imprisonment for the one count of money laundering charge, and up to 20 years for each wire fraud charge, a maximum fine of $250,000 as to each count, and up to three years of supervised release following any prison term. Also filed April 1 was a petition to enter plea of guilty and plea agreement, whereby Blankenbaker has indicated that he intends to plead guilty to all the counts.
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Westfield man charged with wire fraud, money laundering; intends to plead guilty • Current Publishing - Current in Carmel
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