A Draper man has been sentenced to federal prison in connection with a scheme in which he took millions of dollars from scores of investors by claiming he could produce returns of up to 300 percent a year.
Andrew Dean Kelley, 42, pleaded guilty earlier this year to one count of securities fraud in connection with his Blackbird Capital Partners investment company.
Instead of investing the money, Kelley admitted in court documents that he used it to pay earlier investors in what is known as a Ponzi scheme, and also diverted cash for his own personal use and benefit.
On Tuesday, U.S. District Judge Dee Benson sentenced Kelley to seven years in prison, followed by three years of supervised release. Kelley must report to prison on Jan. 3, 2018.
Benson also ordered Kelley to pay $7,965,523.58 in restitution.
Prosecutors say Kelley solicited family, friends, neighbors and fellow church members. Based on his representations of success, about 100 people invested with him.
When Kelley was charged last November, prosecutors were aware of about $3.1 million in investor losses. But prosecutors ultimately claimed 84 of those 100 investors lost more than $12,000,000.
But based on defense arguments, the judge removed some of the victims from the restitution amount based and ultimately ordered Kelley to pay the nearly $8 million amount.
Prosecutors had argued that Kelley should be sentenced to eight years in prison, noting in a sentencing memorandum, that Kelley admitted to one of his alleged victims that he is “delusional” and a “compulsive liar.”
“I am all those terrible things,” Kelley said, according to the memorandum. “I have turned into a monster.”
Kelley and Blackbird still face a lawsuit by the Securities and Exchange Commission filed last year in U.S. District Court alleging Kelley and Paul H. Shumway, of Lehi, took millions from investors under false pretenses beginning in about September 2014.
The SEC lawsuit remains pending, though Kelly agreed to settle the case without admitting or denying the allegations.