Jimmy Sodhi / Jimmy Singh

Investors are nearly $2.4 million poorer and Janamjot Singh Sodhi has earned himself an almost 5 year stay at Club Fed, thanks to a Ponzi scheme carried out through a company called Elite Financial Inc.  The fraudster also used the names Jimmy Singh or Jimmy Sodhi.

The scheme ran from 2005 through September 2011, Like any typical Ponzi scheme, Sodhi solicited investors with the promise of high rates of return, and used new investor money to pay “returns” to old investors. At the same time, Sodhi siphoned off money for himself.

Here’s where it gets interesting… Sodhi previously had a license to sell investments, but it was revoked in 2005. In 2006, he was permanently debarred by the New York Stock Exchange. And in 2009, Jimmy Sodhi was ordered to cease and desist all investment advisor activity in California.

Did investors do any research before giving money to Sodhi? Apparently not. This CNBC article talks about the failure of investors to do basic due diligence, such as using Google to research investment advisors and the investments they are selling.

I published an article last year about investment fraud red flags, with a nice list of items investors should look into. A few of the more obvious red flags include:

• A history of being investigated or disciplined
• Criminal histories
• Inability to verify business or investment being promoted
• High rates of return on investments
• Guaranteed returns
• Little or no third party information to verify the business or investment

Read the whole list of Ponzi scheme and investment fraud red flags here.