Failure to register in Indiana opens door for state charges against Ponzi scheme mastermind

A split Indiana Court of Appeals ruled a man at the center of an alleged Ponzi scheme that defrauded nearly 72 victims in Ohio, Kentucky and Indiana will have to face state charges even though he pleaded guilty to a federal indictment.

The Court of Appeals issued its rulings in a pair of cases from two different counties that involved the same defendant and the same crime.

In Jerry A. Smith v. State of Indiana, 24A01-1210-CR-469, from Franklin Circuit Court, and Jerry A. Smith v. State of Indiana, 15A05-1208-CR-411, from Dearborn Superior Court, the Court of Appeals affirmed in part, reversed in part and remanded.

While the appellate judges threw out a number of state charges because they constituted a double-jeopardy violation with the federal plea, the COA held that other state charges specific to Indiana statute could stand.

Judge Nancy Vaidik dissented with the majority’s decision, arguing it violates double jeopardy. She wrote the “hypothetical reasoning” of the majority ignores the directive of previous decisions. Specifically, she pointed to State v. Allen, 646 N.E.2d 965, 968 (Ind. Ct. App. 1995) which held that a conviction in any other jurisdiction barred a later prosecution in Indiana for the same conduct.

Smith along with Jasen Snelling are alleged to have run a Ponzi scheme from CityFund Advisory and Dunhill Investment Advisors Ltd. The pair told victims they were involved in day trading, were licensed to sell securities and could garner an unusually high returns on investment.

However, according to the federal indictment, they were not licensed to sell securities nor were the firms licensed brokerages. Smith and Snelling never invested their clients’ money but rather used the funds to enrich themselves.

Together, victims of this investment scheme lost more than $8.9 million.

On June 12, 2012, Smith pleaded guilty to federal charges, acknowledging the ploy.

Franklin and Dearborn counties filed their own charges against Smith related to the financial fraud. Smith filed a motion to dismiss all state charges, asserting they were barred by double-jeopardy principles.

In throwing out several state charges, the Court of Appeals agreed with Smith that they arose from the same conduct that was included on Smith’s federal conviction. But the few charges related to Smith not being a registered broker-dealer with the Indiana Secretary of State were related to separate conduct.

“There is not overlap between the failing to register counts in this proceeding and Smith’s federal conviction,” Judge James Kirsch wrote for the majority. “On the one hand, had Smith been registered as a broker-dealer, he would still have faced the federal prosecution for his fraudulent acts. On the other, had Smith sold legitimate securities, he would have still have faced prosecution in this proceeding for his failure to register as a broker-dealer.”