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Atlanta Man Charged In $7M Hedge Fund Scam

Date: Wednesday, July 6, 2011
Author: HFN Daily Report

A Georgia man appeared in front of a federal judge last week on charges that he bilked $7 million from investors in a Ponzi scheme using a phony "hedge fund" front.

Charles Michael Vaughn, 42, made an initial appearance Thursday in federal court in Atlanta on charges of wire fraud and mail fraud arising from his scheme, according to the Atlanta U.S. Attorney's Office.

Prosecutors alleged that from July 2004 through March 2008, Vaughn recruited at least 25 individuals in at least five states to invest in a purported "hedge fund" operated by his Atlanta-based company, CM Vaughn, LLC.

The government also alleged that Vaughn falsely represented that his fund generated returns of 2 to 3.5% per month and from 15% to as much as 50% per year, and that investments would be "insured" and could not decrease below a certain amount.

However, Vaughn allegedly never invested the funds, and used the investments instead for personal expenses and to repay earlier investors.

Vaughn faces five counts of wire fraud and nine counts of mail fraud, with each count carrying a maximum sentence of 20 years in prison and a fine of up to $250,000.