Follow-up: Loles arrested for massive Ponzi Scheme!

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Gregory Loles
You may recall that we ran a story in which Gregory Loles of Loles Farnbacher Racing was being accused of fraud but it now seems that he has been arrested and charged with an alleged massive Ponzi scheme that he used to defraud many associates through all aspects of his business life including the Farnbacher Loles racing team.

Following up on James Tinley‘s reports at the New Haven Register, it seems that the FBI have made the arrest and charged Loles. Following Edmund Mahoney’s article at the Hartford Courant, Loles has been charged with the following:

Gregory P. Loles, 50, was charged with using the U.S. mail and federally regulated communication lines to orchestrate phony investment deals. U.S. Magistrate Judge Holly B. Fitzsimmons ordered Loles held for a bail hearing in Bridgeport on Friday.

According to an affidavit in the case, Loles owned a company called Apeiron Capital Management and served on the board of the endowment fund at St. Barbara’s Greek Orthodox Church in Orange. Loles invested money for the church endowment and later used his position in the church to invest in behalf of fellow parishioners, according the FBI.

Among other things, Lole is accused of promising the church and his other investors that he could obtain annual returns of between 7 percent and 7.75 percent by investing in a particular fund. The fund was a fabrication, however, and Loles was paying investors with principal, the FBI said.

Loles told some investors he was placing their money in a fund called Knightsbridge Holdings ARB. The FBI said that there was no such fund and that Loles used his computer to generate false financial statements in an effort to cover the fraud.

In one case, Loles depleted an investor’s $100,000 investment by making fraudulent interest payments, the FBI said.

Federal prosecutors said Loles used investor funds for his personal use and diverted a portion to Farnbacher-Loles Motor Sports, a Danbury-based automobile racing team in which he has an interest.

Loles seems to have implicated Farnbacher-Loles Motor Sports in his scheme and it remains to be seen just what impact this will have the team. The teams website has been taken down at www.farnbacherloles.com. This leaves a serious void for the 2010 season for Dirk Werner and Wolf Henzler as they may have lost their ride.

Several affidavits and complaints have been filed against Loles and you can see those here.

Unfortunately this has happened and while the lure of this scheme wreaks of Bernie Madoff, it is sad to realize how quickly things like this can come home to roost. The financial crisis has exposed several dodgy issues in motor sport of late and while the political world and financial realm seem to get hit the hardest, no industry is sacred enough to not feel the ill effect of rampant greed and desperation. One look no further than Donington Park to see investments gone wrong and the fleecing of investors.

Loles has been accused of mail and wire fraud and sits in detention awaiting a detention hearing. It is rumored to have costs investors $8 million. It takes a special kind of person to fleece a church of its construction fund after a long-ran capital campaign to raise the money. It takes a special kind of person to defraud many of their investments and continue to fund a racing team under the guise of a successful gentleman racer.

According to Tinley, the fraud is deep and wide and there is not much hope that all of his creditors will be made whole.

On the upside, I haven’t used God or the staff of F1B for my ponzi scheme; no I just watched Bernie Ecclestone fleece Gillett for 12 large and I figure the local karting track my feel my wrath soon. Perhaps I could scam them for used tires or some sanctioning fee for non-existent coverage? Then again, if I wanted that kind of cash I’d just ask SJ Skid for it.

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