Moreno Valley man receives lengthy sentence for multimillion-dollar Ponzi scheme

A Moreno Valley man has been sentenced to over 15 years in federal prison for orchestrating a Ponzi scheme that defrauded investors of more than $24 million over nearly two decades. Paul Horton Smith Sr., aged 61, received his sentence from United States District Judge Jesus G. Bernal and was ordered to pay restitution amounting to $13,331,505.

Smith had previously pleaded guilty to one count of wire fraud on January 8. "This defendant’s greed and deceit caused major losses for his victims, who discovered that the supposed gains for their retirement were nothing more than a lie," stated United States Attorney Martin Estrada. He emphasized the importance of prosecuting such fraudulent activities and advised caution with investment opportunities that appear too promising.

Akil Davis, Assistant Director in Charge of the FBI Los Angeles Field Office, commented on the case's impact: "Paul Smith's clients trusted him. Smith knew that and used it to his advantage, selling them on a bogus investment opportunity and pocketing those funds." Davis noted the vulnerability of many investors, who were seniors at various stages of life.

Smith operated companies in Riverside under names like Northstar Communications LLC, Planning Services Inc., and eGate LLC. From July 2000 to May 2020, he solicited investments by falsely claiming involvement in annuities or real estate ventures under the name "Northstar." He misled investors into believing they would receive fixed returns from safe investments.

Contrary to these claims, Smith deposited investor funds into a non-interest-bearing checking account without making any investments. He used new investor funds to pay earlier investors' interest payments or withdrawals.

In one instance from April 2019, a victim invested $400,000 with Smith following the death of their spouse. Despite assurances of a secure investment with a 5% return rate, Smith diverted these funds to repay other victims within his scheme. To cover up his actions, he made partial repayments totaling $163,324 to this victim.

The scheme affected at least 200 investors overall; however, 106 victims remain unpaid with total losses equating to $13,331,505.

The investigation was conducted by the FBI with assistance from the United States Securities and Exchange Commission (SEC), which had filed a complaint against Smith and Northstar Communications LLC in 2020.

Assistant United States Attorney Benjamin J. Weir led the prosecution of this case.