When the time came to finally tell the truth, Charles E. Hays fired up his iPhone.
"Today is not going to end well," the Rosemount man typed in a message sent Monday to investors, "for me and a lot of others."
With that, Hays said he would get an attorney and turn himself in, the target of a federal charges that accuse him of running a Ponzi scheme that bilked investors of at least $5.5 million.
Hays, 56, was arrested Thursday on civil and criminal charges of wire fraud, mail fraud and violations of the Commodities Exchange Act. A federal judge on Thursday froze Hays' assets and handed down an order prohibiting him from destroying records and requiring that he hand over records to the U.S. Commodity Futures Trading Commission (CFTC).
Hays, who worked out of his Rosemount home, allegedly told investors he could earn 3 percent monthly returns trading stock index and crude oil futures. The reality, a federal investigator revealed in court documents, was that Hays opened a $2 million account with the brokerage Dorman Trading in 2006, then lost $1.5 million trading futures before he closed the account this past July.
Yet Hays sent fake paperwork to investors claiming more profits were coming in, the charges allege. Neither Hays nor his company, Crossfire Trading, was registered with the CFTC.
Victim Bruce Hendry first learned of Crossfire from a friend in late 2007, according to court papers. Later that year, Hendry went to Hays' home on W. 121st St. to watch Hays trade online, committing $2 million to Crossfire after the visit. Hays sent monthly statements that showed Hendry's investment had grown, prompting Hendry to send another $2 million to Crossfire in March.
Hendry asked Hays for $30,000 from his account in October, but even after receiving the funds he became suspicious. Hendry, after visiting Hays' home again in December, contacted authorities last month.
Court papers show that a few months after taking $3 million from Hendry, Hays bought a 64-foot $3 million Viking motor yacht. The boat was seized Thursday, along with $1 million in cash, authorities said.
"Hays ran his Ponzi scheme from his yacht, but was grounded when the tide turned as federal authorities exposed this egregious fraud," Stephen J. Obie, CFTC acting director of enforcement, said in a statement.
Neither Hays nor any of his investors was available for comment Thursday.
The CFTC said in court Thursday that Hays scammed three investors and a charitable foundation, but in a separate interview Thursday, Obie said it's not unusual for the number of victims to grow as the extent of a Ponzi scheme is uncovered.
Hays is only the latest in a string of Ponzi schemes prosecuted by the CFTC. Since the start of the year, Ponzi schemes netting tens of millions of dollars have been uncovered in Atlanta; Long Island and Rochester, N.Y., and Philadelphia, according to the CFTC.
Matt McKinney • 612-673-7329
