WASHINGTON — A fake Internet-based credit union is at the center of a Ponzi-type scheme that has cost investors millions, according to a complaint filed by the Securities and Exchange Commission.
The SEC's complaint, filed April 11, charges Indianapolis-based Timothy J. Coughlin, 63, and two entities that did business as "Oxford International Credit Union" or "Oxford International Cooperative Union" with conducting an Internet offering fraud in which investors lost millions of dollars by investing funds in a fictitious credit union,
The scheme included falsely stating member accounts were insured by a private insurance company.
According to the complaint, Oxford International Credit Union and Coughlin collected deposits from more than 5,000 investors exceeding $12.8 million. Some investors were based outside the U.S.—3,300 resided stateside.
The SEC alleges that Coughlin misappropriated investor money, at least $5.9 million, to pay personal expenses, fund unrelated business expenses, and make distributions to other investors in a Ponzi-scheme fashion.
The plan, according to the SEC, included posting false information to investors' online accounts to create the appearance that their deposits in the fake credit union were earning about a 356% average annual rate of return from January 2007 through December 2009, InsuranceNewsNet.com reported.
The complaint states that the defendants failed to make investments with member's deposits sufficient to generate the results that were posted.
The SEC also stated that in December 2008, Coughlin launched a successor to Oxford International CU—Oxford International Cooperative Union—which also showed fake investment returns on its website through December 2011.
The website states: "You are on the verge of discovering a whole new world of financial opportunities and management strategies which were at one time only available to a select few. Membership in our exclusive, invitation only, group entitles you to participate in a unique, global co-operative."
The SEC's complaint alleges that Coughlin, in late 2008 and in 2009, began to deny investors' requests for withdrawals from their accounts, falsely claiming that the Internal Revenue Service and foreign tax authorities had frozen Oxford International and Oxford International Cooperative Union's accounts.
The U.S. Attorney's Office for the Eastern District of Virginia has also unsealed a criminal complaint against Coughlin.
The SEC is receiving assistance from NCUA in its ongoing investigation.
