A federal judge found Kevin B. Merrill to be a flight risk and ordered the wealthy Towson businessman to remain locked up until his trial for allegedly running a $364 million Ponzi scheme.
In his order Thursday, Magistrate Judge A. David Copperthite said he found strong evidence that Merrill, 53, doctored bank records and swindled investors.
“The documents are incredibly strong. People may not tell the truth, but documents can’t lie,” the judge said. “This is perhaps, and I think I’m pretty secure in saying this, the largest Ponzi scheme ever prosecuted in this court.”
Tall and thin, Merrill was led into U.S. District Court in Baltimore in handcuffs. He wore eyeglasses and a maroon prison jumpsuit. He did not address the judge.
Federal prosecutors say he ran the elaborate Ponzi scheme over the past five years, duping investors around the country and using their money to buy himself million-dollar homes, exotic sports cars and luxury watches.
Federal agents arrested him Tuesday at his home in Ruxton. They found $500,000 in cash inside a safe, Assistant U.S. Attorney Joyce McDonald told the judge.
Merrill and his business partner, Jay Ledford, of Texas and Nevada, are both charged with wire fraud, identity theft and money laundering.
In court Thursday, McDonald said Ledford was the gambler of the pair, spending lavishly in Las Vegas casinos, while Merrill collected extravagant cars and homes, including a $380,000 speedboat.
“We’re looking for the boat,” she said. “We have not yet located all the vehicles.”
She said Merrill has flown to Dubai and Singapore to lure wealthy investors. She said he also made trips to Geneva, Switzerland. FBI agents still are working to find all his bank accounts.
Merrill and Ledford amassed at least 400 investors, including retirees, small-business owners, bankers, lawyers and doctors, the prosecutors say.
These investors believed their money was buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” Instead, prosecutors say, the businessmen were funneling money from new investors to their previous investors. Sometimes, the prosecutors say, the partners paid an investor with that person’s own money, only returning the funds under the guise of profits.
A third man, Cameron Jezierski, 28, of Fort Worth, Texas, has been indicted for wire fraud.
Attorneys for Ledford and Jezierski were not listed in online court records.
On Monday, a federal judge granted a restraining order barring the men from selling the cars and homes. Officials could auction the assets to repay investors if the men are convicted.
Merrill’s defense attorneys asked the judge to release him to his parents or in-laws. They said the businessman, who grew up in Bel Air, has a wife and two young children.
His parents declined to comment after the hearing.
Seema Mittal, his attorney, told the judge that Merrill heard from an investor last year that he was being investigated by the FBI. He didn’t flee then, Mittal said.
In fact, she said, he met with the agents and talked about his business.
“And he waited and he waited and he waited, and nothing happened,” she told the judge. “Nothing happened until two days ago.”
McDonald, the prosecutor, offered another explanation for his willingness to meet the agents.
“Mr. Merrill felt very confident in his ability to snow them in the same way he snowed his investors,” she said. “Fortunately, the FBI did not fall for it.”