Gemstar Capital Group Owner Sued for Texas Securities Fraud in $40 Ponzi Scam He Ran with Ex-Dallas Cowboy Football Player Gets 10-Year Prison Sentence

Gemstar Capital Group owner Jeffrey J. Sykes has been handed a 10-year federal prison sentence for the $40 million Ponzi scam he ran with ex-Dallas Cowboy Michael Kiselak. Although the former NFL player has not been criminal charged, he was found liable for more than $20 million in 2009 over his involvement in the Texas securities fraud portion of the scheme. Now, the federal government is confirming that Kiselak defrauded investors of at least $24 million dollars in the financial scam run by Sykes.

In 2007, Sykes and Kiselak set up Kiselak Capital Group to pursue investors. According to the US Attorney’s Office, Kiselak used information given to him by Sykes to get investors to put in over $20 million. The ex-pro football player took out fees for himself and then gave the money to Sykes even though both Gemstar and Kiselak didn’t engage in Treasury note trading, which is what they told investors they were doing.

Instead, contend prosecutors, the two men used some of the funds for personal spending and in ventures that investors didn’t know about. While some of the funds did go back to investors, in certain instances, Sykes made false claims that the money was profit from T-Bill trading programs or their capital returned.

In the SEC’s securities fraud case against Kiselak, Sykes, and Gemstar, the regulator claimed that Kiselak promised 2.25% monthly returns to investors, falsified documents, dumped 95% of their funds in Gemstar, and failed to disclose that a 35% performance fee was levied on Gemstar profits.

Since Sykes put most of investors’ money in money market accounts, the latter were able to get back some of the funds, which they invested between 2007 and 2009. However, they lost approximately $12.9 million.

“Our firm has represented a number of high-profile athletes with securities fraud claims and we have also taken action against former athletes and the financial firms they represent,” said Shepherd Smith Edwards and Kantas founder and Texas securities fraud attorney William Shepherd. “I have been asked whether an unusually high number of former athletes become involved in such scandals. It is true that when an athlete’s career ends their income can fall precipitously. It is also true that many enter sales, including securities sales because of their ability to reach high net worth clients. But I do not believe former athletes are more likely than others to commit harmful acts. I do believe that when they become involved in problem situations these are far more heavily publicized.”

Owner of California private equity company pleads guilty in more than $40 million Ponzi scheme involving Texas investors, Dallas News, January 11, 2013

More Blog Posts:
Texas Senator’s Bill Would Make Plaintiffs’ Attorneys in Private Securities Cases Disclose Possible Conflicts Of Interest That Might Have Affected Client Retention, Stockbroker Fraud Blog, April 5, 2013
Texas Securities Criminal Case Against Oil and Gas Company Executive Can Proceed, Rules Fifth Circuit, Stockbroker Fraud Blog, February 6, 2013

If you think you may have been the victim of Texas investment fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today.