Although investors were instructed to transit funds to escrow accounts, including one in Atlanta, the money did not stay in any such account, Yates says. Instead, the two transferred more than $20 million of the money to a series of hedge funds that lost money.
They used $10 million of the money to operate the business, pay early investors and pay themselves $500,000 in cash. They ignored most investors' requests for distributions of earnings. The two were indicted in 2010 on 22 counts of mail fraud, wire fraud and conspiracy.
