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Clinton Township Man Pleads Guilty to $40M Investment Scam

David P. Meyer

Alan James Watson, of Clinton Township, Michigan, pled guilty on Thursday to one count of mail fraud in connection to an investment scam that defrauded 750 investors out of $40 million. The victims were located across the country, including in Michigan and in Virginia, where Watson entered his plea.

According to the plea agreement, Watson, acting as CEO of an "investment club" that he started in 2004, obtained $40 million in investor funds over the course of a three-year period (from 2006 to 2009) by promising investors they would earn returns of at least 10 percent per month through an equities-trading system. He then secretly invested the vast majority of the funds ($34 million) in high-risk ventures and lost nearly all of it.

"Without the consent of his clients, Mr. Watson gambled away investors' funds on risky ventures that led to millions of dollars in losses," said Assistant Attorney General Lanny Breuer in a Detroit Free Press article. "He used his investment club to cheat people who trusted him out of their savings."

Like many recent con artists, Watson attempted to cover up his scam by issuing false account statements and paying returns to older investors with new investor money. Investors only learned of the scam in 2010, after Watson had lost almost all of their money.

He faces up to 20 years in prison. His sentencing date is scheduled for Dec. 9 in Virginia.