The United States Attorney’s Office in Los Angeles yesterday announced a 33-year-old Long Beach man who collected $33 million from Southern California investors with false claims of large profits from real estate investments was sentenced today to 78 months in federal prison for running the Ponzi scheme.

Jon Weldon James was sentenced by United States District Judge R. Gary Klausner, who also ordered the defendant to pay $11,172,412 in restitution.

“There was a receiver who liquidated the properties that he bought and some bank accounts that we got, and they got about $3 million total,” said Thom Mrozek, Public Affairs Officer, United States Attorney's Office, Central District of California (Los Angeles).

James pleaded guilty in February to one count of wire fraud arising from a nearly half-million dollar investment made by a couple who were promised a 20 percent annual return. In his plea agreement, James admitted that he defrauded more than 50 victims who invested in his real estate-related investments from late 2003 through August 2006.

However, Mrozek told www.OC180NEWS.com investigators believe there could have been as many as 100 victims. “The victims were primarily from Southern California.”

In a sentencing memorandum, prosecutors wrote: “For over three years in the mid-2000s, [James] marketed real estate-related investments to individuals through word-of-mouth techniques, often encouraging them to invest money they had set aside for retirement. During that time, businesses that [James] controlled took in approximately $33 million from investors but only purchased five pieces of real estate, which never generated any profits for investors.” In fact, James acquired real estate only after the California Department of Corporations began looking into complaints about James in November 2005, which was more than two years after James began accepting money from investors.

In the Ponzi scheme, James used investors’ money to repay other investors who requested withdrawals of their funds. James also used investor money to pay for personal expenses, which included his wedding at the St. Regis Monarch Beach in Dana Point and a nearly $900,000 investment in a recording studio and production company called “On the Ball Entertainment.”

James ran his scheme through an El Segundo-based venture that operated under a series of names, including J.W. James and Associates, Inc. and The Cloaking Device, Inc.

The U.S. Attorney’s Office reported “ In total, prosecutors argued in court, James defrauded more than 100 investors and caused losses of approximately $14.5 million.”

Mrozek told us of the $33 million taken in by James, about 18.5 million was paid out to the Ponzi investors, resulting in the 14.5 million in losses.

Those losses were further reduced by about $3 million of seized assets, resulting in the $11 million restitution judgment against James. But, James is going to prison and, even though the U.S. Attorney’s Office maintains a unit devoted to asset recovery for the benefit of victims, apparently James doesn’t have any assets left.

“The victims should expect to recover only a very small percentage of their losses,” said Mrozek. The receiver appointed by the court to liquidate the $3 million in seized assets has completed distributing those proceeds to victims and so far, the U.S. Attorney’s Office has not identified any other significant assets. Thus, even though there will remain a judgment against James for the unpaid $11 million in losses, the chance of the victims getting anything from it is rather slim.