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Note: FCM Capital (Victim) sued Regent Corporate Consulting, John Miller, and John Grice (Fraudsters) for fraud in the inducement, conspiracy to commit fraud, and multiple violations of the Racketeer Influence and Corrupt Organizations Act, and sought entry of a default judgment after Fraudsters failed to appear.

Victim specialized in film financing and assisted-living projects, and was seeking investors in a biofuel project. Fraudsters held themselves out to Victim as wealthy, capable investors with access to billions of dollars. Fraudsters showed Victim fraudulent bank statements indicating their ability to contract with Victim. Fraudsters provided Victim with a Proof of Funds issued on an HSBC letterhead and signed by two persons claiming to be HSBC managers. Fraudsters and Victim entered into an initial agreement for Fraudsters to invest in one of Victim’s projects. Victim agreed to pay Fraudster USD 100,000 for their due diligence related to the project in exchange for a standby letter of credit for USD 1,000,000. However, when the standby LC obtained by Fraudsters was rejected by Victim’s bank, Fraudster explained that the rejection was due to “document formatting issues.” Victim then paid Fraudsters USD 100,000.

Fraudsters and Victim then entered into a second agreement under which Victim agreed to invest USD 500,000 in a supposed carbon credit investment project. After Victim paid USD 400,000 (the other USD 100,000 was to come from Victim’s payment for due diligence, per the agreement), Fraudsters became unresponsive and Victim, upon learning of the fraud, subsequently sued Fraudsters for fraud in the inducement, conspiracy to commit fraud, and multiple violations of the Racketeer Influence and Corrupt Organizations Act. The U.S. District Court for the Central District of California, Wright, J., in favor of Victim, entered a default judgment.

Due to the nature of the charges, the Judge awarded statutory treble damages in the amount of USD 1,500,000 (three times the actual damage amount of USD 500,000), post-judgment interest, and attorneys feeds and costs, but refused to award punitive damages pointing to Victim’s reasonable capability to have detected the fraud when the standby LC was rejected.

[ALC]

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