A US man has pleaded guilty to federal obstruction of justice charges in connection with an alleged US$3 million securities scam that involved investors in the US, Australia and South Korea.

Bud Allen Wofford has agreed to plea guilty to charges related to his participation in a scam that used standby letters of credit (L/Cs) in its ploy to dupe investors.

Trading programme

Wofford acted as an associate for the company allegedly behind the scam called Vertical Group LLC and admits that he knew that the group's chairman, Daryl Brown, and others gave false information about a trading programme involving standby L/Cs that were supposed to yield very high returns.

Wofford, who has now forgone his right to have his case tried by jury, also admits to warning several investors not to contact the police or the authorities during 2004 and 2005 when over US$2 million of investors' money was allegedly transferred to a so-called escrow account but was in fact siphoned off by the defendants for personal use.

Suspicions

Investors who eventually suspected they had been duped by fraudsters filed lawsuits in Missouri and Georgia seeking some US$8 million from the company, its affiliates and its officers.

Specifically under scrutiny in the lawsuit filed in Missouri are the so-called standby L/Cs, which according to Vertical Group representatives who took hundreds of thousands of dollars from investors, promised returns of up to 1,000 per cent over the course of just a few months. The investors failed to receive those returns, and they lost their principal too.

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