A man who duped US investors from Missouri and Georgia into investing in schemes supposedly incorporating standby letters of credit (L/Cs) has pleaded guilty to conspiracy to commit money laundering.

Sylvester Mitchell , a former employee of the Columbia-based Vertical Group, admitted he participated in a US$3 million investment scam.

Bait and switch

Prosecutors said the scam employed a 'bait and switch' mechanism in which Vertical would promote mortgage loans at low rates to lure and capture potential victims, and then steer them towards supposedly risk-free, high-return trading programmes.

The central investment vehicles in these programmes were billed as standby L/Cs.

False documents

Between 2004-05, Mitchell solicited investments by convincing investors that if they invested US$50,000 or more in these standby L/Cs, they would yield up to a US$1 million return within a year.

Mitchell then convinced investors that lucrative multimillion-dollar investment deals had been struck by claiming to show evidence of this, but the documents he showed turned out to be fakes.

40 years jail

Instead of investing money from investors in standby L/Cs, Mitchell channelled the money to co-conspirators in the scam.

Mitchell will be sentenced after further investigation and faces a jail term of up to 40 years as well as a hefty fine.

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