Two men have been sentenced in the US for defrauding investors of more than US$600,000 in a so-called "prime bank" investment scam.

Walter Snyder and Edward Paradis both pleaded guilty to a single count of conspiracy at a plea hearing in January. If the case had gone to trial, prosecutors would have told a court in Massachusetts that during a three year period commencing in January 1995 the defendants represented to potential investors that Paradis was able to obtain L/Cs issued by so-called "prime," or international, banks for the purposes of financing businesses.

Risk free

The pair also told investors that in order to obtain such a L/C, an advance fee would have to be paid to an escrow account administered by Snyder, an attorney, as escrow agent. The two men further represented to investors that the escrowed funds would not be touched until such time as the L/C was issued.

Moreover, investors were also told that if for any reason the transaction did not result in the issuance of a L/C, the entire amount of the advance fee would immediately be refunded to the investor. Thus Paradis and Snyder sold the investment as risk free.

Jail terms

However, shortly after the investors' money was transferred to his escrow account, Snyder withdrew the funds. None of the escrowed funds, totalling more than US$600,000, were used by the conspirators to obtain L/Cs. Rather, the proceeds from the so-called investments used by the defendants to pay themselves or to make payments to relatives, landlords and various merchants.

Snyder was sentenced to 14 months' imprisonment, to be followed by 2 years of supervised release, while Paradis received a jail term of two years, to be followed by two years of supervised release. The court also ordered the pair to make restitution to victims in a total amount of US$277,769.

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