Indy Lawyer Suspended For $19M Ponzi Scheme
Indianapolis lawyer, Charles B. Blackwelder, has been suspended from the practice of law following a guilty plea to four Class B felony counts of securities fraud. He and his daughter, Cara Grumme, were accused of scamming more than 300 elderly Indiana residents of more than $19 million. The securities involved 35 residential properties located in Carmel, Fishers and elsewhere in Hamilton County, as well as some commercial property in Hamilton, Hancock and Marion counties.
According to the Indiana Secretary of State’s Office, CFS, LLC – Blackwelder’s company – sold securities, marketing investments in rental properties to seniors as a means to shield their assets from Medicaid spend-down requirements. Blackwelder was criminally charged with 20 felony security fraud counts and two charges of theft of at least $100,000. He was sentenced to four years in the Indiana Department of Correction. A condition of the guilty plea was that Blackwelder and Grumme agree to pay $19,379,104.23 in restitution to the victims.
CFS offered investors opportunities to purchase fractional shares of homes that entitled them to a promised rate of return based on a proportional share of rent and other factors. However, 87 percent of the properties CFS owned were oversold to investors. In one case, CFS sold shares totaling 200 percent in a home.
When a receivership was established, the court appointed attorneys at Drewry Simmons Vornehm LLP. The claims against CFS eventually rose to $23 million. Of the 2,082 deeds for shares of properties, there were 131 unrecorded. And, 39 of the 40 parcels owned by CFS owed delinquent property taxes. There was more than 1,440 pounds of paper records and more than 35,000 electronic records. The case is among the largest land fraud receivership cases in Indiana history.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.