On May 5, 2008, the U.S. Securities and Exchange had filed an emergency criminal action before the United States District Court of Eastern District of Michigan, and succeeded in obtaining orders to freeze the assets of George McKnight and several companies controlled by him.
According to the SEC complaint, McKnight raised about $72 million from more than 3,000 investors located across 50 states and in some foreign countries by floating a fraudulent and unregistered security offering through his company Legisli Holdings during the period December 2005 through November 2007. The luckless investors were drawn to invest in the scheme on the basis of McKnight’s assurance that he could pay interest of over 15 percent per month by deploying their funds in various investment avenues.
In fact, McKnight invested less than half of the money raised, and incurred losses of millions of dollars on these investments. Worse, he utilized the money in making Ponzi payments to other investors, and for personal purposes.
On July 6, 2011, the Court judged against McKnight and had ordered him to pay about $6.5 million towards disgorgement of fraudulent profits, civil penalties and prejudgment interest. It also prohibited him from continuing violations of the applicable provisions of the Securities Act and Exchange Act.
On February 14, 2012, criminal charges were filed against McKnight by The U.S. Attorney’s Office for the Eastern District of Michigan. On February 16, 2012, the Court accepted McKnight’s guilty plea to wire fraud for perpetrating the said $72 million Ponzi scheme.
Though his sentence would be decided at a later date, McKnight could face up to 20 years in prison, the maximum potential liability for his crimes.