A California attorney was arrested Tuesday morning on federal charges that he defrauded investors out of at least $4.5 million.
An indictment unsealed in Manhattan federal court Tuesday accuses San Marino attorney Derek Jones, 46, who is being defended by Jonathan Marvinny of Federal Defenders of New York Inc., of misleading people into thinking two real estate businesses were performing significantly better than they actually were between at least 2012 and 2019, leading to charges of wire fraud and aggravated identity theft.
Jones’ alleged offenses involve real estate developer and investment firm BlueRidge Realty and venture capital firm Realize Holdings. According to the indictment, filed under seal Jan. 28, Jones told investors BlueRidge Realty was developing a resort on land in Washington, when in actuality no such resort was underway and the land in question wasn’t owned or controlled by BlueRidge Realty.
He also allegedly sent a Realize Holdings investor a bank statement altered to say a firm account that actually had a negative balance of $268.71 held more than $7 million.
“As alleged, Derek Jones not only failed to live up to the canons of the legal profession, he affirmatively lied to investors and defrauded them out of millions of dollars. As alleged, Jones lied about a real estate development opportunity on land he neither owned nor was developing, and he lied to investors to create the false impression that he had real businesses with real employees,” Manhattan U.S. Attorney Audrey Strauss said. “Jones allegedly spent investors’ money on himself and his family, and to pay some investors in Ponzi-like fashion. Now, thanks to the FBI, Jones is in custody and facing federal charges.”
FBI Assistant Director William F. Sweeney Jr. said Jones used the money solicited from investors to fund at least one of his children’s private school tuition and transfer money to himself and relatives, among other personal expenses.
The lawyer, according to the criminal complaint, allegedly maintained a facade to defraud investors by coming up with excuses not to meet with them and using other peoples’ names without permission, in order to give the appearance that his businesses had other employees.
“Investment fraud schemes are unfortunately all too common,” Sweeney said. “Our efforts to bring the perpetrators to justice are as well.”
If convicted of the charges in the indictment, Jones could face up to 20 years in prison for one count of wire fraud and two mandatory two-year consecutive sentences for two counts of aggravated identity theft.
U.S. District Judge Loretta A. Preska of the Southern District of New York has been assigned to the case, which is being prosecuted by assistant U.S. attorney David Abramowicz and investigated by the Complex Frauds and Cybercrime Unit of the U.S. Attorney’s Office for the Southern District of New York.
Marvinny did not respond for comment on the case Wednesday.
The State Bar of California indicates one of the two attorneys named Derek Jones admitted to practice in the state also resides in San Marino, was suspended in October from practicing law in the state for not paying bar fees and has been suspended four other times since 2012 for failing to pay fees or not meeting MCLE requirements. Disciplinary charges were filed against that Derek Jones in December 2018, and bar admission was ordered inactive in February 2019 and February 2020.