Lights! Action! Ponzi Scheme?

A movie producer from Laguna Niguel, California, has been charged with 89 felony counts – including securities fraud and grand theft – for orchestrating an alleged $9 million Ponzi scheme in which he promised investors up to 35 percent returns for making loans to his B-movie production company. If convicted, Mahmoud Karkehabadi (aka Mike Karkeh) faces more than 25 years in prison.

According to California Attorney General Jerry Brown:  

More than 150 individuals from across the country made "movie production loans" to Alliance Group Entertainment, which has produced four B-movie flops since 2005, including "Confessions of a Pit Fighter" (2005) starring rapper Flavor Flav and "Hotel California" (2008).

Karkehabadi and his agents told investors they would get their money back within a year, regardless of a project's success, with returns of 18 to 35 percent. When the year was up, Karkehabadi convinced investors to roll their "loans" over into the latest movie project or agree to extensions on the date for repayment.

A review of Alliance Group Entertainment bank records showed the majority of funds deposited into the company's accounts were from investors – and their money was the source of most of the principal and interest payments made to earlier investors. The accounts showed deposits of more than $11 million from investors – and just $535,000 in revenue from the movies produced by the company.