Rep. Alan Grayson (D-Fla.) lost $US18 million in an investment fraud scheme that cheated him and other investors out of approximately $US35 million,
the Associated Press reports.
William Dean Chapman, the Virginia man who was at the head of the scheme, was sentenced to 12 years in prison for the scheme.
The AP details how it worked (or was supposed to):
The scheme worked like this: clients would turn over their stocks to Chapman as collateral for a loan, and Chapman would let customers borrow about 90 per cent of the stocks’ value.
If the stocks did badly, borrowers could walk away and keep the money they were loaned. But if the borrowers’ stocks did well, they would repay the loan with interest, and Chapman was supposed to return the stocks to the investor at their increased value.
But, according to court papers, Chapman sold the stocks and had no way to fulfil his obligations if a client’s stock portfolio did well.
Grayson didn’t immediately respond to a text message seeking comment.
Court papers reviewed by the AP indicate no wrongdoing on Grayson’s part, signaling that he was an unknowing victim of the scheme. This isn’t the first time that Grayson has fallen victim to a fraud scheme. In 2009, he won a $US34 million judgment against a company called Derivium Capital, which ran a version of a Ponzi scheme against him and other investors.
Grayson is consistently among the Top 25 wealthiest members of Congress, ranking 21st on this year’s list from Roll Call.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.