RIVERSIDE—On Thursday, May 21, a Moreno Valley resident was arrested on a federal criminal complaint that accused him of swindling dozens of people – primarily elderly retirees – in a Ponzi scheme that earned him over $10 million.
The 56-year-old, Paul Horton Smith Sr., was taken into custody by the Federal Bureau of Investigation (FBI). He was expected to make an appearance later that day in the U.S. District Court in Los Angeles.
Smith was charged with one count of wire fraud. The affidavit states that from at least 2013 until now, he has sold 75 clients an investment called “Northstar.” He claimed that it was a private annuity contract: a safe alternative to the stock market which also had a high annual return rate. In actuality, Smith used the victim investors’ money as “lulling payments” to previous investors.
He owns numerous businesses in Riverside, including Northstar Communications LLC and Planning Services, Inc. Their registered addresses are both 3637 Arlington Ave. Ste A100. According to the latter’s website, “Paul has spent more than 2 decades educating and assisting Riverside and San Bernardino Counties[‘] retirement population” and is a “veteran of the financial services industry.”
Smith also claims to be “a member of many distinguished industry organizations” and to have four children with his wife Joylynn.
According to the U.S. Securities and Exchange Commission (SEC), Smith marketed the investments via free workshops and other events. He allegedly raised over $5.6 million from at least 35 investors and paid $5.2 million back as interest payments or principal returned. Smith is also accused of using the money to “settle investor fraud lawsuits.”
The affidavit claims that a 70-year-old woman, who knew Smith from a church association in the 1990s, sold an Arizona home in 2016 and invested $175,000 in Northstar. Smith transferred the payment to other investors and used it to pay off their Internal Revenue Service (IRS) and Franchise Tax Board tax bills.
In November 2019, an 86-year-old woman sold her rental property and invested almost $170,000 in Northstar. She had also known Smith for a long period of time. He allegedly paid another victim investor around $135,000 of her payment the next day.
Some evidence suggests that the scheme began in the early 2000s, not 2013. The case prosecutor is Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office.
A wire fraud charge carries a penalty of up to 20 years in federal prison.