How’s this for overachieving? Man accused of running software outfit as a Ponzi scheme while on parole from previous fraud

October 2, 2020 TH Author

A convicted fraudster was out on parole when he allegedly conned victims into giving him millions of dollars to place surefire sports bets on their behalf using special software that didn’t actually exist.

The 39-year-old, of Lehi, Utah, has been charged with wire fraud conspiracy and money laundering conspiracy – and must answer a civil lawsuit from punters who say they were duped into parting with their cash.

Hales, it is claimed, boasted to potential investors he owned foolproof sports betting software that could “beat the house.” The pitch to marks went like this, according to prosecutors: Hales would take investors’ money, and use it to place wagers on sports games as directed by his amazing software. Said investors would get a ten per cent weekly return on their buy-in as a result of the code’s prowess.

The pitch was rather effective in bringing in punters, even in the apparently straight-and-narrow US state of Utah, it seems. The criminal complaint [PDF] filed against Hales this week claims he managed to round up $7m from his clients.

All of this allegedly went down a couple of years ago while Hales was out on supervised release, and living in a halfway-house, as a result of being convicted in 2011 of orchestrating a real-estate scam. That rap carried a 90-month prison sentence and a $12,719,236 restitution bill. He violated the terms of his release in 2016, and had to go back behind bars for another 30 months.

The money taken from the sports-betting investors was in part used to pay off earlier investors in the scheme, Ponzi-style, hedge sporting bets, and was in part sent directly to bank accounts of Hales and a co-conspirator, the Feds said. Business was conducted through a company called Sindakit Software, set up by said co-conspirator in Nevada, it is claimed.

Hales even assured his investors his non-existent betting software was a hot commodity, and the subject of bids of “tens of millions of dollars” from tech giants, it is claimed.

But, the Feds say, there was no betting software, no surefire algorithms, and no multi-million dollar bids for Sindakit Software and its too-good-to-be-true code. It was allegedly just Hales, operating under the name of Chris Christian, running what prosecutors say was a scam while still serving time from his previous criminal scheme.

Lawsuit

Not only does Hales have Uncle Sam on his case, but he is also being pursued through the civil courts [PDF] by investors for all manner of allegations from breach of contract and unjust enrichment to violations of the US Securities Exchange Act of 1934, violations of the Utah Securities Act, and fraudulent conveyance.

That lawsuit also names Candace Kanahele, of Utah, as a co-conspirator of Hales, and seeks to extract $7m plus interest, damages, and lawyer fees from the pair.

According to the government’s legal eagles, this isn’t an isolated incident for the Beehive State. Utah is apparently dealing with these sort of alleged scams at a disproportionate rate compared to the rest of the nation. “Utah has an outsized fraud problem, and these allegations illustrate the conduct of a serial schemer,” said US attorney John Huber. “Utahns must diligently consider investment pitches and their risks before parting with hard-earned savings.” ®