Summary of Tim Durham’s Ponzi scheme
The alleged fraud is over $200 million.
Durham’s main holdings were his leveraged buyout firm Obsidian Enterprises, Inc. and Fair Financial Services, both headquartered in Indianapolis, IN. When Durham acquired Fair in a 2002 leveraged buyout, it was a factoring company that purchased accounts receivable from businesses at a discount, profiting when the accounts were paid in full. It financed its operations by selling “investment certificates” to individual investors.

According to the indictment, Durham and his cohorts immediately changed Fair’s business. Rather than using the $200 million they raised from investors to purchase receivables, they instead loaned the funds to themselves and their various business entities. When the loans went unpaid, Fair turned into a Ponzi scheme—taking money from new investors to pay certificates that came due. Now that the merry-go-round has stopped, it is estimated that over 5,400 parties—many of them small mom-and-pop investors—have lost over $200 million.

The legal battles began with claims from disgruntled investors. In November 2009, the FBI raided the Obsidian offices in Indianapolis and seized its records. On February 8, 2010, the unpaid investors forced Fair into an involuntary bankruptcy proceeding. Shortly after his appointment, the bankruptcy trustee filed suit seeking to recover the money that had been improperly diverted from Fair.

The lawsuit language promised to prove a “fraud of shocking proportions and consequences.” According to the lawsuit, Durham looted Fair at “a stupendous pace.” By 2008 about 90% of the new money coming in was used to repay debts to existing investors. “Insider and related-party loans as a whole grew to $30 million within 15 months and $40 million within two years,” the lawsuit claims.

On March 15, 2011, after more than a year of