Risky Business: A Teen, A Nightclub, and a Ponzi Scheme | Ian Bick - Part 1

26:58But when there's not something planned, like in the horizon, that gives me hope. Like if there's no hope, then I get worried. Then I get anxious. Like in prison, for example, if you have an appeal, it could be five years out, an appeal date, you're okay for those five years because you have hope. Like if you have a 20-year sentence and your appeal court hearing is in five years, you're okay. Mentally, you're at peace for a little bit. It's when that last option is gone, that's when, you know, you're in anxious mode and you're like, you know, you don't know what to do. So I think that's when the stress started.

27:38But that was like months down the line into it. And what year were you in at this point? Were you a junior or a senior? This was senior year, 2013. I had left high school. I was supposed to graduate a semester early, but they ended up holding me back over a 0.5 credit, literally 0.5 credits. And I had to get a lawyer and end up suing them to get my diploma. They didn't let me walk at graduation. It was a whole big thing. They didn't like that I was doing the house parties and the club nights because they were getting a bad rep for like the inappropriate music and the girls grinding on the guys and this and that.

28:14What I realized is like public high schools are very like anti, you know, like going off the establishment making like you have to go to college. You have to do this. You have to do that. And I was everything but that. I was not believing in college. I was not at that point. I knew I wasn't going to college. I went to Johnson Wales for a weekend in Miami. My parents were like, listen, you don't have to go to college, but you got to at least go to this to see if you like it. And they sent me and, you know, it was cool and all. But the people at Johnson Wales, they give us this tour around their huge campus, how great it is.

28:51And they're like, yeah, but you're not going to use any of the facilities here for the first two years. You're going to be stuck in the classroom doing the academic part. So that was a turnoff. And then the biggest turnoff of my life on the college aspect was they brought us to the Fountain Blue Miami Hotel. And they were introducing us to interns that had gotten jobs there after they graduated because they were like, this is where you could work. And I thought that was really cool. And then I see what one of the interns doing and she's folding and polishing silverware, folding napkins, polishing silverware with a college degree.

29:23And at that point, I had already had a corporate job working at a conference and banquet center in Danbury. I was helping them book proms and weddings and stuff. So I was way above that at that level. So that was like my decision. I'm never going to college after seeing that. I totally agree with you by the way. I mean, college is a total scam. I mean, well, college presidents should probably all go to jail, but that's a whole other topic. I mean, they just keep raising tuition and because the government backs all the loans, they know they're going to get their money. If they keep raising it more, more 18 year olds are the ones that get screwed borrowing all the money.

30:00This is a whole other topic. So, but did you think maybe, oh, when I graduate high school, I could maybe forget about all the debt that I owed everybody. I could just confess to everybody, hey, we ended up not making any money. Sorry. Next time. No, never. I always just wanted to. So like all of my lies, like over time, I've always stemmed from just wanting to pay people back and just buying time. So it was always just like a stalling tactic to try to figure out the next thing to make people money back. That's all it ever was. So after the 60 grand, what was next? So next, what happened was one of the kids that invested was starting to become my best friend.

30:44And he came up to me and he kind of figured what was going on. And he gave me a business idea that he was doing to resell electronics. He was getting like Beats by Dre and Beats pills and Otterboxes and all these things that he was saying, you know, was coming off the back of a truck that was like dented and it was marked really cheap. And I never was into these types of things. So I didn't really know what I was getting into. But he was basically saying, we could get like this Beats headphones for 40 bucks, and we could sell it for 300 bucks. So in my mind, I'm like, okay, that's 100 % return, we could start a whole business here.

31:24So I get the idea to start taking more investments from like people that I worked with at this banquet facility, this and that, but it wasn't going to be an investment. It was going to be a loan guaranteed, guaranteed loan at a 50 % interest rate of return over 30 days. Because the logic is, okay, if you, James, give me 10 grand, I'm going to use that 10 grand, buy 10 grand worth of electronics, sell it on eBay and Amazon, which will sell within 30 days, you know, 100%, I'm thinking at the time, and it's going to make like 30, 40 grand on that 50 grand. So I can easily give you five grand back on your money.

32:02And that's how it starts. I start, you know, pitching these loans for at a 50 % rate of return. And it started out so innocently. And, you know, it just, it escalated, I was able to pay everyone back that money that I was out without anyone, you know, figuring things out. I think had it got stalled like two or three weeks more, there would have been problems. But this was, it was, it was what it was. So, so the people who, so, so you're paying people back, not out of the profits of this new electronics business, but out of the investments that people were giving you for the electronics business.

32:39Yeah. Oh no. Out of, out of the, out of the proceeds from the electronics. We were selling electronics in the beginning. Right. So were you paying back the old party investors? Yes, I was paying back the old parties with the profits of it. And then, so this electronics business was making profit. Like, where were your estimates wrong in the electronics business? Well, so what went wrong with the electronics business is they turned out to be fake, the electronics. And we realized that very quickly. And then Apple, I mean, eBay and Amazon started banning our accounts and the guy we were getting the money from, I mean, the guy we were getting the product from couldn't provide the quantity of the product that we were getting, which is fine in itself, because at that point, you would have figured that I could have just went and told everyone, hey, it's not working.

33:31But instead, we kept taking more and more money. and it just all happened very quickly. Like in the matter of weeks, I had like six or$700 ,000 in revenue and loans, but they're all due at a 50 % rate of return. Right, and at some point your revenue dropped off a cliff because you had no more product and the product you did have didn't work. Yeah, and then while that's going on, I'm just figuring, okay, I'm 18 years old. I have no credit. People refinance their homes and take one loan to pay another. So until I can figure out ways to make money, I'll just use one loan to pay off another loan. And that's how this, you know, accidental Ponzi schemes formed.

34:14Because we were taking income, like a lender's money and paying off another lender. But everything was structured as like a loan. Yeah, yeah. If you had just structured it as without the word of the guarantee, if you just structured it as equity, you would have been okay. There were so many things I could have done. I mean, if I just went to the bank and tried to get a loan on top of the income we had in the bank or anything, there's so many options. I could have bought real estate. But instead, I go into the most high-risk business ever because simultaneously, I'm like, okay, I want to be like this big hedge fund investing into startups.

34:49And I'm investing$250 ,000 into the concert business again. I'm investing money into a nightclub. I'm doing all these things like a shoe business. I invested in, which are all like sound legitimate investments. But the problem was none of the things I invested in could generate returns immediately, which the business had no cash flow. The only cash flow was loans. So it needed immediate cash flow. And everything I was investing in was like six months down the line if it was to make any money. Right. And, you know, technically speaking, of course, loans aren't cash flow. Yeah. Yeah. Loads are not cash flow at all.

35:28And so was there any point where you were like, okay, I need to spend a little bit on myself or because you needed to cultivate an image of someone who was successful so you could borrow more money? Like there's Ponzi schemes are complicated in that you can't just keep borrowing money either. Yeah. Like, yes, the returns, you could return earlier investors or lenders from the money given you by new lenders. But you also have to cultivate this successful image to appear like a success. Yeah, no, I always hated like when the FBI or the government brought up like saying like I spent money to try to look a certain part.

36:08It was never the case. This was such a short period of time where we were just kids like we're 18 years old and we're looking at it as like, OK, we're working for this company. We need to get a paycheck out of it. So like we took, withdrew money from the business to pay ourselves and that got spent on stupid things. Like we went on a couple of trips and we bought a pair of jet skis that like the investors use that I thought was like a business purchase, like a business car, but business jet skis. We went to dinners, but it was never like, you know, go buy like a fancy car or travel, you know, to another country or put kids through like college or anything like that, or buy houses for myself.

36:50I would say out of the whole amount of money that got brought in, I would say probably like$100 ,000 got misappropriated out of this whole amount. And it was just, you know, spent on dumb things in a very short period of time. Thank you.

37:35strength and backed by experience. Ask a financial professional how Pacific Life can help you today. Pacific Life Insurance Company, Omaha, Nebraska and in New York. Pacific Life and Annuity, Phoenix, Arizona. When did someone and who kind of started investigating, like why did the law start looking at you? So six months later after, because this was all over the span of six months, this is after like all these concerts failed, like this new round of concerts that I invested in and no loans were coming in. Everything was bust. I finally go to a lawyer and I explain the whole situation and he sends letters to everyone, all the investors, because I gave him a detailed list.

38:19And at this time with the interest, I owed like 1.3 million. Like if everyone got their interest. Yeah. If everyone got their interest because people were rolling over their money. So this$500 ,000 turns into 1.3, 1.4 million. It's crazy. And his idea is he tells me, don't communicate with everyone, block everyone, don't talk to anyone, I'll handle this. And he sends everyone a letter saying, you know, the company's bankrupt, and we're reviewing everything, and we're going to work out a payment plan. Everyone was like, okay, that wasn't really the main issue. They were waiting to see for further instructions.

38:55Where it takes a turn is he sends out a second letter after reviewing everyone's money. And people are starting to get letters saying they're owed zero or they owe me money. Because what he did was, and this is what the government would do later on, say you invested$10 ,000 in principal, that you loaned$10 ,000, and you got, say, interest payments back, maybe you got$15 ,000 in interest payments. And then on your fourth investment, you invested another$10 ,000 and you let that pile up until it was turned into$100 ,000 over six months or whatever. Technically, you made$10 ,000 or$15 ,000 because you received those initial interest payments.

39:37So he was taking the people's principal minus whatever they got paid out and saying that's what they were owed. He was looking at only out of pocket from the very first time someone invested, which is logical. And it's the same thing that the government would do years later, because no one's getting their interest. It's just the principle that they lost. And that when you send a letter like that to kids that are 18 years old that have invested one or$2 ,000 and thinking that they're owed 20 or$30 ,000 made a firestorm. And it wasn't the parents that were mad. You know, these were the 40 or 50 or 60 year old parents that were giving me, a kid, you know, 50 grand at a 50 % interest rate.

40:20They weren't the ones that were mad. It was these kids that thought that they had lost their entire life savings. That was an imaginary life savings. And they went to the police and the police look at it as thinking all of these people are owed hundreds of thousands of dollars. This is a million dollar thing. This is crazy. There's real estate. There was rumors going around that I was selling drugs, all this crazy stuff, because simultaneously the news is posting that I own this nightclub and no one ever really realized, like, I never owned the building. I only owned the business, which wasn't worth anything.

40:56So all these things are going around. Things got blown out of proportion. And now the Danbury Police Department's investigating. And me and my lawyer go to meet with them. And the first interview with them, it was one of those sessions where we hear everything that they have. And they were saying, like, I spent 500 ,000 Disney World or Universal Studios own real estate. And this is before they ever had the bank record. So we knew they were fishing and they didn't have anything. And eventually, like someone like one of the detectives there, like in every story, like Wolf of Wall Street, whatever, had a hard on.

41:28He had connections and like the state's prosecutor declined to prosecute. And it went up to the federal level. And that's just when And this is April 2014. I got called to the Department of Banking. Didn't realize we had a Department of Banking. And I sit down, I get subpoenaed. And I'm thinking, okay, I'm just going to go there and explain everything. Because I'm thinking this was just money lost. I didn't mean any ill harm. I just want to pay everyone back. And I sit there. Was your lawyer with you? No, I didn't have. The lawyer that got me into this trouble to begin with, with the letters, ended up suing me because I owed him$15 ,000 in legal fees after he promised me that the legal fees were free.

42:09So I had no lawyer. I didn't, I had trauma PTSD about getting a new lawyer. I didn't know anything about public defenders, anything about this. I'm 18 and I just go and I sit there for six hours telling them everyone, every person's name. I bring the bank records, I bring everything. And honestly, that's probably what gave them most of the ammunition at that point. And after that, you know, they're acting like my friends. And then after that, two postal inspector agents pull me to the side and they interview me for two more hours. And they're acting like my best friend and this and that. And they give me a target letter, which is like the official target letter from the FBI saying you're under FBI investigation.

42:47They give this to me after they talk to me, which is why they ended up losing that count at trial about that I lied to postal inspectors or whatever. So after, when I got that letter, I'm like, I need a lawyer. And I searched on Google, best criminal defense attorney, New Haven, Connecticut. And that's where it all begins. And this is June, 2014 at this point. I mean, you must have been scared shitless. Like when did you first start thinking you could go to jail? I never thought I was going to go to jail until the day, you know, three years later that I was actually going to jail. um i just i never thought it i i thought the whole thing was just like blown extremely out of proportion and that's why i went to trial like i'll i'll die on that sword like i never would have went to trial if they just gave me a good deal about pleading guilty pay all the money back but they the first offer they gave me was like four years i got more time i was offered more time before trial than i got after trial and losing counts of trial which is unusual but But they would just, for whatever reason, and this is like, this is not a big money case that you read about, like the Martin Sherekellys and all these people that owe millions of dollars.

43:59This is, you know,$480 ,000 was a net out of pocket loss. And they spent so much money prosecuting me. Two years of multi-federal agencies, you know, investigating, every day showing up to court at trial, the months long trial, three or four FBI agents that could be out there stopping like, you know, some real criminals or whatever it was. And instead they're going after me. It was like this 19 year old kid. It was just, I don't know. It was just like, I'm not trying to downplay it. It was just like, when you think about the whole thing, like they could have just paid off the money. And then I could have just owed them the money after everything they spent.

44:35I know that's not how the world works, but it would have been cool if that's how it worked. Well, I mean, at this point, were you still, what were you doing to try to pay people back? So at this point in time, I got the idea to reopen the Tuxedo Junction because it goes out of business at that point. I have no money now. No money broke in debt. And my dad helps me get materials like paint and stuff to fix up this venue. and I do all the work myself with a couple of friends and I miraculously find new investors and I'm able to get this place open and I turn it into one of the biggest EDM venues on like the East Coast.

45:16And we start booking these huge acts like the Chainsmokers, Steve Aoki, crazy acts. And the problem was, is that it was a brand new business. It's a high risk business. So you're gonna lose money in the early stages, which was fine. And it does become profitable by year two or year three. But I can never get ahead because I kept taking the good money I'd make from the club. And instead of paying the rent or the electric, I would pay off an old debt to try to make things right. And it was just like this spiraling out of control, terrible money management, terrible business skills. And it just it wasn't working.

45:57But that's what I was running for three years while I was on trial. And then you know, battling it out with the FBI. So when you, when you first got, so you got this FBI letter and then presumably at some point you get arrested. What was, what was the arrest like? So the rest was in January of 2015. I was just getting back from like the casino at 4am. I was going to this Yonkers Raceway and Yonkers, New York, because I wasn't 21. so I couldn't gamble at the Connecticut casinos and I'm 19 years old and I get back it's like a snowy morning and I'm like I go to sleep for like an hour or whatever and then there's just like banging on the door loud and I jump up and I look out the window which faces the road and there's like agents tactical vests FBI outfits everything that you would see in the movies surrounded the house cars up and down the road black SUVs regular cops the whole shebang and everything just happened quickly.

46:57Like my mom opens the door, she's rushing downstairs. They're yelling at her, step back, where is he? And they barged into my room. And at this time I kept getting arrested by local police in regards to liquor violations and things related to the nightclub. So I thought it was that because my lawyer at this time, I had a new lawyer, he was saying, yeah, we knew they were gonna indict me, but I'd be able to self-surrender. Like you see on the news with the celebrities, they don't go, you know, busting down their doors like Donald Trump's able to just turn himself in. That's what they said I could happen.

47:31They lied about that, of course. And they dragged me out of the house in handcuffs and they staged the news there. Because like what news reporter is going to know what's happening at, you know, five or six in the morning? They stage everything. They get the whole thing out there. They walk me out. The neighbors are going crazy. It's all over like the next door community group. Just wild. and then they keep me outside like sitting on the ground for like five or ten minutes until the detective that started this whole thing shows up just to say hey you remember me like a scene out of a movie um and and that was the morning and i got indicted on you know 15 counts and i'm thinking it's just gonna be like one or two and it turns out to be 15.

48:13and and uh did they did you make bail? Like what was the bail set? So the bail was$250 ,000, but in the federal system, you're not actually putting up money. The main components are, are you a flight risk? Are you a danger to the community? So if you're none of those, you're released. And it was just my dad signing that, you know, if I didn't show up to court, they could go after his house, but he didn't have to bring like the deed or he could have still had a full mortgage on the house. You know, they're not checking anything. He's just signing a sheet of paper and that's it. and then I was free to go.

48:48And then from that point, how long was it before you actually have the trial and the trial's done and then you're sentenced? So this was January of 2015. I got arrested. The trial started November of 2015. I was found guilty. Did you have friends at this point? Did people hang out with you? So I always say this is the funniest thing about my life is that if you took my life and you broke it down into phases like high school, I would say the high school business, then the business of like the concerts and then the Tuxedo Junction business. And then, you know, the Whole Foods when I started working at Whole Foods and then now the business I do now.

49:29There's always a different group of people that like attach themselves to me and that I'm friends with and that like are like my business partners or like I'm close with for these time periods. And then the time period ends and I never talk to them again because more likely than not, they end up screwing me over in some way. Like the tuxedo guys that I was friends with during the trial end up like ratting me out for going out of state to gamble, which is how I end up going to jail. But there was always these different time periods. There was always like a different girlfriend in these time periods, too.

50:01I was always like a lover boy, like relationship type of guy at this point. So it was just interesting, you know, when you're older and you look back at the certain memories and stuff. And I always sit down and say, like, when this gets turned into like a documentary or a movie or a book one day, you can't find one person that can connect every single dot. Like, I'm the only one that connects every single person together. But like, if I if you ask one person from 2014 about someone else from 2016, even though the story is connected, they wouldn't know each other because it's so complex. And so at this point, you're going to trial.

50:39You still think you're going to be free afterwards. Why did you think you were going to be free? You saw the indictments. Probably the indictments were largely correct or some of them were correct. What were you thinking then? So the logic has always been, and still to this day, is that one of the aspects of wire fraud, which is what I was charged with, was you have to have criminal intent to be guilty of it. So I always held that I did not have criminal intent because it was never my initial idea to scam anyone or come up with anything or anything like that. Like I've met people in prison that are genuinely bad people that have that bad mindset.

51:21And it just wasn't me. It was so accidental how this whole thing started and how it finished. Like using the word guarantee, that's not illegal in the jail sense, but it feels illegal if you actually don't have the assets back. I don't know. It's also up to the person signing the contract to believe you. So what was it that was illegal? They tried to make the jet skis like you're spending on yourself or what did they actually accuse you of? So they accused me of, so there's not a law about an actual Ponzi scheme. That's not the illegal part. The illegal part is using the money. And so say I promised you, you gave me 20 bucks.

52:02I said I was going to buy McDonald's with that 20 bucks. You asked me for McDonald's, I promised you McDonald's. But then I took that 20 bucks and went to Burger King without telling you I was going to go spend the money on Burger King. That's fraud. That's wire fraud. Because you're doing it like say with a debit, say you cashed me the money or transferred me the money or gave me a check, that would constitute the wire fraud aspect of it. What does it mean that you didn't have criminal intent? Like where does that play a role if you still have the fraud? So that's just one of the rules that you need to be found guilty of.

52:36Like when they break down wire fraud, like what it is, like you have to, I think the steps to wire fraud are you have to have interstate transportation of money, which is like debit card checks, a wire transfer, anything like that. And then number two is you have to have the criminal intent to defraud the person. So if you didn't have the criminal intent, what would happen? Just a massive fine or, and you'd have to pay everyone back or like, what would happen then? I mean, the jury, I mean, it's, it was a mixed verdict, you know, there was counts where, so they took, if someone gave me say a hundred thousand dollars, they charged me three times on it in different scenarios for each time the person gave me money.

53:16And the jury would convict two of those on not guilty and one on guilty. So it didn't really add up. It didn't make sense. How could I be guilty of fraud with the same person in one instinct, but not guilty with the same person on another? It doesn't make sense. Let's say you had the fraud aspect, but not the criminal intent. What would be the consequence? Would you still be guilty of something? Would you get a fine and avoid jail time? How would you be able to get away with the wire fraud even if you didn't have criminal intent? I think it would just come down to if no one reported to you. But I would still found guilty of it.

53:55That's what the jury came to. Because they thought you had criminal intent? Well, they just found guilty. Whether they thought that or not, they still found guilty. I see. So that's really what it came down to. Yeah. And then were you shocked that they convicted you? Like what were you like when they when the judge said guilty? So, I mean, the first I thought I was in the clear the first. So the first like four charges read were not guilty or deadlocked, meaning it was a mistrial on those counts. And then they started reading the guilty verdicts. And my heart just sank in that moment. But I mean, we still looked at it as a win, in a sense, me and my lawyer, because the prosecution was hoping for guilty verdicts on everything, all 15 counts, immediately took the jury four or five days to convict after several instances where they came back to the courtroom and said, we can't reach a verdict on this.

54:54And we were working against the clock because Thanksgiving was that weekend on that Thursday. and no one wanted to come back after Thanksgiving, there was a question from one of the jurors, what happens if we can't reach a verdict before Thanksgiving? And then the judge said, it'll be this day in December or whatever. And then there was another question of this and that. And in federal courts, if the jury comes back and says we can't reach a verdict, the judge is required by law to say, I urge you and compel you to go back and figure out a verdict. and they went back and they had a verdict like an hour later.

55:33It was ridiculous. But I think we were just working against the clock in that.

55:50Wow, what a story, but there's a lot more to it. There's what happened to him in jail and then how he reinvented his life afterwards. So that's going to be in the next episode.