David Aldrich pled guilty in federal court on Tuesday, November 22, to defrauding investors through litigation marketing company PLCMGMT LC dba Prometheys. Aldrich admitted that he conspired with James Catipay, who pled guilty on October, 26, 2016, to lie to investors when convincing them to invest.
Specifically, Aldrich and Catipy falsely told investors that they could redeem their investments at any time; that funds were available to pay both redemptions and hefty returns; and that their investments were secured by enforceable liens. In reality, as Aldrich admitted, the investments were risky and unsecured and there was no existing source of funds to pay investor redemptions or returns.
According to his plea agreement, Aldrich and Catipay established prometheus in 2013. They then devised a business plan and began soliciting investors. According to the business plan, Prometheus would use investor funds to pay for marketing efforts to recruit potential plaintiffs for tort actions against the manufacturers of prescription drugs and medical devices. Any proceeds from those tort actions would fund investor redemptions and returns.
To convince investors to entrust Prometheus with their funds, Aldrich and Catipay created marketing materials for prospective investors. The marketing materials falsely stated that the tort plaintiffs that Prometheus identified through its legal marketing would, as soon as the claims were filed, be entitled immediately to funds from legal actions that had already been settled and for which funds had been placed on escrow.
In fact, only 1% of the tort plaintiffs’ legal actions had been settled, and an overwhelming majority of the legal actions had not been litigated or successfully negotiated for settlement. The marketing materials also represented that investors could redeem their investments on demand. The truth was that investor funds were never secured by lien, and Prometheus had denied, and would continue to deny, a large majority of redemption demands received by investors.
In exchange for investing in a “Prepaid Forward Contract,” Prometheus promised to pay investors returns ranging from between 100% to 300%, depending on the amount invested and the time horizon for the investment.
Based on these lies, and during the time Aldrich was associated with Prometheus, approximately 200 investors entrusted Prometheus with more than $8.5 million. Despite the defendant’s promises, Prometheus was only able to pay back approximately $300,000 of this amount. Most investors, many of them retirees, lost their entire investments.