Legal battle: Lawsuit alleges defendant’s scheme mirrors past program
Two financial advisors in Lubbock are currently facing legal action over accusations of persuading investors to participate in a multi-million dollar Ponzi scheme. The KCBD Investigates Team has uncovered two class action lawsuits brought against Joshua Allen, Mike Cox, Ferrum Capital, and related entities. Following a bankruptcy filing, Cox is no longer listed as a defendant in the lawsuits.
Documents from the courts detail the creation of Ferrum as a Ponzi scheme, purportedly collecting about $50 million from investors and loaning it to Collins Asset Group, owned by Walt Collins. The lawsuit asserts that Collins Asset Group issued promissory notes to investors, many of which are now in default. Ed Price, a local attorney representing over 70 plaintiffs, estimates losses between $60 million to potentially $100 million.
An additional class action lawsuit, involving the same defendants, alleges that the promissory notes qualify as unregistered securities, and the accused were not authorized to trade in securities. A document from Ferrum’s investment packet suggests that they do not view their agreements as securities, identifying potential registration requirements with the SEC should they be considered securities. The defendants supposedly employed language to evade potential litigation arising from investors’ financial losses.
Investors have previously sued Collins Asset Group in a similar scheme filed in a Georgia federal court in 2020, resulting in a $15 million settlement. The court documents from Georgia outline a complex investment structure involving shell companies to avoid repaying investors. Daryl Bank, associated with these shell companies, received a 35-year prison sentence for multiple charges related to securities fraud and money laundering.
The U.S. Attorney’s Office characterized the scheme as a nationwide investment fraud that victimized over 300 individuals, leading to substantial financial losses. Another lawsuit filed in Bexar County noted similarities in the language used with Ferrum investors, allegedly mirrored from previous schemes involving shell companies. Attorneys representing plaintiffs in the lawsuits highlight the repetitive nature of such schemes where individuals adapt strategies after previous ventures are exposed.
Walt Collins has not responded to requests for an interview regarding these allegations. In court filings, Collins Asset Group denied responsibility for the damages outlined in the lawsuits. Following Cox’s bankruptcy filing, his legal team maintains that the grievances were not directly caused by him. Cox expressed disappointment in the allegations and aims to dispute them while emphasizing his dedication to his investors.
In response to the legal actions, Allen, Ferrum Capital, and related entities have refuted all claims brought against them. Allen, however, has not provided any comments regarding the ongoing litigation. The swirling allegations against these financial advisors highlight the severity of the situation and the complex web of financial deception that has ensnared multiple investors.
