Fraudulent Scheme

According to Rosoff, Pontell, & Tillman (2010), Russell Erxleben implemented a fraudulent scheme to defraud investors of his company, Austin Forex. He secured investors for his company by providing them with fraudulent records of the company as well as by making false promises and statements regarding the success of the company. Russell’s fraudulent scheme used the new investors’ initial investments to pay the existing investors. White-collar crime is defined as a crime committed by an individual of high social status that is attained during his or her occupation (Schlegel & Weisburd, 1992).

This encompasses a number of nonviolent crimes that involve fraud as well as illegal financial deals. In the case study on Russell, the type of fraud committed is embezzlement because he misappropriated funds from his investors. Embezzlement is defined as a type of financial fraud by which an individual dishonestly appropriates funds that have been entrusted to his or her care (Putney, 1908). Investigations on Russell’s fraudulent scheme were done by a federal grand jury and the Texas State Securities Board.

A temporary receiver was appointed by the court so that investigations could be done in an accurate manner. The receiver found that Austin Forex used the new investors’ money as the only source of funds to satisfy the existing investors because the company lacked a source of income which could be used to pay the existing investors. The total money that the company had taken from its investors amounted to $50 million but the amount of money the company had in cash was $400, 000.  Investigators had suspected that Russell had hid the money in the offshore bank account and later concluded that he lost the money because of the volatile nature of the currency trading. Russell was found guilty of not telling his clients regarding the losses and by sending them fake financial statements. He pledged to recover the investors’ money but the clients were not satisfied with his apology (Rosoff, Pontell, & Tillman, 2010).

Russell was jailed for six months after which the final judgments were made. He was doomed to seven years in prison on top of which he was fined one million dollars and was ordered to pay twenty million dollars for the loses he made to his clients. Because of the technical delays, he remained on bond for a while during when he was alleged to threaten the life of a former investor and ex-friend. Therefore, the bond was canceled and he was shut up in October (Rosoff, Pontell, & Tillman, 2010).