A Sterling man will spend 12 years in federal prison after authorities said he orchestrated a $270 million stock loan scheme that took more than $35 million from his clients.
William Dean Chapman, 44, the founder and owner of Alexander Capital Markets, pleaded guilty on May 23 to wire fraud.
According to the U.S. Department of Justice, the primary role of the business was to “offer a financial product that provided customers with a purportedly fully hedged loan at an above-market rate of interest against a customer’s securities.” This served as collateral for the transaction for a percentage – typically between 85 percent and 90 percent – of the securities’ value.
Prosecutors said Chapman's customers were assured that the business was engaged in hedging transactions that would return the full value of the securities, or the cash equivalent, at the end of the contract period. But in reality, ACM sold the securities upon receipt, remitted up to 90 percent of the sales proceeds to its customers as the loan and retained the remaining sales proceeds for itself and the parties who sold, marketed or facilitated the product, according to reports.
By April 2008, ACM was functionally insolvent and did not have sufficient funds to cover its outstanding liabilities.
Still, authorities said, Chapman continued to solicit new customers despite knowing that ACM would never be able to fulfill its financial obligations.
Over seven years, Chapman took in more than $270 million in stock, and 122 victims lost more than $35 million as a result of this scheme, according to reports. At the same time that ACM was amassing massive liabilities and failing to repay its existing clients, Chapman used his clients’ money to support a lavish lifestyle by purchasing a custom-built $3 million home in Great Falls; condominiums in the Turks & Caicos and Pompano Beach, Fla.; and a Lamborghini and Ferrari.