A federal judge has sentenced a Westfield businessman to five years in prison in connection with a Ponzi-style scheme in which he induced 100 individuals to sink more than $11 million into his companies.
George S. Blankenbaker Jr., president of Indianapolis-based Stevia Corp., pleaded guilty in April to two counts of federal wire fraud and one count of money laundering. On Wednesday, Judge Sarah Evans Barker also ordered him to three years of supervised release and pay $1.5 million in restitution.
In a separate action in April, the U.S. Securities and Exchange Commission announced that the Blankenbaker-controlled companies involved in the scheme had agreed to pay almost $5.2 million in a preliminary settlement. Blankenbaker also consented to an administrative proceeding barring him from the securities industry.
Blankenbaker, 56, who played football at Indiana University in 1983-84 as a business finance major, has operated several single-employee companies over the past two decades, including Blankenbaker Investments LLC and farm-management firm Stevia Corp., a pink-sheet-traded public company that focuses on the development of Stevia-derived products.
In recent years, he began creating numerous business entities related to hemp and CBD production.
According to federal investigators, Blankenbaker conducted a fraud scheme from August 2016 to May 2019 through three business entities: StarGrower Commercial Bridge Loan Fund 1 LLC, StarGrower Asset Management LLC and Blankenbaker Investments Fund 17 LLC.
A complaint from the SEC said Blankenbaker and those three companies raised more than $11 million from at least 109 investors, including many who were elderly.
“Blankenbaker and his companies falsely told investors that their money would be used to make short-term loans to food exporters in Asia, that the investors would receive interest payments from the profits generated from the loans, and that investments were secured by shipping containers holding the food products,” the SEC said.
But the SEC said Blankenbaker misused at least $8.1 million of those investments, by directing at least $4 million to hemp companies and using more than $1.7 million in investor funds for his own personal benefit.
“Blankenbaker also used at least $965,000 in new investor funds to make Ponzi-style payments to prior investors,” investigators said. “Contrary to the pretenses, representations and promises made by Blankenbaker, he did not invest the investors’ money as he had described.”
Investigators said Blankenbaker diverted investment money more than 300 times to fund unrelated business ventures, pay personal expenses, make interest payments and return principal payments to investors.
Prosecutors said 34 investors lost nearly $1.5 million because of Blankenbaker’s schemes.
According to court papers, Blankenbaker also laundered money through a business entity known as EDU Holding Trust, which was designed to utilize investor funds to purchase life insurance policies on the secondary market at a price less than the face maturity amount of the policies.