Fake Credit Union Ponzi Scheme Costs Consumers Millions

credit union fraud

By William Charles

On the 11th of April, 2014 the SEC charged Timothy J. Coughlin, 63 for conducting internet fraud under the business names “Oxford International Credit Union” or “Oxford International Cooperative Union”.

It’s alleged that defrauded investors of over 12.8 million between June 2007 and December 2009 under the name of Oxford International Credit Union & Oxford International Cooperative Union. Over 5,000 investors (over which 3,000 were American) were defrauded, with Mr. Coughlin misappropriating money to “pay personal expenses, fund unrelated business expenses, and make distributions to other investors in a classic Ponzi-scheme fashion”.

SEC also alleges that the website (www.oxfordicu.com) was created to show that investors were receiving large returns on their investments (up to 0.471% each trading day for an annualized return of 356%). It’s also alleged that Mr. Coughlin misrepresented that the accounts were insured by a private insurance company, when this was not the case.

In December, 2008 it’s alleged another business was created called Oxford International Cooperative Union which followed a similar path to it’s predecessor, offering bogus rates of returns and private insurance. This company was wound up in late December, 2011.

Consumers Trying To Get Their Money Out

In 2008-2009 consumers were told they were no longer able to withdraw money from their accounts, Mr Coughlin allegedly stated that this was because his accounts were frozen by Internal Revenue Service and foreign tax authorities, when this was not the case.

Mr. Coughlin has been charged by the SEC with the violating the following:

  • Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933
  • Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder

They are seeking “…all ill-gotten gains with prejudgment interest, civil penalties, conduct-based injunctions, and an officer-and-director bar against Coughlin.”

How To Tell If A Credit Union/Bank Is Legit Or Not

Credit unions are generally branded as a better option for consumers and if the allegations are correct Mr. Coughlin preyed upon this public perception by branding his businesses as credit unions. There are a few simple things everybody can and should do before they open a new deposit account.

Look To See If It Is FDIC Insured: The FDIC (Federal Deposit Insurance Company) is a government sponsored insurance program that protects consumers deposit accounts (checking and savings accounts, money market deposit accounts and certificates of deposit). It provides coverage of up to $250,000 per depositor, per insured bank.

Neither company at the center of these allegations (“Oxford International Credit Union” and “Oxford International Cooperative Union”) are FDIC insured. If they were, consumers would be able to access their funds through FDIC. Instead consumers were told that their deposit accounts were privately insured. This should cause warning signals to go off in your head.

To be FDIC insured you have to follow some very specific rules, which help prevent against consumers being taken for ride and having their funds stolen. The only companies that don’t want FDIC insurance are those that don’t want to follow these rules and as such should be avoided. You can use the bankfind tool from FDIC.com to see if the bank or credit union you have an account(s) with is FDIC insured.

If It’s Too Good To Be True, It Probably Is: Oxford International Credit Union was offering a daily interest rate of up to 0.471% (which is higher than some companies yearly annual rate). This is another case where individual’s greed got the best of them. Legitimate banks are never going to offer you terms that are 500x better than their competitors, even if you’r investing in investment vehicles with a higher risk profile you’re going to find it impossible to get a daily return of 0.4%+ on any consistent basis.

If something is too good to be true, it probably is and you should stay well clear of it. Don’t let greed get the best of you.

(Photo courtesy of Don Hankins)

googleprofileWilliam Charles is a part time blogger at http://www.doctorofcredit.com and staunch consumer credit activist. He spends his free time between lobbying government for increased transparency for consumers and writing about consumer credit topics such as credit scores and credit laws.

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3 Responses to Fake Credit Union Ponzi Scheme Costs Consumers Millions

  1. Cristen says:

    You should clarify that reputable credit unions are federally insured by the NCUA or by major private insurance providers such as ASI, not the FDIC which is strictly for banks. Perhaps written by a banker??

  2. scfr says:

    For credit unions in the USA, check to see if they are insured by the National Credit Union Administration (NCUA). FDIC for banks, NCUA for credit unions. http://www.ncua.gov/Pages/default.aspx

  3. Balanced says:

    Your headline is very misleading. A more accurate title would be: “Fake Credit Union Ponzi Scheme Costs Consumers Millions”

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