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Guilford, CT Ponzi Scheme Operator Pleads Guilty

October 3, 2006, Kevin J. O'Connor, United States Attorney for the District of Connecticut, announced that BLAKE A. PRATER, age 54, of 63 Davis Drive, Guilford, pleaded guilty today before United States District Judge Janet Bond Arterton in New Haven to Count One of an Indictment charging him with securities fraud, and one count of an Information charging him with conspiracy to engage in certain monetary transactions involving proceeds of securities fraud.

PRATER was the President and director of Wellspring Capital Group, Inc., ("Wellspring Capital"), which promoted, offered, and sold a variety of financial products. PRATER operated Wellspring Capital out of his residence in Guilford and from offices in Gales Ferry, Connecticut, and St. Albans, Vermont. PRATER was also the founder and director of MpactVentures Ltd. ("MpactVentures"), which purported to be the business acquisitions and management arm of Wellspring Capital.

On January 4, 2006, a federal grand jury in Hartford returned an 18-count Indictment charging PRATER with securities fraud, mail fraud, money laundering, and engaging in monetary transactions with the proceeds of unlawful activity. According to the Indictment, between September 2002 and September 2003, PRATER operated a "Ponzi Scheme" through which he fraudulently obtained money from thousands of investors by offering and selling financial products with exorbitant rates of return. PRATER is alleged to have used several web sites to promote various fraudulent investment products under a program called "Defined Equity Account Limited Liability Company" or "DEAL." DEAL products included schemes whereby PRATER, through Wellspring Capital, would solicit a relatively small amount of funds from an individual in return for a promise to pay the individual's car loan or rent payments for two or more years. PRATER fraudulently promised that investor funds would be invested in MpactVentures, and would be used to acquire various companies. PRATER is alleged to have received millions of dollars in investor funds through the sale of the financial products contained in the DEAL programs before he ever purchased any companies on behalf of MpactVentures, and in fact was paying off investors in the DEAL programs by using funds provided by new investors. PRATER is also alleged to have fraudulently concealed from investors in the DEAL programs that he was using investor funds to employ and send teams of gamblers to casinos to use a system that PRATER claimed to have devised for winning at craps.

Wellspring Capital was not registered with the Securities and Exchange Commission as an investment company, investment advisor, broker dealer, or in any other capacity, and was not registered with the National Association of Securities Dealers in any capacity. Also, PRATER failed to inform investors of his prior criminal history, including the fact that he had previous felony convictions.

In pleading guilty, PRATER specifically admitted today that, through Wellspring Capital, he offered and sold "Right-to-Receive Agreements" ("RTRs") and other purported investment vehicles to the investing public, which contained certain materially false and misleading representations, including that investors would receive distributions exclusively from normal business activities, when, in truth and in fact, distributions were often simply payment of monies invested by other persons.

"This defendant operated a large-scale Ponzi scheme that has victimized thousands of individuals," U.S. Attorney O'Connor stated. "This Office is committed to protecting investors by prosecuting those who violate our nation's securities laws."

Judge Arterton has scheduled sentencing for December 12, 2006, at which time PRATER faces a maximum term of imprisonment of 10 years and a fine of up to $14,300,000.

U.S. Attorney O'Connor encouraged victims of this matter to visit http://www.usdoj.gov/usao/ct/Victim_Witness.html in order to receive case updates.

This case has been investigated by the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation, with the assistance of the Securities and Exchange Commission and the United States Postal Inspection Service. This case is being prosecuted by Assistant United States Attorneys Eric J. Glover and Christopher W. Schmeisser.

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