A promise of 12 percent a month is not a return. It is a warning. A Boulder, Colorado, man learned how federal prosecutors treat that promise when he was sentenced to more than four years in prison for running a Ponzi scheme built around a computer trading program that did not exist.
The sentence handed down in Manhattan federal court
Matthew Melton, who operated under the name Price Physics, was sentenced to 51 months in prison and ordered to forfeit roughly $3.76 million, according to the U.S. Attorney’s Office for the Southern District of New York. Judge Arun Subramanian imposed the term after Melton admitted to defrauding investors who believed their money was being traded by a sophisticated algorithm.
Prosecutors said the algorithm was fiction. Rather than generating the advertised gains, Melton used money from newer investors to pay earlier ones and to cover personal spending, the classic structure of a Ponzi scheme. The 12-percent-a-month figure he dangled would have compounded to well over 100 percent a year, a rate no legitimate trading strategy sustains.
The forfeiture order requires him to surrender the proceeds traced to the fraud. Forfeiture is separate from any restitution and is aimed at stripping the defendant of the money the scheme generated, though whether victims recover in full depends on what assets remain.
Why the “secret algorithm” pitch keeps working
The scheme’s central prop, a proprietary trading algorithm too complex to explain, is a recurring feature of investment fraud rather than a novel twist. It gives the pitch a veneer of technology while conveniently placing the mechanism beyond scrutiny. Investors are told the returns are real but the method is a trade secret, which discourages the questions that would expose an empty account…