Cedar Rapids man pleads guilty to wire fraud in Ponzi-type scheme

A Cedar Rapids businessman, who previously settled a civil action for fraudulently soliciting investor funds, pleaded guilty in a Ponzi-type scheme involving commodity futures trading Thursday in federal court.

Jeffrey J. Kinseth, 58, director and president of Virtual Vision admitted to soliciting and accepting $975,360 for trading commodity futures through his company from at least 11 investors between March 2008 and September 2009, which is the same scheme and victims involved in the civil suit brought against Kinseth by the U.S. Commodity Futures Trading Commission in 2012.

The investors provided Kinseth the money with the understanding it would be invested by Kinseth through Virtual Vision - "a purported pooled investment tool," according to the plea agreement. Kinseth told the investors he would invest their money and they would receive substantial returns. He didn't invest all the money at times and would use some of the money to make payments to earlier investors.

Kinseth admitted to intentionally defrauding investors and to obtaining money from investors under fraudulent pretenses, according to the plea.

Kinseth consistently had losses on trading and concealed the losses by creating and providing false account statements to investors, according to the plea. During the course of the scheme, Kinseth sent several fraudulent emails from Iowa to investors located outside the state. In one email he told an investor he was preparing to travel to Florida to bring the investor a "sack of cash" but he actually didn't have any money to deliver.

In the trading commission settlement, Kinseth was ordered to pay $975,360 in restitution to the investors and he may also be required to pay restitution in the criminal case. He also was required to pay a $575,000 civil monetary penalty in the civil settlement.

The settlement also permanently prohibited Kinseth and Virtual Vision from being involved in any commodity related activity, including trading and from registering or seeking exemption from registration with the commission. Kinseth wasn't registered with the trading commission.