Ohio businessman Monroe Beachy was denied Chapter 7 bankruptcy protection from the demands of his creditors recently, when bankruptcy judge Russ Kendig officially ruled on an objection to the petition, according to an article from The Budget.

The objection had been filed by the bankruptcy trustee in the case. In the objection, the trustee raised questions about Beachy’s business operations, and brought forth concerns about potentially unlawful activities.

The Chapter 7 bankruptcy trustee, attorney Scott Belhorn, claimed in the complaint that Beachy was operating a Ponzi scheme, and that he used his company, A&M Investments, as a way to commit fraud to steal millions of dollars from would-be investors.

Belhorn also claimed that Beachy intentionally kept his investors from learning that A&M Investments was in debt and not financial viable. The claim states that Beachy, in the classic style of a Ponzi scheme, attempted to find and use new investors in the scheme to offset the losses that the company was undergoing.

Documents presented in court also suggested that Beachy had not acquired the appropriate licenses to act as a securities dealer or a broker. He also allegedly claimed to potential investors that he was investing a significant amount of money into government mortgages. This was not true, according to the claim.

Further documents presented in court suggested that Beachy’s company had not been viable since 1998, and that Beachy never informed his investors about this state of insolvency. Instead, he carried on with business, and allegedly set up the Ponzi scheme to cover up the large financial losses.

Based on the fact that Beachy, if guilty of such activities, was acting illegally, then he would not be eligible for Chapter 7 bankruptcy protection.

Beachy accepted the denial of Chapter 7 bankruptcy protection, but he did not admit to any of the illegal activities that are alleged in the bankruptcy trustee’s report.

Beachy had just received a summons from the Securities and Exchange Commission regarding A&M Investments when he filed for Chapter 7 bankruptcy protection. The company had almost $18 million in assets, but listed just over $33 million in liabilities, most of which was owed to 2,700 investors from surrounding counties.

A&M Investments posted a sign on its door that they were closing due to an investigation, and they sent out a press release announcing the bankruptcy petition filing.

In a meeting with creditors soon after, Beachy informed those present that he had recently made a number of undocumented loans to family members, with only handwritten records, and that he had sold another business of his to his daughter. These loans to family members, he said, totaled in the hundreds of thousands of dollars.

The year 2000 was missing from his company’s financial records, and Beachy told those attending that he was not able to account for those records, and he did not explain why they would be missing. He did admit that he possibly should have closed shop on his business after several technology stocks didn’t turn out well in 2000.

Official charges have not yet been brought against Beachy from the SEC.

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