George S. Blankenbaker, Jr., a 56-year-old Westfield resident, was sentenced to five years in prison for wire fraud and money laundering. He also will serve three years of supervised release and was ordered to pay more than $1.5 million in restitution.
According to a press release from the U.S. Dept. of Justice, Blankenbaker was charged April 1 after an investigation by the Internal Revenue Service Criminal Investigation. Between May 2008 and August 2016, Blankenbaker created three business entities, Stargrower Commercial Bridge Loan Fund 1 LLC, Stargrower Asset Management LLC and EDU Holding Trust. He later used these entities, which he owned and managed, in the execution of a Ponzi and money laundering scheme.
Blankenbaker persuaded more than 100 individuals to invest more than $10 million in the Stargrower Entities. He told investors the funds would be used to finance the use of shipping containers of food. However, Blankenbaker did not invest the money and instead diverted the funds to primarily make interest payments and return of principal payments to other Stargrower Entities investors. He also used the money to fund personal expenses and unrelated businesses ventures, leading to 34 investors losing more than $1.4 million.
Blankenbaker’s other business, EDU Holding Trust, was designed to utilize investor funds to purchase life insurance policies on the secondary market at a price less than the face maturity amount of the policies. Investors believed they were beneficiaries and that they would receive compensation from the profits generated when the life insurance policy matured after the insured person died. In August 2016, one of the policies purchased matured, and a proceeds check in excess of $2.5 million was issued by the life insurance company. The check was not deposited into an escrow account, but was rather deposited into an account Blankenbaker opened at PNC Bank in the name of EDU Holding Esc Acct. Although some of the funds were appropriately transferred to investors, others were transferred to another account he controlled at PNC Bank in the name of one of the Stargrower Entities. These funds were used for Blankenbaker’s business and personal expenses. An investor lost $110,200 in the scheme.
IRS Criminal Investigation, the United States Postal Inspection Service and the Securities and Exchange Commission investigated the case. Assistant U.S. Attorney James M. Warden prosecuted the case.