Jan. 21—A small group of investors who lost millions in New Hampshire's largest Ponzi scheme can begin applying for compensation from the state.
In 2021, the state legislature approved a $10 million fund to compensate victims of the Financial Resources Mortgage fraud.
A group of 150 investors lost around $30 million when the scheme cratered in 2009. It was the biggest Ponzi scheme in New Hampshire's history. The leaders of the scheme are serving sentences in federal prison, and the state collected millions in restitution.
But those investors lured by the scheme did not receive compensation.
Taxpayer-funded compensation for the defrauded investors had come up in the legislature periodically since the fraud was uncovered more than a decade ago, because state regulators — the Banking Department, the Securities Bureau and the Department of Justice — missed opportunities to shut down the fraud years before the Great Recession brought it crashing down.
Complaints about Financial Resources Mortgage Inc. started coming in to state regulators as early as 2000, raising concerns that the company was a Ponzi scheme — soliciting investments, and then repaying those investors with money from new investors instead of profits from a real business.
After the scheme was discovered, then-Gov. John Lynch and the Executive Council commissioned an investigation into how the fraud had slipped past state regulators for almost a decade.
The report found different agencies had repeatedly audited and investigated the company, but did not follow up — even after the examinations found the company violated the law. Agencies did not communicate with each other, conducted lax audits and relied too much on the company to be honest.
Support for investor compensation split along party lines, with Republicans favoring compensation to make up for the state's failures, and Democrats arguing the state had more pressing priorities than compensating investors who fell prey to the scheme. The proposal passed in the Republican-controlled Legislature.
This week, the state Department of Justice sent letters to some of the Financial Resources Mortgage investors, inviting them to apply for compensation from the $10 million fund. Applications will be accepted until May 18.