Lakeville Man Sentenced for Role in $80 Million Ponzi Scheme

A Lakeville man was sentenced to six years in prison for operating a Bernie Madoff-type Ponzi scheme that defrauded 18 lenders out of nearly $80 million.

Corey Johnston, 41, from Lakeville, pleaded guilty to the ponzi scheme back in September. On Thursday in federal court, he was sentenced to 72 months in prison on one count of bank fraud and one count of filing a false income tax return. Johnston will also be ordered to pay restitution, according to authorities.

The government says Johnston scammed lenders in Minnesota and other states out of $79.9 million, using some of the money to repay other loans and perpetuate the scheme, but much of the money was used for personal use.

According to his plea deal, Johnston admitted that from 2005 through March of 2009, he oversold participation in large commercial and personal loans arranged by him through his company, First United Funding. According to the government, Johnston also neglected to report the fraudulent income on his federal income tax return, resulting in the underpayment of taxes of approximately $508,905.

According to the government, Johnston's scheme involved selling more than 100 percent participation in at least ten different loans arranged through his company. In other words, he purportedly sold loan participation to banks after already selling that same participation to other banks. In each instance, Johnston failed to disclose that the total participation exceeded 100 percent of the original loan, making it impossible for the participating banks to receive the money expected.

For example, Johnston oversold loan participation for a project known as White Out Way Investments. The original White Out Way loan, arranged through his company, was for $7 million.