Feds charge Daryl Heller with securities, wire fraud for ATM investment scheme

• By Dan Nephin / LNP | LancasterOnline

The federal government charged Daryl Heller with securities and wire fraud on Wednesday, saying he used his Lancaster based ATM network into a scheme that cost investors $402 million.

The FBI arrested Heller Wednesday morning at his home in Bent Creek, a gated community in East Hempfield Township. He is expected to appear before a federal magistrate today.

The federal indictment unsealed Wednesday by the U.S. attorney for the Eastern District of Pennsylvania accuses Heller of using money from new investors to fund payments to existing investors. He is charged with one count of securities fraud and four counts of wire fraud.

“A substantial amount of the funds obtained from investors was used to pay the monthly payments owed to earlier investors,” read the indictment that was filed Aug. 21 and unsealed Wednesday.

“The magnitude of this offense is enormous,” U.S. Attorney David Metcalf said during a news conference Wednesday afternoon in Philadelphia announcing the charges. “This case involves the operation of a $770 million investment fraud scheme involving some 2,700 victims,” he said, “leaving behind a trail of broken promises and dreams.”

Metcalf did not describe the fraud as a “Ponzi scheme” but referred to the language in the indictment. The 29-page indictment describes Heller perpetrating a financial fraud that relied on new investors to pay off earlier ones, and which collapsed when the payouts are greater than the money coming in — the definition of a Ponzi scheme.

The Securities and Exchange Commission filed similar civil charges Wednesday describing Heller perpetrating “a Ponzi-like scheme exploiting retail investors.”

Christopher Adams, a criminal defense lawyer Heller hired in March, said, “We are prepared for and look forward to rebutting all the false allegations and speculation in open court.”

“Those portfolio managers who are desperately trying to portray themselves as victims will soon have the light shone on their actions. The truth will definitely come to light,” Adams said.

The filing of federal charges caps a stunning fall from grace for Heller, 55, a Lancaster County native who grew up in a conservative Mennonite family where his father was the pastor of the church that had also been led by his grandfather.

Heller was named Lancaster Chamber’s “Small Business Person of the Year” in 2005, back when he was still only just beginning to build a sprawling business empire that would come to include ATMs, cannabis, hospitality, an airplane charter company and a technology consulting company. In 2022 Heller valued his business empire at $370 million.

Heller began investing in ATMs nearly 20 years ago after he dropped out of Bible school in 1990 to start his own telemarketing company selling long-distance phone service to businesses.

While his ATM business, Paramount Management Group, began small, Heller used aggressive dealmaking to turn it into one of the largest managers of cash machines in the United States. His representations of the company’s growth drew money from investors who paid increments of $52,000, $104,000 or $120,000 for a slice of surcharge fees from the cash machines.

Attorneys representing several individuals and groups involved in lawsuits against Daryl Heller and his companies had these reactions to Wednesday’s news:

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Josh Voss, representing Prestige Funds investors who filed the initial lawsuit against Heller’s Paramount Management Group in August 2024:

“On behalf of the Prestige Funds, we are pleased with today’s actions by the Department of Justice and the SEC against Daryl Heller. The Government’s filings confirm what the Funds have been saying in various courts for the last year: Heller defrauded the Funds and their investors. We hope that today’s actions hasten the recovery of money for those persons impacted by Heller’s fraudulent scheme.”

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Dan Centner, one of the attorneys who filed a recent class action lawsuit against some of Heller’s partners:

“Great news. Investors deserve answers, and this is a great step toward getting some of those answers. We’re not surprised. This many people don’t lose this much money under normal circumstances. We expect other dominos will fall into place soon, and at the end of the day we remain hopeful investors can be made whole, or at least something close to it.”

A scheme detailed

In the indictment unsealed this week, federal investigators described a seven-year-long investment scheme that was unsustainable from the start.

Beginning around January 2017, the monthly profits earned by Paramount for the operations of the ATMs was less than the monthly amount that Paramount paid to investors, according to the indictment.

“As a result, in order to fund the monthly payments … Paramount used other sources of money, which included money obtained from new investors,” the indictment read.

From January 2017 until December 2024, Heller “knowingly and willfully” worked to maintain the scheme through “manipulative and deceptive devices,” the indictment said.

In addition to using money from new investors to pay old ones, the indictment said Heller used some of the investor money for other business debts, as well as his personal expenses. Heller caused Paramount to use $1.5 million in investor money to purchase a beach house in Sea Isle City, New Jersey, the indictment said. That beach house was sold in April to help settle some debts in Heller’s ongoing personal bankruptcy.

The indictment describes Heller working alone to create phony reports for investors that showed a robust ATM network paying healthy returns.

“(Heller) used his control over Paramount to ensure that he was solely responsible for delivering, primarily via email, to Prestige employees the false bills of sale and ATM financial reports,” the indictment said.

One such report on ATM activity for March 2023 described more than 25,000 ATMs earning $34 million in revenue. But, in fact, there were just over 10,000 ATMs earning $8.1 million in revenue, according to the indictment.

Based on his phony reporting, Heller collected, through his Heller Capital Group, approximately $8 million in margin payments from 2020 to 2024, the indictment said. Paramount was one of the portfolio companies of Heller Capital Group.

Start of troubles

Heller’s indictment and arrest is the culmination of a federal investigation that became public Dec. 5, 2024, when at least a dozen FBI agents were seen at the downtown Lancaster city offices of Heller and his ATM management company, Paramount.

The agents, who spent most of the day inside the offices at 415 N. Prince St., emerged around 3:30 p.m. to load boxes into some waiting vehicles.

However, trouble was apparent before the FBI appeared in Lancaster.

After years of regular payouts, Heller’s ATM management company, Paramount, stopped making monthly payments in April 2024.

The payouts went to some 2,700 investors in a series of Prestige funds operated and marketed by Jerry Hostetter, Mir Jafer Ali “Buck” Joffrey, William K. Poole and David Zook, all from Lancaster County with the exception of Joffrey.

Those managers of the Prestige investment funds were the first to sue, though Heller is a co-owner of the funds and originally challenged their right to sue without his consent.

There, the Prestige funds — at the behest of Hostetter, Joffrey and Zook — are challenging the bankruptcy filing and are among the creditors arguing a judge should appoint a trustee to review Heller’s holdings and wind them down to pay back creditors and investors.

In the bankruptcy case, the losses attributed to Heller and his businesses stand at more than $800 million. The 2,700 investors in Heller’s former ATM network, joined by banks, business partners, vendors, individuals and family trusts, have submitted nearly 100 separate “proofs of claim” totaling $826 million.

Heller, meanwhile, has filed a reorganization plan that envisions selling all his businesses to pay creditors what amounts to 14 cents on the dollar even as he continues to seek the dismissal of most of the claims against him. He has also filed a counterclaim in an attempt to quash a lawsuit Prestige filed against him personally.

Heller’s plan says selling off the businesses could take 10 years, during which time he could be paid about $3 million total to manage the process. His Chapter 11 bankruptcy plan describes him satisfying $118 million of the $825 million worth of claims against him.

The federal judge overseeing the bankruptcy case has set an Oct. 22 hearing to hear the Prestige owners’ request to appoint a trustee. A recent report by a court-appointed examiner said that Heller’s network of businesses had the hallmarks of a Ponzi scheme, a finding that is likely to play a key role in arguments around whether a trustee is necessary.

The managers of the Prestige funds themselves have become the target of a lawsuit filed last week.

A New Jersey couple claim they lost $2 million investing in the ATM network and are plaintiffs in a class-action lawsuit that claims Heller’s partners helped carry out a $700 million Ponzi scheme.

The suit was filed in U.S. District Court for the Eastern District of Pennsylvania by Batman Investments LLC on behalf of 2,700 investors.

The suit names Hostetter, Joffrey and Zook, along with Randall Leaman, who was Paramount’s chief executive officer from 2022 to 2024, and president for 11 years before that.