"Six of the seven have been arrested and their cases are currently pending," says Bill Leone, Acting US Attorney for the District of Colorado. "It is our intention to extradite the seventh in London, England." Some victims of the alleged scheme, he says, lost their life savings, another invested all of his retirement money, and another mortgaged his house to put money into the Ponzi-style scheme that promised anywhere from 2% to 400% monthly returns. Instead of being invested, the money was used to support the "lavish lifestyles" of the seven promising that the money would be invested in "high-yielding vehicles," he says.

One of the investments was the Redstone Castle. The group paid $6.3 million for the castle and three other surrounding properties that can be bought together or separately. The castle, which sits on 72 acres and has 20,000 sf of space, was completed around 1900 by coal baron John Cleveland Osgood.

"This is quite an unusual circumstance to be in possession of a castle," says John Harrison, an IRS special agent. "This auction marks a number of firsts. This is the first time we have ever been involved in a sale or an auction of such a historical property. It's also is the first time we have allowed people to bid in an online simulcast. This will be aired throughout the country and throughout the world. That will allow as many people as possible to participate in the auction."

A $100,000 fee is required to enter bidding on the castle and either $25,000 or $50,000 for the other properties. The castle, he says, has 16 bedrooms, 11 baths and more than 20,000 sf. Other properties to be auctioned include a carriage house, a barn and stable and a Victorian home in downtown. Together, they cover about 150 acres.

When the IRS seized castle about two years ago, it met with preservationists and local business people and decided the government had to keep operating it or it would crush the local economy, he says. "That's how the IRS ended up getting into the wedding business, the wine and cheese tasting business and the tour business," he tells GlobeSt.com. He says the castle was a money loser because the upkeep was so high. People who live in town say that uses of the castle could include a bed and breakfast, a spa or corporate retreat.

One thing it won't end up as a giant retail center in the bucolic Crystal Valley. Working with preservation groups, the IRS placed an historic easement on the castle, "so it can't be torn down and replaced with a Wal-Mart or some other commercial use," Harrison says.