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LOS ANGELES-Two local men who allegedly ran a massive real estate Ponzi scheme and then used $28 million of the proceeds to buy racehorses and start offshore bank accounts have agreed to repay investors more than $11 million.

The announcement was made by the Securities and Exchange Commission. The settlement stems from fraud charges the SEC filed last October against Ernest Cossey and Gary Williams, both of Diamond Bar.

The SEC’s suit claimed that the pair set up several entities—among them TLC Investments & Trade Co. and TLC America Inc.—to collect millions of dollars from about 1,800 investors, many of them senior citizens. The investments promoted by the two men promised safety and liquidity with a guaranteed return of 8% to 15%, the SEC said.

Instead, the SEC says, Cossey and Williams essentially used money from new investors to pay off previous investors. Some of the cash the pair collected was moved offshore, used to buy racehorses and make charitable contributions, the lawsuit says.

A judge ordered Cossey to repay $10.7 million, plus $381,921 in penalties and interests. Williams is required to repay $248,145 but was not assessed a fine.

Both men also agreed not to violate laws in the future, but did not admit or deny the fraud charges made by the SEC.

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