Houston investor David Hamer is one of a handful of investors who sued Thompson after he lost $25,000 in the business. However, he chose to drop the matter because of the mounting legal costs involved, he said.
Hamer stumbled across the Invest in Car Notes website and was attracted by the high rate of return promised by the site.
“They may have started out with good intentions, but when things weren't going well, they just kind of got new investors to pay the interest payments,” Hamer said.
Irving Faught, administrator for the Securities Department, said regulators filed suit against Thompson this week after he failed to comply with an earlier agreement to pay some reparations to investors.
“I don't know whether you would call it a Ponzi scheme or not, but he did use some of the money to pay personal expenses, as is alleged in the case,” Faught said.
In its lawsuit, the Securities Department claims that in some instances, a single car loan would be assigned to multiple investors. Although Thompson promised his investors notes that went into default would be replaced with a new note, he “did not have an adequate surplus of replacement notes.”
Thompson said he is committed to repaying those who lost money investing in his business. He also claims that he has been living off his Social Security check for the past year and a half and has not taken any salary while working to ensure investors get their money back.
“I won't take a dime until everyone gets their money back,” he said.