KNOXVILLE, Tenn. — An 81-year-old Knoxville man will spend nearly four years behind bars after pleading guilty to scamming people out of more than $2 million over 14 years.
The U.S. Department of Justice said Hugh Murphy pleaded guilty to one count of mail fraud and one count of money laundering. A federal grand jury in the Eastern District of Tennessee indicted Murphy in November 2018 for several more counts of wire fraud and money laundering, but those extra counts were dropped as part of the plea agreement.
Investigators said from May 2002 to September 2016, Murphy scammed dozens of people by running a pyramid scheme, claiming he would invest their money in commercial real estate and pay out through a fake annuity.
The DOJ said Murphy "recruited" 47 victims who paid him nearly $6.3 million total. Murphy didn't pocket all of the money, though. In order to keep up the façade that their "investments" were paying out, he took some of the funds he received from later victims to pay the earlier "investors." He would also mail victims statements with fake information.
In all, the DOJ said the victims suffered a net loss of more than $2.2 million.
On Wednesday, Judge Katherine Crytzer sentenced Murphy to serve 46 months in prison, followed by a year of supervised release. He is also ordered to pay back the $2.2 million he pocketed to the victims.
The DOJ said the U.S. Postal Inspection Service and IRS led the investigation into the scheme.