'Amish Madoff' accused of $33m fraud involving 2,600 investors

You don't need to drive a Porsche and jabber into a mobile telephone to commit a multimillion-dollar financial fraud. Just ask victims of Monroe Beachy, a 77-year-old Amish elder who has been accused of taking $33m from fellow members of his community in a Bernie Madoff-style Ponzi scheme.

More than 2,600 investors have seen their savings wiped out since the collapse of A&M Investments, the firm Mr Beachy ran from his home in the secluded village of Sugarcreek, Ohio, for almost 25 years, according to charges filed by the US Securities and Exchange Commission (SEC).

The vast majority of his clients were Amish, from a fundamentalist branch of the Mennonite Church whose followers shun modern technology such as electricity and motor vehicles. The personal effects listed in Mr Beachy's bankruptcy filing include his horse, cart, and leather harness. According to prosecutors, Mr Beachy began trading in 1986, telling potential customers that their money would be used to buy ultra-safe bonds and US government securities. Despite the low-risk nature of the investments, they were told to expect far higher rates of return than from a normal bank account.

Although investors were sent regular statements telling them their nest-eggs were growing steadily, the SEC claims A&M was in fact a Ponzi scheme. Its dungaree-wearing proprietor was losing vast sums on the markets, and using money from new clients to cover his commitments to existing ones.

Things started spiralling out of control afterthe dot-com crash of the late 1990s, it is claimed. Despite his community's supposed rejection of modernity, Mr Beachy decided to invest a hefty proportion of his funds in technology stocks. Many investments were completely wiped out. "In hindsight," his attorney declared in a bankruptcy filing, "[he probably] should have ... shut down at that point." Instead, he soldiered on, accepting fresh funds from churches, families and Amish community groups. Most of their cash was parked in risky stocks or junk bonds in an effort to recoup lost capital. His fund staggered on until last year, when it finally ran out of cash. Shortly afterwards, Mr Beachy was forced to file for bankruptcy.

"At the time this scheme was uncovered, the more than 2,600 investors believed they had a total of $33m," said the SEC, which cottoned on to the affair shortly after A&M's unfortunate clients were told the fund was insolvent. "In reality, on-hand assets were just below $18m."

The SEC is seeking an injunction and penalties against Mr Beachy for securities fraud. But getting to the bottom of the case may prove tough: a tranche of his financial records – some of which, in keeping with Amish tradition, were kept on paper rather than in computer files – appear to have been destroyed. Key witnesses are also proving tricky to contact, since many fundamentalist Amish do not own a telephone, let alone have use of email. Some prefer to communicate with the authorities by handwritten letter.

The notion of bankruptcy is taboo in Amish circles, meaning many of Mr Beachy's former clients have also been reluctant to pursue claims for compensation through the normal courts. They would rather settle the affair within their community, and argue that engaging with the US legal system violates their religious freedom.

Meanwhile, Mr Beachy is keeping a low profile. Reached via telephone by the Washington Post yesterday, he said: "My attorney advised me not to discuss [the case] with anyone." When asked about the huge losses his fund had accrued, he added: "Of course, it was not intentional."