The former president of a California mortgage firm accused of raising $30 million from investors to fund his lavish lifestyle and pay off gambling debts has agreed to pay $20 million in restitution and spend up to five years in prison under the terms of a plea agreement with prosecutors.

Salvatore Favata, the former president of National Consumer Mortgage LLC in Orange County, Calif., agreed to plead guilty to one count of mail fraud, according to the Securities and Exchange Commission.

The Commission said it has settled its own securities fraud case against Favata, in which he neither admitted nor denied charges that he operated “a massive Ponzi scheme,” but accepted a permanent ban from associating with broker-dealers.

According to the SEC’s complaint, Favata solicited investors in face-to-face settings, including church gatherings and investment seminars, persuading them to invest money they obtained from refinancing their mortgages in his company’s investment notes. He told investors NCM loaned money to homeowners who did not qualify for traditional mortgages, maintaining a low default rate by only lending on properties with a 65 percent or lower loan-to-value ratio.

Favata promised a return of 30 percent to 50 percent, but was only able to deliver those returns to early investors by recruiting new ones, “in typical Ponzi-like fashion,” the SEC said in a statement.

The U.S. Attorney’s office for the Central District of California filed a plea agreement with Favata on Oct. 6, the same day the SEC filed its civil complaint.

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