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Washington's Mini-Madoff Flies Free
September 15, 2021

Washington's Mini-Madoff Flies Free

by The CE Shop Team

Darren Berg’s Bold Real Estate Ponzi Scheme

In 2011, Darren Berg, a local real estate investor, stood in a federal courtroom after being investigated for running Washington’s largest Ponzi scheme. The man nicknamed “Seattle’s Mini-Madoff” pled guilty to charges including wire fraud and bankruptcy fraud stemming from his operation of a $120 million Ponzi scheme.

To truly understand this scam, let’s dive into the man behind the madness.

Who Is Darren Berg?

Born in Ashland, Oregon, Berg grew up in a pink rambler with his mom, dad, and three siblings. He showed his entrepreneurial side and love for the hustle from a young age. As a child, Berg was often found roaming the streets on his Schwinn, looking to help neighbors for cash, or even trying to sell his grandfather’s cherries in his yard. 

After graduating high school, Berg attended the University of Oregon and pledged to the Pi Kappa Alpha fraternity. Like many villainous backstories, the frat house was where Berg’s murky misdealings began. 

Soon after joining, he was elected to be the group’s treasurer. Among Berg’s responsibilities was collecting rent and monthly dues. But there was one big problem: Berg wasn’t paying their landlord. Instead, he took this money, around $21,000, and invested it in his own bus company. 

After being accused of stealing rent and due money from the fraternity, he left and dropped out of college before moving to Portland, Oregon. His criminal streak continued, leading to Berg being convicted of bank fraud after stealing approximately $30,000 in a check-kiting scheme.

He wasn’t given any jail time. Instead, he was sentenced to probation. The financial fraudster would continue heading north, taking his twisted talents to Seattle.

Berg’s Seattle Scam Makes History

In 2001, Berg founded the Meridian Group, a collection of investment funds in Mercer Island. Approximately 1,000 investors trusted Berg, resulting in $350 million being invested into the Meridian family of funds. 

The fraudulent mortgage group would lie to investors and report that their money was being invested into real estate contracts, mortgage-backed securities, and hard money loans.  In reality, Berg used investor funds to make payments to earlier investors, as well as reallocate funds for personal and business expenses. Expenses included the creation and operation of a luxury bus company, the purchase of multiple multi-million dollar yachts, private jets, luxury cars, and a multi-million dollar mansion in Mercer Island with a full-time staff. In total, Berg used roughly $58 million of investor money to fund his luxury lifestyle.

Berg would go to great lengths to cover up his disingenuous deals, creating false records of contracts and loans, which would include fake appraisals and titles.

Darren Berg's Ponzi Scheme

The Conman’s Downfall

During the big Bernie Madoff scandal of 2008, some of Berg’s investors began feeling wary. The situation got worse when one of Berg’s big investors wanted to cash out, and Berg couldn’t pay up.

By 2010, a group of investors filed a petition that would force several of Berg’s funds into bankruptcy. This quickly raised a red flag, alarming federal investigators. Prosecutors and federal agents charged Berg with nine counts of wire fraud and one count of money laundering. He was arrested in the fall of 2010.

Almost a year later, in the summer of 2011, the two sides reached a plea agreement. Berg pled guilty to wire fraud, money laundering, and bankruptcy fraud. He was sentenced to 17 years and was placed in federal prison. If Berg was a regular criminal, this is likely where the story would end. But lo and behold...

Seattle’s Mini-Madoff Made Off

Berg served his first six years at various minimum-security facilities throughout California. He was eventually placed at a satellite prison camp in Atwater, California. This particular camp had minimal security due to its low inmate population and the low-risk inmates it contained. Located near an airport, the prison was a relatively quiet place — until 2017. 
That December, Berg became one of eight people to escape from the facility when he hopped a fence, bolted for the nearby airport, and boarded a private jet. 

After his daring escape, the hunt for Berg went cold. With no real clues as to where he went, authorities shifted their focus to Berg’s boyfriend, Darrell Ray Blankenship. Blankenship, a flight attendant, had connections to private jets and international resources. Here is the investigators' current theory:

  • Weeks after Berg’s escape, Blankenship posted photos on his Instagram of three men in Rio de Janeiro, Brazil. One of these men’s facial characteristics matched Bergs’.
  • During this trip, Blankenship sent a message to Berg’s mother saying, “Hello from Rio.”
  • Blankenship also sent a message to a mutual friend that said, “Just heard from Darren.”
  • The last clue is a message sent to a tarot card reader in early 2018 that read, “Darrell and Darren”.

Now, it’s not beyond the realm of possibility that all of these messages are just red herrings to throw authorities off. While Berg has historically displayed a lack of morality, he has proven that he is clever and cunning. Darren Berg remains on the run and is suspected to be in South America, likely Brazil or Belize. 

If you have information on Darren Berg’s whereabouts, contact the U.S. Marshals at 1.800.336.0102.

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