Acting as fund managers for ATM investments, Jerry Hostetter, Dave Zook, William Poole and Buck Joffrey received a total of $52 million for recruiting and overseeing investors who poured $770 million into cash machines managed by Lancaster businessman Daryl Heller.
The fund managers also made money — at least for a time — through their personal investments in the ATMs.
The collapse late last year of the ATM network amid allegations of fraud leading to criminal charges against Heller has undone an investment program that operated for years like, well, a cash machine, providing a stream of monthly payouts. Now, roughly 2,700 investors have been left with more than $400 million in losses, questions about who to blame, and uncertainty about any possible restitution.
Monday’s decision by a federal judge to appoint a trustee in Heller’s bankruptcy case could spark the recovery of some losses for investors. Yet for Hostetter, Zook, Poole and Joffrey, the involvement of a trustee could mean they are forced to return some payments they have received.
A trustee would have the power to try to “claw back” any money that was improperly paid out, including payments directed to the fund managers for managing the program or for their personal ATM investments. There’s also the possibility that any potential clawbacks would instead be managed by the federal Securities and Exchange Commission.
The criminal indictment and the SEC complaint against Heller portray him as the mastermind of a wide-ranging fraud who kept money coming in by putting out phony numbers to investors and fund managers alike. Yet the rapid unraveling of what federal investigators have described as a fundamentally fraudulent scheme has raised questions about whether the fund managers could have — or should have — seen it coming.
None of the fund managers have been charged, but Zook, Hostetter and Joffrey have been targeted in one civil lawsuit from investors and Zook was singled out in a separate investor suit. The lawsuits come even as the fund managers continue to press legal claims against Heller on behalf of investors.
Many investors knew very little about Heller himself. For them, the fund managers were the face of their ATM investments, and investors wrote checks because of the trust those managers engendered from their reputations and strong ties to the local business and religious communities.
Heller has repeatedly attempted to shift blame for the ATM network’s collapse to the fund managers, arguing in a countersuit that the fund managers caused the massive financial losses. Heller has claimed that the fund managers spread false information in messages to investors about the health of the ATM network after its monthly payments dried up and in the lawsuit the fund managers filed not long after. The messages and lawsuit spooked customers, vendors and acquisition partners, causing the network’s collapse, Heller maintains.
But more than a year after the troubled ATM investment network became the subject of media scrutiny, none of the fund managers has publicly commented on their role. Zook, Joffrey and Poole did not respond to request for comment for this story, and Hostetter referred an LNP | LancasterOnline reporter to his attorney, Rory Connaughton, who declined to comment on the record.
Origin of ATM investment funds
The failure of the ATM investment is a particularly homegrown Lancaster County scandal, arising from and taking root among local Mennonite and Amish communities.
Heller as well as the three original fund managers have strong ties to the Anabaptist community and many members of Amish and Mennonite churches wound up investing. Heller’s father and grandfather were pastors at the conservative Hammer Creek Mennonite Church near Lititz and Zook grew up in an Amish household. Hostetter and Poole graduated together from Lancaster Mennonite High School where Heller is also an alum.
Heller began investing in ATMs after building a successful company selling phone and technology services to businesses. In 2011, Heller partnered with Hostetter to form Prestige Investment Group to invest in ATMs. Initially, they solicited friends and family to invest through Prestige.
One early investor was Zook, who helped in his family’s shed-building business near Atglen but who also began investing in real estate and would eventually become the top recruiter of ATM investors.
“This team who I got to know very well, both of them are lifetime Lancaster County, Pennsylvania, natives.” Zook said in a September 2020 podcast interview. “For me it almost feels like farming. … You plant the seed. And then you reap the harvest. That’s what investing is to me, and I can’t get enough of it.”
When Zook joined Heller and Hostetter, the three began offering membership interests in the various funds to investors around 2017, the year federal investigators mark as the beginning of what they say was a fraudulent scheme.
The investment money was grouped under three Prestige Management funds that were mostly managed by Heller, Hostetter and Zook. Poole, a banking executive and longtime friend of Hostetter’s, had a 5% ownership interest in one of the funds.
In 2000, Buck Joffrey, a California surgeon turned real estate investor, partnered with Heller and Hostetter to create a new group of investment funds. Joffrey’s funds generally had names beginning with “WF Velocity,” a nod to Joffrey’s “Wealth Formula” podcast where he shares insights about investing.
“So, you’ve got an institutional quality group of individuals and operators with an institutional level, a significant portfolio, attractive monthly payments, hedge against the economy and it’s highly tax efficient,” Joffrey said in a November 2020 interview with Heller on his podcast where they discussed ATM investing. “So, it sounds like a pretty good opportunity, and I assume you would think so too.”
Fund managers did not take an up-front commission on new investment money. Rather, they received a portion of the money left over after expenses were covered and investors were paid. The money was called “margin payments.”
The SEC complaint says Heller controlled those margin payments and continued to authorize them even though there were never any actual profits. Of the $60 million in margin payments between 2017 and 2024, the SEC says $8.2 million was collected by Heller himself. The SEC did not specify how the rest of the margin payments were divvied up.
Kept in the dark
Heller and the fund managers worked together to expand the ATM investment network. Yet the fund managers were also often kept in the dark about the financials of Paramount, the Heller-owned company that distributed money to investors and fund managers.
“Daryl Heller has absolute control of Paramount,” read a private placement memorandum for one investment fund that offered details of an investment opportunity.
In multiple instances, Heller either stonewalled fund managers looking for financial information or supplied phony numbers, as alleged in the indictment and SEC complaint.
In June 2023, the criminal indictment says Joffrey asked Heller for financial information about one of the funds that he helped manage. In response, Heller sent him documents showing that the fund had 831 active ATMs generating $7.4 million in total revenue and $3.1 million in gross profit in 2022.
The criminal indictment says Paramount’s own records show that those 831 ATMs either didn’t exist or were not generating any revenue.
A critical point came in 2023 when the SEC complaint says Zook requested audited financials of Paramount from Heller but did not receive them. In December 2023 Zook told Heller he would no longer solicit new investments.
Zook stopped raising money but continued to raise questions about Paramount’s finances.
“Dave Zook is putting a lot of pressure on me and I’m just giving him high level multiple contributing reasons why we can’t pay this last fund,” Heller texted Paramount CEO Randall Leaman on April 16, 2024. “Please don’t take any calls from Dave until this is behind us as I will handle.”
Days later, just before monthly payments were due to investors, Hostetter texted Leaman after not hearing from Heller.
“I’m a partner and not an employee and still haven’t heard from Daryl if (Paramount) will make payments Monday. Is and was (Paramount) a fraud?” Hostetter wrote in a text to Leaman that Leaman forwarded to Heller.
“OMFG. I’ll hit him tomorrow,” Heller replied.
Instead of their regular monthly payment, investors got an email signed by Heller on April 29, 2024, that informed them of the decision to move to quarterly payments, noting that the decision was his alone.
“Jerry Hostetter was not part of the decision to move to quarterly and is just finding out about this change now,” the email said.
Over the next four months, Heller offered multiple excuses for the lapsed payments that he repeatedly promised would be sent. The payments were never made.
Eventually, Hostetter led a lawsuit in August 2024 against Paramount that would reveal details about the ATM investment network that were new – and startling – for him and the other fund managers who had been promoting and making money off the investment for years.
Hostetter’s lawsuit resulted in a $138 million judgment in November 2024 against Paramount, a civil penalty that came just weeks before the FBI raid of Heller’s home and Lancaster city offices that led to criminal charges against Heller. Hostetter’s lawsuit also opened the way for other civil suits that prompted Heller to file for bankruptcy.
The cascade of legal action has put Heller in grave legal peril but also left his four former partners facing possible severe financial and legal repercussions of their own.
