Reed Slatkin

Reed Eliot Slatkin (January 22, 1949 - June 23, 2015) was an American financier, Scientology minister, and co-founder of the internet service provider EarthLink. He gained notoriety as the architect of one of the largest Ponzi schemes in U.S. history, defrauding approximately 800 investors of nearly $600 million between 1986 and 2001[1][2][3].

Early Life and Scientology Involvement

Born in Detroit, Michigan, Slatkin was introduced to Scientology as a teenager by his uncle.

He studied directly under the religion's founder, L. Ron Hubbard, and was ordained as a Scientology minister in 1975[1][3][4]. For nearly a decade, he served full-time in the church before transitioning in the mid-1980s to self-employment as an investor. Many of his clients and eventual victims were fellow Scientologists, leveraging his position within the organization to build trust[1].

"Slatkin used his position within the Church to set up an unlicensed investment club."[3]

- Summary of Slatkin's exploitation of Scientology networks

The Investment Club and Ponzi Scheme

In 1986, Slatkin launched what he called the Reed Slatkin Investment Club, an unregistered advisory business based in Santa Barbara, California.

He promised investors annual returns of around 24%, minus 10% fees, through savvy stock trades and startup investments. In reality, it operated as a classic Ponzi scheme: funds from new investors paid "returns" to earlier ones, while Slatkin rarely executed the claimed trades[1][3].

Over 15 years, he solicited about $593 million from roughly 800 wealthy individuals, including Hollywood figures like actor Giovanni Ribisi.

Early investors received $279 million on their $128 million principal, creating an illusion of success. Slatkin siphoned funds for personal luxuries-art collections, cars, and airplanes-and wasted others on failed ventures, such as a never-built theme park[1][3]. He paid millions in "consulting" fees to associates and fabricated documents, including a fake Swiss firm's phone line with a European ringtone to bolster credibility[4].

Key Scheme Statistics

Metric	Details
Total Funds Raised	$593 million[1][2]
Number of Investors	~800[1][3]
Payouts to Early Investors	$279 million on $128 million invested[1]
Net Investor Losses	~$240 million[5]
Duration	1986-2001[1]

Collapse and Legal Consequences

The scheme unraveled amid the 2000 dot-com bust, triggering mass withdrawals Slatkin couldn't cover.

Investor lawsuits, including one from Santa Ynez resident John Poitras who lost $15 million, forced bankruptcy in May 2001[4]. That same month, the U.S. Securities and Exchange Commission (SEC) filed an enforcement action, securing an asset freeze. The FBI raided his operations simultaneously[1][2].

Slatkin and accomplices obstructed the probe by submitting fake documents and lying under oath.

In March 2002, he pleaded guilty to 15 felony counts: mail fraud, wire fraud, money laundering, and conspiracy to obstruct justice. On September 2, 2003, U.S. District Judge Margaret M. Morrow sentenced him to 14 years in federal prison, overruling lighter recommendations[1][2][5].

Incarceration Path: Started at Taft Community Correctional Institution; transferred to Lompoc Federal Correctional Institution by 2010[1].
Released on July 5, 2013, after serving about 10 years under a plea deal[4].
Died in prison on June 23, 2015[1].

EarthLink Founding and Legacy

Despite his fraud, Slatkin co-founded EarthLink in 1994 with Sky Dayton, serving as an initial investor and former director.

This legitimate venture contrasted sharply with his illicit activities[1][2]. Post-collapse, bankruptcy proceedings clawed back assets from profitable early investors. The Church of Scientology distanced itself, excommunicating Slatkin and denying involvement[1][5]. His case, predating Bernie Madoff's scandal, highlighted risks in unregulated "investment clubs" and faith-based networks.

Scheme Growth Visualization (ASCII Graph)

Funds Raised ($M) | 
593      ██████████████████████
       █████████████████████
       ████████████████████
       ██████████████████
       ████████████████
  0 ________________________________________________
     1986   1990   1995   2000   2001 (Collapse)
  Approximate cumulative inflows; peak at ~$593M before bust[1][3]

Slatkin's story serves as a cautionary tale of charisma, deception, and the fragility of trust in high-stakes finance.

While he expressed remorse in court, the devastation to victims underscored the human cost of such frauds.