Maple Shade resident Jim Melvin received a statement last week showing that the $20,000 investment he made last September in the Life's Good High Yield Mortgage Fund was worth $23,454 on June 30.

Melvin found that bizarre, since the Securities and Exchange Commission had shut down Life's Good Inc. on June 29, alleging in a civil suit that the Philadelphia company was running a Ponzi scheme that had raised $16 million from investors since 2006.

"I wanted to give them a call and find out how the hell did that work," said Melvin, referring to the Colorado company, Entrust New Direction, that was administering his individual retirement account, which contained the Life's Good investment.

Ponzi schemers often find new victims through word of mouth and deal directly with unwitting investors. But Robert Stinson Jr., of Berwyn, CEO of Life's Good, reached people like Melvin and Carol Smith, of San Diego, through what seem to be reputable financial advisors.

It baffles Melvin and Smith how their money could end up in the hands of Stinson, who had been convicted several times for financial fraud and larceny and did not register the Life's Good funds.

Stinson pursued people with self-directed individual retirement accounts, an IRA that allows investors to spread their money beyond stocks and bonds to real estate, private equity, mortgages and other private investments. One of the things he did to attract clients was participate in a 2007 webinar sponsored by Pensco Trust Co., a major administrator of self-directed IRAs.

Stinson has not responded to repeated requests for comment.

"We are not in a position to make any comment at this time," Marge Chapman, Pensco's chief compliance officer, said, citing the SEC investigation of Life's Good.

Self-directed IRAs are not necessarily prone to fraud, said Jacqui Basso, a certified public accountant and financial advisor in Downingtown. But they allow investors to "start going out into private equity, real estate partnerships. That's where the potential is for fraud," said Basso, who chairs the personal financial planning committee of the Pennsylvania Institute for Certified Public Accountants.

Melvin's path to Stinson started last year with a Colorado debt-settlement firm, Real Talk Network, that was recently shut down by the Colorado attorney general.

The coaching sessions he bought for $3,000 did not help with his debt, but they did persuade him to turn over $20,000 in a retirement account to a broker at Brentwood Equity Advisors, who advised him to put the money in the Life's Good High Yield fund. It promised a 10 percent annual interest rate.

Melvin said he was enticed by Life's Good because the fund was presented as a "hard-money lender," which means it makes high-interest, short-term real-estate loans while a property is being fixed up for sale. From his own experience in real-estate investing, Melvin said, "I knew how strict [hard-money lenders] could be about who they lend their money to."

In addition, the broker, Brad Peterson, told him the fund had received a five-star rating from "Morningstar." Morningstar Inc., a Chicago fund-rater, has no record of Life's Good funds, a spokeswoman said.

Peterson no longer works at Brentwood, of Denver, said company principal John Staiano. Asked how many clients Brentwood has in Life's Good, Staiano said: "I'm not going to discuss that. That's something that is private." Peterson could not be located.

Bill Humphrey, a principal at Entrust New Direction in Louisville, Colo., the administrator for Melvin's IRA, estimated that his company had 10 clients with Life's Good investments who were referred by a Brentwood broker.

In California, Carol Smith's $50,000 investment in the Life's Good STABL Mortgage fund was made through an advisor at Total Wealth Management, a registered investment advisor in San Diego.

Total Wealth told Smith in a letter that the Life's Good fund was "on the safer side" and had a "good track record," and he pointed to a five-star rating from Morningstar.

Total Wealth Management's owner, Jacob Cooper, was on vacation last week and did not respond to an e-mailed request for comment.

Smith still can't get her head around what happened: "How did someone who has a criminal record set up a fund?"