U.S. District Court Judge John Mendez didn’t know what to make of the man standing in his courtroom for sentencing on September 7, 2010. Dave Sanders was a successful corporate sales executive—a widower who was raising his three young children in a suburb outside Sacramento, California. His shoes gleamed from the energetic polishing he’d given them that morning, and his buzz cut gave him the appearance of an earnest, middle-aged Boy Scout. But now the 43-year-old had confessed to operating a bizarre paramilitary vigilante squad that targeted people involved in Ponzi schemes. His team included a 365-pound US postal worker and a woman who looked like a Playboy Playmate; it was equal parts SWAT team and three-ring circus, and it had landed Sanders here, in a Sacramento courthouse, facing up to 11 years in prison.

It would be one thing if Sanders had been trying to get his own money back—the judge might understand that. But Sanders wasn’t a victim and barely knew the people he was trying to help. He was the senior vice president of sales and marketing at a company that sold fiber-optic and copper cable. He had no criminal history. In fact, many in his industry viewed him as an inspiration: He had twice been selected Telecommunications Speaker of the Year. The judge was baffled. “It seems out of character to me that someone who … is raising kids on his own, has a job, is employed, on weekends decides ‘I want to dress up’ and give the impression that they were involved in law enforcement,” Mendez said.

Sanders stood ramrod straight. He was due to give a speech at a telecommunications conference later that week. Back at his office, there were millions of dollars in deals pending. It was a normal Tuesday, except for the fact that he might be on his way to federal prison within the hour. The judge asked if he’d like to explain himself.

Sanders hesitated. It had seemed simple in the beginning. Now everything was so complicated, he wasn’t sure what the truth was. He had to admit that he might have gotten involved with the wrong people—that he might have become part of a scam within a scam.

“I thought that maybe I could somehow help the folks,” Sanders said, struggling to hold back tears. But what actually happened, he told the judge, “was beyond explanation.”

One thing you have to know about Dave Sanders: He used to moonlight as a bodyguard. In 1994, while working his way up in the staid “cabling” industry, as it is known, he enrolled at the Advanced Security Institute, a Sacramento-area school that offered firearm, baton, and tear gas training. He learned a little bit of jujitsu, practiced shooting guns at night, got pretty adept with a baton, and figured out how to handcuff people with a flick of the wrist. It was a lot of fun.

When he finished the training, he got a gun permit, a security guard license, and a badge that said he was a certified “executive protection agent.” To his surprise he began to get hired from time to time to follow dignitaries and celebrities around. He was 6’3″ and 220 pounds, so nobody seemed to care that he was a sales executive who spent most of his days discussing the finer points of RS-232 data signals and the advantages of hot-melt fiber-optic connectors.

Cathy, his wife, didn’t think much of his hobby and finally convinced him to quit in 2000. They had kids, he was a serious businessman: It was time to put the executive protection badge away. Sanders didn’t have time anyway. In 2004, he was appointed national sales director for the voice and data division at Leviton, a multibillion-dollar electrical supply company, and Cathy got pregnant with their third child. Sanders was in his late thirties, was making mid-six figures, and bought a new car every year. Life was pretty good.

And then, soon after the baby was born, Cathy was diagnosed with cervical cancer. At first the doctors were optimistic. They said she’d be fine. She went through intensive chemo and had surgery, but the cancer metastasized. After fighting the disease for a year and a half, she died on July 24, 2006. They had been married for nearly 13 years, and now Sanders was suddenly on his own with a baby, a 7-year-old son, and an 11-year-old daughter. He felt like he had been broken in half.

His life turned into a blur. He rushed from sales meetings to swim lessons and then to basketball practices and counseling sessions. At night, after he’d put the kids to sleep, he avoided his old bedroom; he couldn’t sleep in the bed he’d shared with Cathy. Often he’d drift to sleep in a chair in his home office. The walls were lined with articles from magazines like Electrical Wholesaling and Cabling Installation & Maintenance that documented his professional success—Cathy had proudly framed many of them. In the photos, he was smiling and looked happy. Now stray thoughts kept him awake most nights: He was never going to hold her hand again or fall asleep beside her. She was only 33 when she died. He was left with a dull ache in his chest and the agonizing feeling that he’d been cheated.

THE PLAYERS Sanders’ money-recovery team included a weapons expert, a model, and a 365-pound postal worker. 1// Dave Sanders (“Sundance”) The sales executive who brandished a badge and a gun in an effort to retrieve money lost in a Ponzi scheme.

The sales executive who brandished a badge and a gun in an effort to retrieve money lost in a Ponzi scheme. 2// Craig Andersen (“Agent Bob”) A US postal worker who attended a bodyguard training academy with Sanders (shown here on graduation day in 1995).

A US postal worker who attended a bodyguard training academy with Sanders (shown here on graduation day in 1995). 3// Anthony Vassallo (“BYU”) The alleged mastermind of the $40 million Ponzi scheme.

The alleged mastermind of the $40 million Ponzi scheme. 4// Russ Putnam (“Principal”) A real-estate developer (here with his wife, Charity) who lost millions to Vassallo and asked Sanders to help him get it back.

A real-estate developer (here with his wife, Charity) who lost millions to Vassallo and asked Sanders to help him get it back. 5// Kari Sonovich A real estate consultant who claimed her associate, Sir Joseph Birch, could offer 300 percent returns.

A real estate consultant who claimed her associate, Sir Joseph Birch, could offer 300 percent returns. 6// Brandy White Elk (“Summerland”) A mortgage specialist who worked with Sonovich and vouched for Birch after claiming to have met him in Zurich.

A mortgage specialist who worked with Sonovich and vouched for Birch after claiming to have met him in Zurich. 7// Sean Smartt (“Hawk”) A former college basketball player and dunking-contest champ who joined Sanders’ team.

A former college basketball player and dunking-contest champ who joined Sanders’ team. 8// Chad ENGLE (“Cowboy”) An electrical contractor in Las Vegas who provided weaponry.

An electrical contractor in Las Vegas who provided weaponry. 9// Cassandra Moore (“Anastasia Beaverhousen”) A model and sometime actress who, ostensibly, was recruited for her computer skills.

A model and sometime actress who, ostensibly, was recruited for her computer skills. 10// Sir Joseph Birch (“SJB”) A mysterious British investor who supposedly had a warehouse full of gold bars.

Sanders was driving home from work one evening in early December 2008 when his insurance agent, Will Sassman, called. It sounded like people were yelling in the background.

“Can you come to my office?” Sassman asked, sounding nervous. “I need some help.”

Sassman had handled Cathy’s life insurance policy at the time of her death two and a half years earlier. He was also a financial adviser and explained that he was trying to help a group of people who were having trouble withdrawing money from a local investment fund. He’d invited them to his office, and the meeting had turned ugly. Some investors were accused of receiving preferential treatment from the fund; tempers were flaring. Sassman was worried that the situation might get violent, but he didn’t want to call the police. He remembered that Sanders had once been a bodyguard. Would he mind stopping by to help calm things down?

Sanders laughed—it was an odd request—but the insurance salesman had treated his family well in the aftermath of Cathy’s death and was even now managing the proceeds of her policy, so he agreed.

When he arrived at Sassman’s office, the conference room was packed with about 30 very upset people. Some were shouting, others were crying. Sassman pulled him into another room and explained the situation: In 2004, a 25-year-old named Anthony Vassallo started a hedge fund in Folsom, California. He was a nice kid—a little bit shy, devoutly Mormon, and obsessed with the stock market. He had studied investing since high school and had developed trading software that he said could deliver returns of 3.5 percent per month. He said there was little risk of loss since he sold everything he had bought at the end of each trading day, limiting his exposure to the market. To a sophisticated investor, it would sound like pure rubbish: There’s no reason stocks can’t decline significantly in a single trading day or over a succession of days. But to more than 400 people, it sounded great, and they invested roughly $40 million.

For a number of years, those investors were delighted. They received monthly reports documenting gains just as promised, and word spread about the dazzlingly successful young financier. But a US prosecutor would eventually label Vassallo’s enterprise a “vast Ponzi scheme,” where promises of high returns lured in new money, which in turn funded payouts to earlier investors.

Investors knew something was wrong in December 2008, when Vassallo stopped answering his phone and wouldn’t immediately honor withdrawal requests, according to court records. There were rumors that someone spotted him at a stoplight, pulled him out of his car, and beat him for refusing to return money. Others thought that Vassallo had been kidnapped. Entire life savings were on the line; the people in the conference room were panicking. Something had to be done, and fast.

Sanders didn’t know why, but he started to get choked up. Maybe it was the echo of his own loss that got him. When Cathy was ill, he was always on the edge of tears, but when she died, he did his best to bury his feelings. Weeping wasn’t going to change anything, and it was better to stay strong for the kids. But now those emotions started to bubble up inside him again. He could feel what the investors were feeling. They were on the brink of losing everything, just like he had. But this time, something could be done about it. This was a loss he could prevent.

The insurance salesman led Sanders into the conference room and introduced him. The room quieted down. Sanders looked at everybody and decided to do more than just maintain the peace.

“I’m in the fiber-optics business,” Sanders said. “But I also know how to conduct investigations, and I want to help.”

“You’re a private investigator?” one of the investors asked.

“No,” Sanders replied, handing out business cards. “I’m a certified executive protection agent.”

A few days later, Sanders says, Russ Putnam called and asked if he was free for dinner. Putnam was one of the investors at the meeting, and he said he was out approximately $10 million. (IRS interviews would later corroborate this.) He said he had spoken with the FBI and little appeared to be happening. He was getting desperate, and if Sanders was willing to help him track down his money, Putnam would be willing to donate to a charity in Sanders’ wife’s name.

That night, Sanders pulled into the stone driveway of Putnam’s custom-built Mediterranean-style home. It was a walled-in mansion, and there were two Ferraris and an Audi R8 parked near a burbling water fountain. Putnam answered the door and warmly welcomed him in.

Tim Homan, Putnam’s business partner, was less friendly. Homan and Putnam had made their money buying and renovating apartment buildings, and they were a good team. Putnam was the kind of guy people just liked: He was good-looking, had a breezy charm, and seemed boundlessly optimistic. Homan was more of a skeptic.

And right now there were a lot of things to be skeptical about. First, Putnam had invested the partnership’s money into Vassallo’s fund; if they didn’t get it back, it looked like they might lose their business. Homan was furious because, from the beginning, he’d told Putnam not to do it. He just didn’t buy the idea that a twentysomething kid in the small town of Folsom had cracked the code to Wall Street. And now he wasn’t buying Putnam’s desperate bet that some fiber-optic cable salesdude was going to get them out of the hole they were in.

Putnam led Sanders into his elegant kitchen and introduced him to two women: Kari Sonovich and Brandy White Elk. They were friends of Putnam’s sister-in-law and owned a mortgage brokerage in Vegas. When they’d heard about Putnam’s troubles, they’d offered to use their real-estate know-how to track down property investments Vassallo had made, Putnam later told IRS investigators.

Homan had no patience for niceties and bluntly asked for Sanders’ qualifications. Sanders showed him the badge he got after graduating from bodyguard school. It was made out of metal, had the California state emblem on it, and was emblazoned with the words “Executive Protection Agent.” Sanders was proud of it; Homan thought it looked like a joke, like something you could buy at Target. He thought Sanders was a buffoon, he later told Wired .

But even buffoons can be useful. Homan listened to Sanders for a while—Sanders said he had guarded Sharon Stone in the 1990s (he hadn’t liked her) and that he used to work as armed security at a well-known local nightclub. (He didn’t mention the fact that he’d twice sprayed himself in the face with his own mace while working there.) Homan wasn’t exactly wowed, but Putnam pressed ahead. He told Sanders that they wanted to introduce him to Anthony Vassallo.

Sanders looked back and forth between Putnam and Homan. For a moment, he thought they might be joking. “You mean the guy you say stole your money?” he finally asked.

“That’s right,” Putnam said, leading Sanders into the living room. Putnam nodded at White Elk, who disappeared down a hallway. A moment later, she brought Vassallo into the living room.

To Sanders, the guy looked miserable: He was pale and unshaven, and his hair was a mess. He was wearing a T-shirt and jeans, and his eyes darted nervously around the room. He limply shook Sanders’ hand, and White Elk motioned him into a big leather chair. He did as he was told.

“Anthony knows where a lot of the money is and wants to help us get it back,” Putnam said. “Don’t you, Anthony?”

Vassallo glanced at Sanders, who sat down across from him. Vassallo didn’t look like the mastermind of a $40 million fraud. He looked like a scared kid.

“I feel terrible,” Vassallo mumbled.

“God damn right you do!” Homan shouted.

“I can still fix this,” Vassallo said, a little color returning to his face. “But I can’t do it if I’m dead, and I can’t do it from a jail cell.”

“As long as I’m here, you’re safe, so you tell me what’s going on,” Sanders reassured him.

The room was silent. For the past several months, Vassallo had claimed he was “killing it,” Putnam recalls. In reality, he’d suffered heavy losses and essentially stopped trading stocks in mid- to late 2007, according to court documents. In the hope of making the money back, he’d started investing in other, more speculative ventures. Sanders leaned in toward Vassallo and remembers clearly what the kid said next.

“There’s another $20 million still out there, and I know where it is,” Vassallo said, looking Sanders in the eye.

“What needs to happen for you to get that money back?” Sanders asked.

“I need somebody to protect me,” Vassallo said simply.

The first mission sounded relatively easy. Vassallo had deposited $1.2 million at a bank in a Sacramento suburb, court documents show. The plan: Drive Vassallo there, get the money, and bring it back to Putnam’s house. Sanders was confident he could handle it.

That seemed to make Vassallo feel better. The $1.2 million had come from a 6’2″, 260-pound concrete contractor named Charlie Urata, and Vassallo was terrified of the guy. Urata had only recently invested the money and felt that it was his to take back. But Putnam told Sanders that there were lots of people who wanted their money back. Urata didn’t get special treatment just because he was one of the last to invest.

On a Friday in January 2009, Sanders picked up Vassallo at Putnam’s in a rented Crown Victoria and set off for the bank. The vehicle looked like an undercover cop car—Sanders thought it made him more intimidating. The impression was shattered when his 4-year-old called. Dave Jr. was looking for the peanut butter and the babysitter couldn’t find it. Sanders explained that it was in the pantry, above the Campbell’s Soup, and hung up.

“What kind of bodyguard are you?” Vassallo asked.

“One with kids,” Sanders said.

They parked and Sanders escorted Vassallo inside the bank. The money was held in an account controlled jointly by Vassallo and Urata, but Vassallo tried to convince the teller to let him make a withdrawal. Instead, another bank employee called Urata. Minutes later, his booming voice broke the orderly calm of the bank lobby.

“What the fuck is going on?” Urata demanded.

He looked like Mr. Clean—a bald-headed bull of a man—and he headed straight for Vassallo. Sanders stepped in his way, flashed his executive protection badge and said he was helping Vassallo withdraw money.

“Like hell you are,” Urata said, cutting him off. Urata looked ready to start swinging. But Sanders was pretty big. It would be a nasty fight. After some heated negotiations, a compromise proposal emerged: split the money.

Sanders looked at Vassallo—the kid was standing behind him, sweating. He nodded his agreement. The bank manager was ready to call the cops, so they got a cashier’s check, drove to another bank, deposited the money, and asked the bank to call when the customary hold on large deposits was cleared.

Sanders felt like a hero. He had kept Vassallo safe and prevented Urata from running off with the money. A surge of self-confidence coursed through him, the sense that he could set things right after they had gone so wrong, both in his life and the lives of others. For the first time since Cathy’s death, he was powerful and alive again. It didn’t seem to matter that Urata was a victim too. The fantasy felt good.

But things were getting complicated. Kari Sonovich, the real estate consultant from Vegas, began pitching Putnam on an investment opportunity, Putnam later told IRS investigators. She said she knew a successful British securities trader named Sir Joseph Birch, SJB for short. She said he was a financial adviser to the Vatican and had special access to the markets that allowed him to make enormously profitable trades. Maybe, she said, he could help Putnam make some of his money back.

Putnam says he was eager to hear more—he was getting increasingly desperate. Sonovich said she was very close to SJB and could arrange for Putnam to get a 300 to 500 percent return on his money within 90 days. Sonovich told Putnam that he could “recoup the entire investment that was lost with Vassallo,” according to Putnam’s interview with the IRS.

White Elk, the other Vegas consultant, backed up Sonovich. They had flown to Zurich in 2008 to meet SJB, she said, and he had taken them to a warehouse that was filled with gold bars. “You just can’t freaking fake stuff like that,” she later said. Sonovich showed Putnam pictures of the gold and then proceeded to call SJB and put him on speakerphone. In a British accent, he made it clear he was happy to help a friend of Sonovich’s, the IRS report says.

As eager as Putnam was, he still had enough caution to take Sanders aside and ask if he had any way of looking into SJB. Sanders agreed that the scheme sounded risky and said he’d find out what he could.

A few days later, on a speakerphone in Putnam’s living room, Sanders called Craig Anderson, a friend from bodyguard school. Anderson, he said, now worked for an investigative branch of the US Post Office in Chicago that tracked terrorists. As a result, he had access to a wealth of private data: He could search bank records, run license plates, and dig deep into the background of anybody in the world. Anderson had researched SJB and explained that the British investor owned a ranch in England named Phlorian Racing. Sanders added that the man raced horses and that all the data indicated he was legitimate.

Putnam was impressed with Sanders and Anderson, who left him with the understanding that Anderson could not discuss his work for the post office because it was classified. Putnam felt like he had a secret agent on his side. “I’ve finally got real, official people helping me,” he thought.

Sonovich was even more enthusiastic. This underscored everything she’d been saying about SJB. The focus, she said, had to be on finding more of Vassallo’s money so that SJB could make Putnam whole again.

Sonovich and White Elk were staying with Putnam, and to Sanders the women seemed to be getting increasingly close to Vassallo. On at least one occasion they even watched him as he showered. Another time, Sanders and Anderson said, Vassallo tried to eat a cookie, but Sonovich forbade it.

Putnam’s wife, Charity, would later report to IRS investigators that there was a lot more than cookie monitoring going on in her house. She told them that White Elk confessed that both she and Sonovich were having sex with Vassallo. Soon, according to a report filed by a court-appointed investigator, both Sonovich and White Elk were pregnant. (White Elk denies she had a sexual relationship with Vassallo. Sonovich did not respond to multiple interview requests.)

It also became apparent that Vassallo had developed a drug problem. Homan observed him rubbing white powder off his nose at one point. “I went to school in the ’80s,” Homan says. “I know what that means.”

Before long, according to interviews and court documents, it came to light that Vassallo was using the opiate-based painkiller Oxycontin. Apparently, not everybody thought this was a bad thing. Charity told IRS investigators she thought Sonovich “could control Vassallo with his drug addiction … and took full advantage of it.”

This alleged coercion quickly produced results. Sonovich reported that Vassallo had $872,306 on deposit with an investment firm in Las Vegas. The money was managed by a man named Rob Buckhannon.

It was time for Sanders to gear up again and go get it.

Anderson decided to fly in from Chicago to help Sanders prepare. They met up at Putnam’s house, and Homan remembers being introduced to Anderson. It was a shock. Anderson was morbidly obese, weighing in at 365 pounds. “There’s no way that man is a secret agent,” Homan told Putnam. “He can barely walk.”

It turns out that Anderson actually was an employee of the US Postal Service—he just wasn’t part of a secret branch that hunted terrorists. In fact, he was a letter sorter. For eight hours most days, he operated a machine that routed mail. It was mind-numbing work—nothing like the fun he’d had at bodyguard school with Sanders in the 1990s. So when Sanders called, he jumped at the opportunity to do something adventurous. “After all,” he says, “who doesn’t want to be a secret agent?”

But by the time they arrived in Las Vegas on Thursday, February 5, 2009, Anderson and Sanders were arguing. Anderson told Sanders that they needed to be careful: It was hard to predict how someone would react when asked to hand over money. They needed to stick to what they’d learned in bodyguard school—keep it simple, stupid.

Instead, the operation was getting more complex. Putnam and Homan had insisted on coming, as had Sonovich and White Elk, who were still keeping a close eye on Vassallo. Putnam brought two friends: a building contractor who liked to gamble and a hot-tempered guy who told the other team members that he collected debts for the Hells Angels. In addition, Sanders invited Sean Smartt, a former basketball star at Sacramento State University, and Chad Engle, a friend and electrical contractor in Vegas. Engle owned a vast array of weaponry and agreed to provide the team with firearms.

The first team meeting occurred the next day at the Mandalay Bay hotel. Sanders had rented a suite with a stunning view of the Las Vegas strip, and he began the proceedings by giving everybody codenames. He explained that this was for “operational security” in case anyone overheard them talking on their $110 Motorola walkie-talkies. Anderson was dubbed “Agent Bob,” and Engle was called “Cowboy” because he wore boots and walked with the swagger of gunslinger. Sanders named Smartt “Hawk” because he had flown through the air when he was the slam dunk king in college.

To Engle, the whole thing seemed a bit silly, but it was kind of fun too. He opened up his duffel bag and took out an AR-15 assault rifle, a Bennelli M4 semiautomatic shotgun, and a variety of handguns.

“Damn,” Smartt said, looking around with concern. “Are we going to war? Because this dude just brought the artillery.”

“You never know who might walk through the door,” Engle said.

“All right, you’re sleeping by the door, then,” Smartt said. “I’m gonna sleep way the hell over there.”

Anderson took over the conversation. To him, it seemed like he’d boarded a ship of fools. In his mind, the only way to prevent something from going drastically wrong was to assert his own authority. He explained that they were going to start tomorrow—Saturday—by setting up surveillance on Buckhannon. Tonight, they should all take it easy, rest up. This was serious business, and they needed to be in top form once the mission was under way. It was time to act like professionals.

Within hours, Smartt had lost count of how many shots of whiskey he’d had. Engle kept buying him drinks at a bar on the casino floor. A couple of the guys were bickering with a prostitute, some were on the dance floor, and Anderson eventually gave up trying to get everyone to go to sleep.

“We were tossing back Jack Daniel’s like it was Kool-Aid,” Smartt recalls.

It was an emotional time for Smartt. His glory days as a college athlete were over: He was in the middle of a divorce, his father was terminally ill, and he was concerned about losing his day job as a loan officer for a mortgage company. But now, with a good amount of whiskey in him, he just wanted to dance and let loose. He forgot all about the mission.

The next morning, Smartt was so hungover, he could barely move. Engle eyed him as they put on bulletproof vests.

“You better not throw up, ’cause that’s some good alcohol I bought you last night,” Engle said.

Around the same time, Sanders and Anderson were squabbling about who was going to play the role of lead agent. Sanders had put the team together—it was his operation—but Anderson insisted on doing the talking when they confronted Buckhannon. When he threatened to drop out of the mission if he didn’t get his way, Sanders relented.

Their plan hinged on subterfuge. Vassallo had called Buckhannon to say he was in Vegas with a prospective investor, IRS and FBI documents say. Vassallo said that his friend was interested in investing with Buckhannon and wanted to talk to him. Buckhannon was busy Saturday—his teenage son was in a wrestling tournament—but he was free on Sunday. Vassallo gave him the address of White Elk’s office and they arranged to meet there at 11 am Sunday.

Anderson Googled wrestling matches in Vegas and quickly located two tournaments. They decided to split up and check both. Vassallo had provided a photograph of Buckhannon; the idea, Sanders says, was to find him, get as close as possible, and, in accordance with their bodyguard training, perform a “threat-level assessment.” In other words, they wanted to see whether the guy scared them.

They sped out of the Mandalay Bay parking lot in the two bulletproof Cadillac Escalades that Sanders had rented. Storm clouds rolled across the desert, threatening rain, but Sanders was upbeat. The operation was finally under way.

Then he ran out of gas.

The armored SUV spluttered to a stop on the side of the freeway. Putnam called the other group.

“The A-Team just ran out of gas,” Putnam announced.

Sanders protested that the fuel gauge was broken, but he could hear raucous laughter over the phone.

Luckily, Homan had a roadside assistance policy, and within half an hour a small pickup pulled up behind them on the freeway. The service technician was momentarily taken aback when Sanders stepped out of the vehicle wearing a bulletproof vest and a sidearm.

“Fucking Vegas,” he muttered as he walked past Sanders with a 5-gallon jug of gas.

At the tournament, Sanders says he concealed his bulletproof vest under a button-up shirt and wandered through the crowd. In a matter of minutes, he spotted Buckhannon in the bleachers, munching popcorn. Sanders made his way into the stands and sat right next to him.

“Which one’s yours?” Buckhannon asked amiably.

Sanders pointed vaguely to the far side of the room.

“That one,” he said.

When Buckhannon’s son was called to the mat, Sanders clapped encouragingly. The kid fought hard but ended up in a headlock. Buckhannon raced down to the mat, and Sanders heard him yelling at his kid to break free.

Sanders was worried. The guy definitely seemed scary. He gave him a 7 or 8 out of 10 on the threat level assessment.

Early the next morning, the team filed through the lobby of the Mandalay Bay bristling with guns, bulletproof vests, tear gas canisters, and handcuffs. A number of them wore black SWAT-team-style fatigues. For once, everybody seemed focused. Threat level 7/8 meant that the team was going into the operation heavily armed and would be ready for a fight. Sanders says he had alerted hotel security—the guns were all registered—but the conventioneers and vacationers in the lobby gawked as the team strode past.

This time they didn’t run out of gas, and they made it to White Elk’s office a couple of hours before Buckhannon was due to arrive. Anderson positioned one team member on the roof with the AR-15 assault rifle. Another kept watch from one of the Escalades in the parking lot. The rest headed inside to go over the script Anderson had written.

They had just finished a quick tour of the office when someone on the team started yelling on the radio that police were massing across the street. Cruisers were parked three deep. There were cops everywhere.

Anderson strode outside to deal with the situation. Sure enough, there was a line of police cars parked at a strip mall across the way—but Anderson didn’t see any cops. He scanned the storefronts and noticed that one was filled with officers. It was a coffee shop.

“God damn it,” Anderson radioed back to the team. “They’re getting doughnuts.”

At 11 am, just as expected, Buckhannon arrived. Vassallo met him at the door and led him back to a conference room, where Tim Homan was waiting. Homan was playing the part of Vassallo’s investor friend. Everybody shook hands and then, following the script, Vassallo said, “Would you like something to drink?”

The group rolled out of the casino parking lot in two bulletproof Cadillacs. Sanders was upbeat. It looked like the operation was finally under way. Then he ran out of gas.

This was the cue. The team burst into the room with their hands on holstered pistols, ready to draw.

“I’m with the federal government,” Anderson declared. Technically, he wasn’t lying, since he worked for the post office. “You are Robert L. Buckhannon?”

Buckhannon managed to say yes, and Anderson explained that he was there unofficially to recover money for the victims of certain financial crimes. He said that Vassallo wasn’t supposed to be outside of California and ordered Sanders to handcuff him. Sanders pulled the cuffs off his belt and tried to slap them onto Vassallo in one smooth movement like he’d learned in bodyguard school.

It didn’t work. The cuffs bounced off. Everybody was watching. He tried again, hitting Vassallo’s wrists harder this time. No luck. As tension mounted in the room, Sanders tried a third time, but it wasn’t working.

“You’ve got to be kidding me,” Smartt thought.

Finally, Sanders unlatched each cuff and placed them on Vassallo the slow way. One of the team members then marched Vassallo out of the room.

“What the hell is going on here?” Homan shouted with well-rehearsed indignation as he was also led away.

Anderson turned his attention back to Buckhannon.

“I need to inform you that you can leave anytime you want,” Anderson said, hoping that the phrase was enough to shield them from charges of kidnapping.

Sanders then complimented Buckhannon on his son’s performance at the wrestling match and cautioned him to go easy on the kid.

Buckhannon was terrified. Not only were these people heavily armed, but they appeared to be surveilling his family.

Sanders told him he had to immediately initiate a wire transfer of $872,305, the amount Buckhannon allegedly owed Vassallo’s investors. If Buckhannon cooperated, he’d have no further problems. If he refused, court documents show, Anderson told him that federal agents would harass him and that his business would be ruined.

“You won’t even be able to convince your own mother to invest $10 with you on a corner Kool-Aid stand,” Anderson said, playing the role of lead agent with gusto.

Sanders handed Buckhannon wiring instructions for SJB’s purported account in the UK, and Buckhannon hastily pulled a laptop out of his satchel. He used an open Wi-Fi connection to log in to his bank account and ordered the transfer. When it was done, he showed them the confirmation screen, Sanders recalls.

Anderson and Sanders looked at each other. They didn’t think it would be this easy.

“You’re free to go, then,” Anderson said.

Buckhannon stood up unsteadily and started walking toward the door. Then he paused and said something surprising.

“Can I hire you guys?” he asked.

Three weeks later, Buckhannon wired Sanders $100,000 and asked for help retrieving money that other people owed him, according to court documents. He even wrote a reference letter praising Sanders’ team: “Through their intervention, they allowed me to return monies invested in my company to the rightful owner. In doing so they helped me avoid a long expensive legal battle.”

Word of Sanders’ missions was getting around, and Sanders began to receive impassioned calls and emails from other investors who claimed they had been defrauded. “My group and I are one of those helpless starfish that have been washed up on the beach,” wrote one man. “You may not be able to save them all, but if you throw us back in the ocean, you’ve at least made a difference in the life of one.”

Sanders started to cry when he read it. He wanted to help them all, but at the same time he worried that he was getting too emotional. The more desperate and heartfelt the plea, the more he felt compelled to help, but he couldn’t be sure that everyone was a victim. He started to feel confused.

In the midst of his busy day job, he found himself preparing for new missions. One minute he’d be selling a fiber-optic package to an airport in Southern California, the next he’d be on the phone trying to track down information about a scam artist in Arizona. He didn’t tell anyone at work about his new career, and nobody seemed to notice that he was distracted.

Sanders set out on his last operation on Sunday, March 8, 2009. The targets were David Joiner and Luke Wiseman, two stock traders who had worked for Vassallo. According to court documents, Vassallo accused them of leaving the hedge fund with millions. (Joiner says they left in part because Vassallo refused to submit to an external audit.) According to Sanders, Vassallo could produce paperwork showing only that the pair had taken $378,300. Sanders was sent to collect.

What Sanders didn’t know was that Putnam and Sonovich had already met with the traders. According to Joiner, they had come to his office to solicit an investment with an amazingly successful trader they referred to as Sir Joseph. They explained that SJB could multiply their money in a matter of weeks and that the investment was guaranteed to produce stellar returns. It wasn’t the only time Putnam had helped Sonovich drum up business for SJB, according to interviews and an IRS investigative report. He also arranged pitch meetings with at least two other potential investors. Putnam insists that he thought SJB was real and only wanted to help others recoup their losses by sharing an extraordinary investment opportunity with them.

The traders weren’t buying it. Putnam and Sonovich left without a commitment, and when they were gone the guys laughed at how crazy it sounded.

Putnam and Sonovich, however, weren’t ready to give up on the traders. If they couldn’t get Joiner and Wiseman to willingly invest in SJB, maybe they could get Sanders to help. They told Sanders that the traders had essentially stolen money from Vassallo’s fund when they worked for him, IRS interviews show. It belonged to the investors, they said, and it was time to get it back.

Since Vegas had gone so well, Sanders decided to use the same game plan. Putnam phoned the traders to say that he had a friend who might be interested in investing in their new firm, according to the IRS report. The purported investor was the son of a wealthy window-and-door magnate. It was a ruse—a friend was recruited to play the role of the heir—but the traders agreed to the meeting.

To round out the team, Putnam and his wife invited Cassandra Moore, a family friend, to come to Sacramento to help retrieve the missing investments. Moore, a curvaceous model and actress from Los Angeles, was supposedly adept at online research. The Putnams thought her computer skills might come in handy, but as soon as Sanders and Anderson got a look at her, they decided to cast Moore in her first big role: When they confronted the traders, she would play the part of a mysterious representative of the defrauded. The script called for her to deliver one line: “You have no idea whose money you took.” According to Sanders, her sexiness would convey a sense of “wealth and power” that would further induce the traders to cave. Sanders quickly assigned her a codename: Anastasia Beaverhousen.

To prepare for her part, she modeled a number of different outfits at the Putnams’ house. At one point, she donned a skintight black Bebe pantsuit, prompting an argument among the mission planners. Putnam’s wife felt that the outfit didn’t convey a “professional presence.” Sanders disagreed. It was just right, he insisted.

Moore’s addition to the team caused problems. On their way to the traders’ office, says Smartt, who had returned for another mission, Moore talked about doing a revealing photo shoot at the Playboy Mansion. On one hand, he wanted her to keep talking. On the other hand, they were starting a mission and he needed to focus.

“My job was to keep an eye on things, but I was also keeping an eye on her,” Smartt recalls. “You couldn’t take your eyes off her. Shapely, strong legs. Round butt. She wore these tight-fitting black pants, little diamond earrings. I mean she was dialed in.”

While Smartt monitored Moore’s backside at the staging area a block away, Homan and the friend playing the heir entered the office. Minutes later, Anderson tapped on the office door with his bodyguard badge. When Wiseman opened the door, Anderson, Sanders, Smartt, and Moore barged in.

“We are official people, we are here unofficially, and you are free to leave at any time,” Anderson said, according to the FBI. “But if you leave, you’re leaving in handcuffs.”

Joiner was both terrified and embarrassed. It looked like federal agents were raiding his office while he was in the middle of meeting a prospective client. Sanders and Smartt wore SWAT-style black outfits with stun guns on their hips. Sanders and Anderson had badges hanging around their necks. Joiner asked what this was about.

“My name is Special Agent Robert Johnson, and I am here on behalf of the EIMT investors,” Anderson said, referring to the name of Vassallo’s fund.

Anderson and Sanders looked at Moore. This was her cue to say her one line, but she appeared oblivious. Anderson coughed. There was an awkward pause, and then Sanders handed the traders a sheet of paper with instructions to wire $378,300.16 to Sanders, who would then turn the money over to Putnam.

Wiseman protested that he couldn’t get the money that fast and asked for more time, according to court documents.

“You have no idea whose money you took,” Moore blurted out, surprising everyone.

Smartt was getting nervous. These guys weren’t folding like Buckhannon, and he was pretty sure the difference was Moore.

“We got a damn Playboy Bunny with us,” Smartt thought. “It’s confusing everybody.”

Sanders stepped outside to call Putnam and figure out what to do. After a minute, he returned to say that the traders had 24 hours to return the money. If they didn’t comply, they would be subject to arrest by the federal government.

Joiner said he understood and watched with relief as Sanders’ team walked out. After they were gone, he called his attorney, who promptly informed the FBI.

When special agent Karen Ernst called to ask Sanders to come by the bureau’s office in Sacramento, he figured they were going to congratulate him on all his good work. Maybe they were finally ready to get serious about investigating Vassallo’s fraud and wanted his help. He walked through the doors carrying a box of doughnuts and a stack of files that might aid their inquiry.

Instead, a group of FBI agents pushed him against a wall, pulled his jacket halfway down his back to immobilize his arms, and shackled him.

“I came here to help you guys!” he shouted.

An agent read him his rights and told him that he was charged with extortion and impersonating a federal officer.

Back at his office, his colleagues were dumbfounded.

“It came out of left field,” says Jim Morales, Sanders’ boss. “He’s a really good fiber-optic cable salesman—one of the best. That’s what we know him as, not a vigilante.”

But Morales could also understand how Sanders got in trouble. “This is a guy who will go to an ATM, withdraw money, and give it all to a homeless person,” he says. “He’s got a big heart.”

Even Joiner has sympathy for Sanders. “I can’t really fault the guy, because he may have thought he was working in the interest of the people who lost their money,” Joiner says.

Putnam now sells Ferrari parts out of a warehouse in an industrial part of Sacramento. He says he lost everything: SJB never sent any money, Putnam’s real-estate business collapsed, and his marriage fell apart. He works in a grimy room surrounded by pieces of wrecked Ferraris, a stark reminder of luxury lost.

He’s sickened at the memory of what happened, and the blame, he argues, lies in part with Sanders. “He told us he researched SJB and that it all checked out,” Putnam says. “He convinced us.”

“He never convinced me,” Tim Homan counters. Despite the losses, Homan stuck with his old friend and now co-owns the parts business. He sits at a desk near Putnam and says that Sanders somehow had to be complicit in the SJB investment.

“He and his big fat secret-agent friend tried to make us believe that SJB was real,” Homan says.

Anderson now says that Sanders misrepresented some things. For instance, he says Sanders invented the whole convoluted story of Anderson’s affiliation with a secret post office department to impress Putnam. Anderson admits that he went along with it because it was fun, but in reality his “secret” powers boiled down to a $50 online public records search on Sir Joseph Birch.

What he says he found wasn’t very convincing: SJB’s accounts traced to the address of a small alpaca farm in southern England. Sanders, he says, turned that into an elaborate story about the man’s wealth and penchant for horse racing.

According to Anderson, Sanders was so excited by the adventure that he lost sight of what was real. He started to exaggerate the capabilities of his team, in part because he simply wanted to believe that he was something other than a heartbroken widower. And when Sanders’ vision of vigilante justice collided with Putnam’s desperate willingness to believe anything, the combination blossomed into a full-fledged fantasy world.

It helped that Sanders was a convincing salesman—it was his day job after all. Anderson says Sanders was so good, he could convince anybody of anything, even that a 365-pound guy was a dashing spy.

“Let me put it this way,” Anderson says. “If you came home early from work and Dave was screwing your wife, by the time he got done talking to you, not only would you be thanking him, he’d ask you to leave for 45 minutes so he could finish and you’d do it with a smile on your face.”

Back in Vegas, Buckhannon certainly felt screwed. Sanders, he says, continued to harass him after their meeting in Vegas. Buckhannon insists that he never actually wanted to hire Sanders—he just felt that if he sent $100,000 and offered to hire the team, Sanders would leave him alone. He says he never notified the police because he was scared.

“They threatened my family,” Buckhannon says. “It was straight up extortion.”

Sanders says he did no such thing, arguing that Buckhannon didn’t need to write such a detailed reference letter. And in regard to Anderson, Sanders fires back that his friend never allowed anybody to speak for him. Anderson always wanted to be in control and came up with a secret identity to show off.

In March 2009, the federal government filed civil and criminal complaints against Vassallo, charging him with multiple counts of fraud, conspiracy, money laundering, and securities violations. The court appointed Stephen Anderson, a retired banker, to act as a receiver to recover funds for investors, and he soon went after Buckhannon’s firm. The receiver demanded that the company return money that Vassallo had invested, but a few days before an evidentiary hearing was to be held before a federal magistrate judge, the firm hastily declared bankruptcy and hasn’t repaid any of the money. The receiver has also investigated the stock traders Joiner and Wiseman, though his findings have yet to be released.

The trustee was, however, able to recover the $1.2 million that Sanders went after on his first mission. An attorney representing other investors managed to tie the money up, and the authorities later seized the funds. Sanders still claims this as a victory and says that between the $1.2 million and the $872,305 that Buckhannon wired, he helped retrieve more than $2 million for investors.

It’s a hard argument to make. The $872,305 disappeared into the purported Sir Joseph Birch fund and has yet to be recovered. And if Vassallo had been able to get his hands on the money from Urata, who knows where that cash would have ended up? So in some respects, it’s a good thing that Sanders wasn’t more successful.

Putnam says now he doesn’t know what side Sanders was on, though the same might be said of Putnam, whose defense is that he was overwhelmed. Nobody seemed to know what was going on for certain, but one thing eventually became clear, Putnam says: “The easiest people in the world to Ponzi are the ones who just got Ponzi’d.”

Judge Mendez stared at Sanders. The federal courtroom in downtown Sacramento was quiet. After months of wrangling with Sanders’ lawyers, the assistant US attorney dropped the charge of extortion, and Sanders agreed to plead guilty to conspiracy to impersonate an officer. 1 Now Mendez had to decide whether to accept the plea and, if so, what the sentence should be.

The judge struggled with the decision. Sanders’ bank records showed no indication that he had profited substantially from his actions. In fact, Sanders paid his team members thousands, sending a total of $36,100 to Anderson alone. He even gave money to the Putnams. Sanders said it was because they couldn’t pay their bills and he felt bad for them.

In many respects, Sanders looked like a sucker. In late 2009, Will Sassman, the insurance agent who had introduced him to Putnam, ended up running off with $127,000 of the life insurance payout from the death of Sanders’ wife. Sassman was eventually convicted of operating his own Ponzi scheme and sentenced to 18 years in prison. Sanders never got the money back. He was, it seemed, surrounded by scams but didn’t realize it.

At the very least, the operations helped Sanders fill the void left after the death of his wife. For a couple of months in 2009, Sanders felt like everybody’s hero, but he didn’t mention that to the judge. He didn’t talk about how much fun it was to run the Vegas operation or how exciting it was to put together a recovery team.

Instead, he said he’d never do it again.

After a moment of deliberation, Mendez pronounced his sentence: He imposed a fine of $100 and two years’ probation, including 180 days of “home detention.” Sanders would be allowed to go to work and take his kids to school, but not much more.

Apparently, the judge concluded that Sanders was just a fiber-optic cable salesman who’d gone astray.

Craig Anderson also pled guilty to conspiracy to impersonate an officer. 2Sean Smartt and Cassandra Moore pled guilty to possessing false documents. They all received sentences similar to Sanders’. Anthony Vassallo is awaiting trial. The receiver is attempting to recoup money sent to SJB. Dave Sanders continues to sell fiber-optic cable in the western US.

Joshua Davis (jd@joshuadavis.net) wrote about entrepreneur Elon Musk in issue 18.10.

Note 1. Correction appended [5 p.m. EST/Nov. 30, 2011]: Dave Sanders pled guilty to conspiracy to impersonate an officer, not impersonating an officer as previously reported.

Note 2. Correction appended [5 p.m. EST/Nov. 30, 2011]: Craig Anderson pled guilty to conspiracy to impersonate an officer, not impersonating an officer as previously reported.