Kathy Bazoian Phelps
Senior Counsel in Ponzi Scheme Litigation
and Bankruptcy Matters

Kathy is a senior business trial attorney with more than 27 years experience prosecuting and defending claims for clients involved in Ponzi scheme matters and in bankruptcy proceedings. Kathy’s practice includes recovering assets for clients in complex fraud cases under standard fee and alternative fee arrangements. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring an expert on fraud or Ponzi schemes.

Kathy’s Clients in Ponzi Scheme Cases and Bankruptcy Matters
Equity Receivers
Bankruptcy Trustees
High Net Worth Investors
Debtors in Bankruptcy
Secured and Unsecured Creditors

Monday, September 30, 2019

September 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for September 2019. The reported stories reflect at least 17 new Ponzi schemes worldwide; at least 4 guilty pleas, over 52 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 52 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
   
Joseph S. Anile II has agreed to plead guilty in connection with a scheme run through the Oasis International Group Ltd. Anile is the co-founder of Oasis, which ran a $75 million trading scheme that defrauded 700 investors. The scheme promised investors a minimum of 12% per year returns and was shut down by the CFTC in April. Other defendants named in the CFTC case are Oasis Management, LLC, Satellite Holdings Company, Michael J. DaCorta, Raymond P. Montie, III, Francisco "Frank" L. Duran, and John J. Haas.

Jan Douglas Atlas was accused of aiding the 1 Global Capital LLC Ponzi scheme. Meanwhile, a liquidation plan was approved in 1 Global’s bankruptcy case in Florida. The company was involved in a $330 million Ponzi scheme.

Kevin Brody, 56, of Pennsylvania, was sentenced to more than 2 years in prison for a scheme that defrauded at least 50 people out of more than $12 million. The scheme was run with co-defendant Matthew Eckstein through Conmac Funding Corp.

Hal Herring Brown, 49, of North Carolina, was charged in connection with an alleged $10 million Ponzi scheme run through “Oodles Company.” Brown claimed that his company was selling intellectual property to large companies like Disney and Apple. He claimed that he owned, produced and distributed family entertainment shows and movies worth hundreds of millions of dollars. The FBI alleges that Brown did not sell any shows or entertainment at all.

Brian R. Callahan, 50, was again denied bail when the Second Circuit affirmed the denial of bail to the former investment fund manager. Callahan was convicted in a $96 million Ponzi scheme and is seeking to overturn his sentence.

Jin K. Chung, 56, a South Korean citizen, is due for sentencing in connection with a scheme run through SNC Asset Management, Inc. that targeted Korean-Americans. His co-conspirator, Peter C. Son, 47, is currently serving a 15-year sentence in connection with their role in a scheme that caused more than 400 victims to lose $60,300,000. The scheme promised returns of up to 36% per year.

Natalie Cochran, 38, was arrested on charges that she ran a Ponzi scheme with her late husband, Michael Cochran. Cochran allegedly defrauded 11 people out of more than $2.5 million. The alleged scheme was run through Tactical Solutions Group and Technology Management Systems, which were government contractors. Cochran filed bankruptcy following the fraud charges.

David L. Downey, 50, of Indiana, pleaded guilty to running a scheme that caused $9.4 million in losses to clients of his payroll service business. Downey ran his payroll service business through Time Payroll, bringing in about $20 million but only returning $11 million of those funds to the IRS for employment taxes.

Gary Dragul and his businesses, GDA Real Estate Services and GDA Real Estate Management, were labeled as a Ponzi scheme by the receiver assigned to administering the assets. The accounting reveals that Dragul used funds to pay gambling debts of almost $9 million, he paid off more than $8.3 million in charges on his wife’s credit cards, and he bought a condo for his son.

Joseph Esposito, 43, and Salvatore Esposito, 47, two Florida brothers, pleaded guilty to charges in connection with an alleged $7.9 million Ponzi scheme run through U.S. Coin Bullion, LLC, a precious metals investment firm. They produced false account statements for customers who bought metals and stored them at U.S. Coin Bullion for “safekeeping.” More than 100 customers were defrauded and believed their purchased precious metals were safely held by U.S. Coin.

Zvi Feiner, 49, a Chicago rabbi, and his associate, Erez Baver, 39, settled charges with the SEC relating to an alleged $11.5 million nursing home scheme. Feiner, Baver and Feiner’s firm, FNR Healthcare, LLC, were accused of defrauding 62 or more investors in connection with the purchase of nursing homes and assisted-living facilities. Investors were promised returns around 15% from the operations of specific facilities. Baver’s company, Cedarbrook Management, Inc., and Feiner’s family investment company, Netzach Investments, were named as relief defendants.

Renwick Haddow entered a consent judgment with the SEC in connection with the charges that he ran a Ponzi scheme through Bar Works and Bitcoin Store, Inc.

Omar Khan of New York was sued by investors accusing him of running a fraudulent Ponzi scheme. Khan, an ex-NYPD cop and the head of Sensei International, is a business consultant. He allegedly defrauded investors through the International Business & Wine Society by luring investors to invest in his wine and dinner events businesses. Khan denies the allegations.

Scott A. Kohn, 65, was arrested in connection with criminal charges pending in South Carolina on charges that he and his partners ran a $1 billion Ponzi scheme through Future Income Payments LLC. The scheme targeted people receiving pensions and provided cash advances to veterans and others that would then be repaid by their pensions. The advances had interest rates at 240%, and the investors loaning the money were promised back 8%. Authorities believe that 2,600 people invested in Future Income Payments and lost more than $451 million. Kohn, of California, had been on the run since March.

Glenn C. Mueller, 72, was accused by the SEC of running a scheme through his company, Northridge Holdings. Mueller solicited investors to earn returns of 3% to 12% for investments in the purchase and renovation of apartment buildings. The scheme defrauded more than 300 investors out of at least $41.6 million.

Jack Nissen, 47, was sentenced to 2 years and 3 months in prison in connection with a $71 million Ponzi scheme run through National Event Co. Nissen had misrepresented that he would purchase and resell tickets to popular events such as the Broadway musical “Hamilton.” Craig Carton was sentenced to 3½ years in connection with the scheme.

Carol Ann Pedersen, 66, was sentenced to 97 months in prison. Pedersen, a Long Beach accountant, embezzled more than $27 million from clients who thought she was investing their money in low-risk securities. At least 56 people invested more than $40 million.

Stephen Condon Peters, 46, of North Carolina, was sentenced to 40 years in prison and ordered to pay back $15 million, for the scheme he ran through VisionQuest Wealth Management. Peters promised returns of 8% to 9% on low-risk investments that involved the sale of promissory notes.

Rodney Scott Phelps, 58, of Kentucky (no relation to the author), was convicted of running a Ponzi scheme that defrauded dozens of investors out of more than $2.2 million through their company, Maverick Asset Management. Phelps ran the scheme with Jason T. Castenir, in which they promised investors returns from an oil concession from the government of Belize. They promised investors royalties which were to be backed by a supposed multi-million trust, the Phelps Family Trust. The two also ran a scheme in which 3 victims were enticed to trade on commodities markets, and a third scheme in which they promised returns from the purchase of a casino in Mississippi. Castenir previously pleaded guilty.

Mark Ray, 59, of Colorado, was sued by the SEC on allegations that he was operating a cattle-flipping Ponzi scheme. Ray ran the scheme through multiple businesses including Custom Consulting and Product Services, LLC, RM Farm and Livestock, LLC, MR Cattle Production Services, LLC, Sunshine Enterprises, Universal Herbs, LLC, and DBC Limited, LLC. Ray promised returns of 10% to 20% over short periods of time from investors in his cattle-trading and marijuana businesses. Co-defendants Reva Stachniw, 67, and Ron Throgmartin, 55, are alleged to have substantially assisted Ray in the fraudulent scheme. The SEC alleges that, at the height of the scheme, more than $140 million per month was moving through the bank accounts controlled by Ray and Stachniw.

Matthew Taylor, 42, of Florida was arrested on charges that he was running a $1.5 million Ponzi scheme through his business, Savage Yachts, LLC. Taylor was a boat broker who was required to place deposits into an escrow account, but instead Taylor treated the account as a business operating and personal checking account. Authorities allege that Taylor operated the business as a Ponzi scheme, taking money from investors and promising a high return.

John F. Thomas, 74, and Thomas Becker, 72, were accused by the SEC of running a $29.5 million Ponzi scheme. The scheme allegedly defrauded more than 600 investors to put money in pooled investor funds to bet on sporting events. They used a network of at least 150 brokers and agents to solicit the investments and used the following six companies as part of the scheme:  Einstein Sports Advisory LLC, QSA LLC, Vegas Basketball Club LLC, Vegas Football Club LLC, Wellington Sports Club LLC, and Welscorp Inc.

Michael S. Young, Michael S. Stewart, Bryant E. Sewall, and Mediatrix Capital Inc. were the subject of an SEC action seeking an injunction and asset freeze to stop an allegedly fraudulent international trading program involving over $125 million. Investors were told that their money would be invested in an algorithmic trading strategy that had returned more than 1,600% since December 2013. The defendants diverted more than $35 million for their personal use and made “Ponzi-like” payments to investors. Mediatrix was awarded the Top Global Asset Manager Award in 2018.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Ralan Group, a developer, collapsed leaving 2,300 investors with almost $300 million in losses. Ralan asked homebuyers to release their deposits as loans to the company in return for 15% annual interest. The loans were not secured so the investors lost their deposits. Most of the investors targeted by the company are Chinese-Australians.

Canada

Steven Nowack, 56, was found guilty, sentenced to 9 years in prison, and ordered to pay $14.5 million in restitution in connection with a $20 million foreign exchange trading Ponzi scheme. Nowack had claimed that he had developed a “proprietary methodology” in which he would play on “dichotomies in the market” as between Asian, European and American investors.

England

Police are investigating Around The World Travel, owned by Hayley King, for running an alleged Ponzi scheme. Customers booked travel packages and substantially lower prices and would then learn that no rooms were available when they arrived at their hotels. It is alleged that newer customers who thought they were getting discounts were actually paying for other people’s flights and hotels.

India

Sanjeev Kumar, 37, was arrested on charges that he defrauded more than 500 people.

Sunil Kumar Choudhary, 36, Rijesh P, 36, and Rakesh K S, 41 were arrested on allegations that they were running a fraud through a funding firm named WAM Companies (OPC) Pvt Ltd
 
Garba Iliyasu and Umar Iliyasu were arrested on charges that they were running a scheme under the name, MGM Global Market. Mohammed Garba Iliyasu who is now on the run was the Managing Director of the company. Two of his brothers, Abubakar Garba Iliyasu and Ibrahim Garba Iliyasu, also part of the scheme, are equally on the run.

Charges have been brought against 8 people involved in an alleged Ponzi scheme run through Gold Express Pvt. Ltd., including directors Maajid Saliya and Amin Malpara. Investors were promised returns as high as 48% to 60% per year.

Assets of EBIZ.COM Pvt Ltd. and Pawan Malhan and Anita Malhan were attached on allegations that they were running a Ponzi scheme. Authorities allege that they defrauded investors with promises of quick returns from the sale of worthless products like free computer education packages.

Vikram Singh Rajput, 39, was arrested in connection with an alleged scheme run through ADG.

Asirbad Behera, the former honorary secretary of Odisha Cricket Association, was arrested on charges that he assisted Artha Tatwa Group in running a Ponzi scheme by boosting its credibility.

S. Sathiskkumar, 38, and S. Gunavathi, 36, were arrested on allegations that they were running a Ponzi scheme through an investment firm named Dream Makers Global Private Limited.

Mauritius

Authorities issues an investor alert regarding Cloud Token Mauritius and Cloud Token Indian Ocean and Africa, a cryptocurrency Ponzi scheme advertised on social media.

New Zealand

Tom Tanaka aka Masatomo Ashikaga, died, giving rise to claims of victims that he had been running a $45 million Ponzi scheme through East Winds Group. Tanaka had promised investors 8% returns on their investments into supposedly profitable foreign exchange trading businesses.

Nigeria

Operators of Bluekey Investment Club were arrested on allegations that they were running a Ponzi scheme promising 10% per week returns.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

Defendant law firm in a case brought by the receiver of Madison Timber, run by Arthur Lamar Adams, would not force the receiver into arbitration. A Mississippi federal judge held that the contract between the Ponzi scheme and the law firm was ambiguous as to the parties’ intent on how to resolve disputes.
 
FINRA arbitrators ordered UBS Financial Services to pay $555,000 to an elderly customer who claims she was defrauded by a former employee of UBS, William A. Hightower. Hightower had been accused of taking funds from clients through his company, Hightower Capital, and invested them in a Ponzi scheme run through Isospec Technologies and Reproductive Research Technologies. A 2018 indictment against Hightower alleged that Hightower took $10 million from clients to invest in a Ponzi scheme.

Saturday, August 31, 2019

August 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for August 2019. The reported stories reflect at least 9 new Ponzi schemes worldwide; at least 2 guilty pleas, over 97 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Deborah Ball, of Massachusetts, pleaded not guilty to charges that she ran a $100,000 scheme. Prosecutors allege that she used her position as a tax collector to embezzle real estate and excise taxes that were paid in cash. She then applied portions of check payments made by other taxpayers to try to cover the losses.

Dawn J. Bennett, 56, of Maryland, was sentenced to 20 years in prison for running a Ponzi scheme through her companies, DJB Holdings and DJBennett.com. Bennett was a financial advisor and radio personality on the show, Financial Myth Busting, who told investors that her company would become a sportswear empire that would rival Under Armour. More than $20 million was received from 46 investors. Bennett instead used the funds for her personal expenses and lavish lifestyle, including two penthouses in the wealthy suburb of Chevy Chase, a box suite at the Dallas Cowboys’ stadium worth about $500,000, and payment for priests in India to “perform religious ceremonies to ward off federal investigators.” Bennett has appealed the sentence.

Larry A. Carr, 84, of Florida, was sentenced to 4 years in prison and ordered to pay $8 million in restitution for orchestrating an $8.2 million Ponzi scheme. Carr ran the scheme through his companies, Cita Trust N.A. Inc., Cita Trust Company N.A., Cita Trust Company Ltd., and Cita Trust Company A.G., promising returns from the sale of securities.

Carl Chen, 75, of Delaware, was sentenced to 51 months in prison for his role in defrauding investors out of more than $3 million. Chen owned Chenmex Properties , Inc. and was a part owner of Re/Max Sunvest Realty Co. He solicited $6.6 million from investors and promised annual returns of 10% to 15%.

Thomas Dluca, Louis Gatto, Eric Pinkston, and Scott Chandler settled with the FTC in connection with the claims brought by the FTC in 2018 against the individuals, Bitcoin Funding Team and My7Network. They promoted cryptocurrency programs through websites, YouTube videos, social media and conference calls, promising investors as much as $80,000 per month on an initial investment of $100.

Shayeh Dov, 49, of Florida, was sentenced to 7 years, 3 months in prison and ordered to pay about $3 million in restitution in connection with a Ponzi scheme that targeted a South Florida Jewish community. More than 30 people invested with Dov. Dov sold investors fraudulent discounted real estate notes that he and his firms did not actually own.  The losses in the scheme were approximately $3 million. Dov used the funds on gambling, renting luxury cars and paying for trips to the Bahamas, Israel and New York. Dov pleaded guilty earlier this year.

David L. Downey, 50, of Indianapolis, pleaded guilty to charges stemming from an alleged $9.4 million Ponzi scheme. Downey ran a payroll service under the name Time Payroll and misdirected clients’ funds to his personal accounts. Downey misapplied about $20 million but returned about $11 million to the IRS for employment taxes.

Albert “Alex” Golant, of Wisconsin, was sentenced to 10 years and 6 months in prison for his role in a Ponzi scheme that obtained more than $30 million from at least 40 different victims. The scheme was run through Timeless Auto Group and involved the purchase of luxury vehicles in the U.S. and then selling them at a profit to foreign buyers overseas, usually in China. Golant sometimes did not purchase the vehicles and in other instances sold the same vehicle to multiple clients.

Khemraj Dave Hardat, 50, was sentenced to 7 years and 3 months for running a $7.5 million Ponzi scheme. Hardat held himself out as a successful investor and businessman in the performance beverage and water-bottling industries.

Tytus W. Harkins, 37, of Montana and his company, Hartman Wright Group LLC, were sued by the SEC in Colorado alleging that they were engaged in fraud. Harkins told investors that he would find distressed or undervalued mobile home parks, purchase them using investor money, make capital improvements, and then sell them for a profit. The scheme raised over $8 million and promised investors returns of 6 -8% per year. 

Tanmaya Kabra, 25, of New Jersey, was arrested on charges that he defrauded at least 4 investors out of more than $700,000 in an alleged Ponzi scheme. Kabra represented that he was an entrepreneur, venture capitalist and investor in start-up companies and he promised investors high rates of return through his companies, Vanguard Ventures Group and LaunchByte Ventures LLC. Kabra used the funds to pay his credit card debt and to buy a boat.

Terry Wayne Kelly Jr. of Mississippi, and Kelly Management LLC were charged by the SEC in connection with their role in selling promissory notes for the Madison Timber Properties LLC Ponzi scheme.

Thomas Lanzana, 51, of South Carolina, was indicted on allegations that he defrauded about 45 investors in a phony foreign currency Ponzi scheme involving $1.1 million. The scheme was run through Blackbox Purse (Unique Forex).  Lanzana allegedly posted bogus monthly account statements showing balances for forex trading accounts that didn’t exist. The CFTC had initiated a case against Lanzana in 2017.

Bradley Mascho, 53, was sentenced to 2½ years in prison for conspiracy related to the $20 million Ponzi scheme run by Dawn J. Bennett at Bennett Group Financial Services LLC. Bennett and Mascho solicited investors into a scheme run through DJB Holdings, offering them 15% returns.

Hector May, 78, of New York, was sentenced to 13 years in prison and ordered to pay $8.4 million in restitution in connection with a Ponzi scheme that defrauded 15 investors. May, the former president of Executive Compensation Planners, promised investors that he would use their money to purchase bonds and other investments on their behalf but instead used the money for personal and business expenses. May pleaded guilty last year to stealing $11.5 million from investors. May’s daughter, Vania May Bell, 54, has been named as a co-conspirator.

Robert Glen Mouritsen, 72, of Utah, had his hearing delayed in connection with an alleged $1.5 million Ponzi scheme. Mouritsen is a former stake president in The Church of Jesus Christ Latter-day Saints and is accused of cheating follow church members. 

Patrick O’Connor, 61, was sentenced to 7 years in prison in connection with a Ponzi scheme run through Madison Financial Services. O’Connor defrauded 6 investors out of about $10 million by represented he would put their funds into a TradeStation online brokerage account, promising average annual returns of 2% per month. O’Connor plead guilty to the scheme earlier in the year 

Robert Shapiro, 61, of California, pleaded guilty to charges that he orchestrated a $1.3 billion Ponzi scheme through Woodbridge Group of Companies, LLC. Woodbridge promised investors returns on investments in real estate loans. The scheme defrauded more than 9,000 victims, many of them senior citizens. Shapiro admitted that he misappropriated between $25 million and $95 million of investor funds. Shapiro had accumulated, and then lost to forfeiture, artworks by Pablo Picasso, Alberto Giacometti, Marc Chagall, and Pierre-August Renoir; 603 bottles of wine; numerous pieces of luxury jewelry; and a 1969 Mercury convertible. Two alleged co-conspirators, Dane Roseman and Ivan Acevedo, are scheduled for trial next year.

Brenda A. Smith, 59, was arrested and charged in connection with a $63 million Ponzi scheme. Smith ran a network of investment companies that included Broad Reach Capital, L.P., Broad Reach Partners, and Bristol Advisors, LLC. She solicited more than $105 million from high net worth individuals and promised 30% returns. The SEC also filed a lawsuit against Smith and her entities.

Troy Wragg, 37, of Philadelphia, was sentenced to 22 years in prison and order to pay $54 million in restitution in connection with the Ponzi scheme run through Mantria Corp. The scheme defrauded nearly 500 investors and promised returns of 50% or better from technology that would supposedly turn household waste into power – “trash for cash.” Investments came through Wragg’s co-defendant Wade McKelvy, who operated unlicensed investment clubs. McKelvey was convicted but has not yet been sentenced. Amanda Korr, 36, pleaded guilty to fraud in the green energy scheme and is serving a 30-month sentence.

INTERNATIONAL PONZI SCHEME NEWS 

China

The key suspects in the PlusToken scheme that solicited $3 billion from investors in a cryptocurrency scheme have been detained. The scheme allegedly defrauded 10 million investors. Reports state that the company might have been liquidating portions of the $3.5 billion in cryptocurrency via various crypto exchanges.

England

Richard Rufus, 44, was charged with running a Ponzi-style scheme that defrauded about 100 investors. Investors lost almost £9 million.

India

Dhavel Mavani was arrested for promoting a Ponzi scheme. Mavani developed Bitconnect’s website and was hired in 2017 by the head of Bitcoinnect in Asia to build a website for the $3.2 billion cryptocurrency scheme. 

Three additional directors, Harish Kumar, 43, Rajesh Singh, 39, Vishal Kumar, 35,  were arrested in connection with the Bike Bot taxi service scheme. So far 11 officials, including Sanjay Bhati, have been arrested. Bike Bot is a multi-level marketing scheme run by the Garvit Innovative Promoters Limited.

Indian police arrested Australian citizen, Harpreet Singh Sahni, in connection with an alleged crypto Ponzi scheme that defrauded about 1,500 investors out of $14 million. Sahni set up Plus Gold Union Coin through which the scheme was run. Three agents, Brijesh Raikwar, Seema Raikwar, and Rupesh Rai, were arrested earlier this year. 

Suraj Singh, 24, was arrested on allegations that he was running a Ponzi scheme related to renting cars. The scheme allegedly defrauded 50 investors involving more than 100 high end cars.

Israel

Ramon Kadri, a Mexican citizen residing in Israel, was indicted on charges that he ran a NIS 3 million Ponzi scheme.

Nigeria

Operators of the alleged Ponzi scheme run through Bluekey Investment Club have been arrested. The company was registered as a software development and general contracting firm but then started in engaging in an interest-yielding Ponzi scheme with promised returns of 10% weekly over 6 months.

South Africa

Authorities warned that Coin It Trading is “showing hallmarks of a Ponzi scheme.” Investors were promised as much as 200% on their investment in 3 years. It’s sister company, Commex Minerals, is also suspected to be operating a fraudulent scheme. Authorities have identified Michael Andrew Anthony de Beer as the director of Coin It and Patricia Ursula de Beer, who is allegedly Michael de Beer’s former wife, as a director of Commex Minerals.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

Investors in the MRI International Inc. Ponzi scheme reached a settlement for $441 million in connection with the $1.5 billion medical debt scheme.