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

Kathy is a senior business trial attorney with more than 25 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

Sunday, September 30, 2018

September 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for September 2018. The reported stories reflect at least 8 new Ponzi schemes worldwide; about 38 years of newly imposed sentences for people involved in Ponzi schemes; 4 guilty pleas or convictions, and an average age of approximately 47 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. 

Stanley Bates was sentenced to 15 years in prison in connection with the Ponzi scheme run through FourWinds Logistics with co-conspirator state senator Carlos Uresti. Bates had previously pleaded guilty. Uresti was sentenced to 12 years in prison earlier in the year, and Gary Cain was sentenced to 5 years in prison. All three men were ordered to pay back their victims more than $6.3 million.

Bitconnect, Magma Foundation and Pension Rewards Platform were the subject of cease and desist orders sought by the North Dakota Securities Commissioner. The action is part of an initiative known as “Operation Crypto Sweep,” which is a multi-jurisdiction investigation and implementation effort involving about forty U.S. and Canadian security regulators. Bitconnect has previously received such orders from regulatory authorities in Colorado, North Carolina and Texas.

Wade T. Caughman, 51, of South Carolina, pleaded guilty to charges that he ran a Ponzi scheme. Caughman told investors that he had lucrative auto sales leads from local credit unions and that investors would make $800 in interest for money loaned to finance the purchase of cars that were sold to credit union members. He created fictitious auto loan and purchase paperwork to persuade investors.

Homero Joshua Garza, 33, the former CEO of GAW Miners, was sentenced to 21 months in prison and ordered to pay $9.2 million in restitution in connection with the cryptocurrency scheme involving PayCoin. GAW Miners had guaranteed investors a $20 floor price for PayCoin, but the highest price paid was $15.92. GAW, short for “Geniuses at Work,” also ran its own cloud-based wallet service (Paybase), cloud-based mining service (ZenMiner), and online discussion board (HashTalk).

Jeffrey Goldman, 52, and Christopher Eikenberry, 49, of Michigan, were charged on allegations that they were running a day-trading scheme through Nonko Trading that defrauded customers out of at least $1.4 million. Nonko targeting inexperienced traders and provided them with accounts that merely simulate actual trading. The customers’ deposits were used for personal expenses and to make Ponzi payments. The SEC had previously charged four other individuals and two entities in connection with the fraud. Naris Chamroonrat and Adam Plumer have settled the charges. Criminal charges against the other two, Yaniv Avnon and Ran Armon, are pending.

James E. Hocker, 48, was criminally charged on allegations that he was running a Ponzi scheme involving about $1.5 million. He had previously been sued by the SEC in connection with the scheme run through James E. Hocker & Associates involving the sale of insurance products and annuities. Hocker allegedly defrauded about 25 individuals and promised them returns of between 10% and 30%.

Claud R. “Rick” Koerber was found guilty on charges relating to one of the biggest Ponzi schemes in Utah history. Koerber raised almost $100 million in connection with the fraudulent real estate scheme that he ran through his companies, Founders Capital, Franklin Squires Investments and Franklin Squires Cos

Nemelee Liwanag Jiao, 47, was sentenced to 8 years in prison for running a Ponzi scheme that defrauded 39 investors out of about $1.9 million. The scheme victimized Filipino, African, Indian and Korean fellow medical workers. Jiao sent funds to the Philippines and bought luxury items for herself.

Kevin B. Merrill, 53, Jay B. Ledford, 54, and Cameron R. Jeziersky, 28, were indicted on charges relating to an alleged $364 million Ponzi scheme in Maryland that defrauded at least 400 victims. The three individuals invited investors to buy consumer debt portfolios from which they would profit from debt payments and flipping of the portfolios. The three men and their five companies, including Global Credit Recovery LLC, Delmarva Capital LLC and Rhino Capital Holdings LLC, were also named in a lawsuit filed by the SEC. Prosecutors allege that about $197 million was repaid to investors and about $148 million is still owed to investors.

James Bernard Moore, 57, was arrested in connection with a $17 million Ponzi scheme. Moore and his company, Universal Voicetech, Inc., were also named in a lawsuit filed by the SEC accusing them of selling fraudulent investments. The scheme related to misconduct by Renwick Haddow, 50, and his company Bar Works, Inc. Moore and his network of sales agents raised over $5 million from at least 100 investors. 

LaVerne “Vern” Moter, 50, of Colorado pleaded guilty to charges that he was running a $2.6 million real estate Ponzi scheme. Moter was supposedly buying undeveloped land in Arizona through his company, American Undeveloped Real Estate Fund. Investors were promised interest between 5% and 12% per year.

Jonny Ngo, Donato “Mick” Baca Jr., and NL Technology, LLC were sued by the SEC on allegations that they were running a Ponzi scheme. One day later, Ngo and NL Technology entered into a consent judgment agreeing to pay back $4.5 million, without admitting or denying the allegations in the complaint. The SEC alleged classic Ponzi scheme factors, such as false promises that funds would be used in a wholesale electronics import business; false promises of security; exorbitant returns for short periods of time; no meaningful legitimate business activity; and the use of new money coming in to pay prior investors and themselves, rather than for the alleged business. The scheme defrauded over 350 investors and had raised $61 million by promising returns of 5% to 15% every two weeks to 45 days.

Perry Santillo, 38, was previously charged by the SEC with running a Ponzi scheme that defrauded 637 investors and raised $102 million. Santillo, along with Christopher Parris, 38, Paul Larocco, and John Piccarreto, are accused of running the fraudulent scheme. The FBI is actively interviewing victims.

Michael Scronic, 46, of New York, was sentenced to 8 years in prison and ordered to pay more than $22 million in restitution in connection with a Ponzi scheme that defrauded 45 people out of $22 million. Investors were promised returns in the Scronic Macro Fund. Scronic had previously pleaded admitted to the scheme.

Mark S. Scott, a former partner at Lock Lorde and founder of MSS International Consultants Ltd., a private equity fund headquartered in the British Virgin Islands, was arrested and pleaded not guilty to charges that he helped launder $400 million in connection with an international cryptocurrency Ponzi scheme known as OneCoin.

Roger Dale Williams, a preacher in Kentucky, was sentenced to 63 months in prison and ordered to pay about $1.4 million in restitution after pleading guilty to running a fraudulent investment scheme that netted him $2 million. The scheme was run through Dash Holdings and more than 50 people were defrauded. Williams offered investments in stock purchases, start-ups, and bonds, and he provided investors with false IRS forms.

Michael Wright, 42, pleaded guilty to charges that he, along with co-defendant Craig Carton, ran a ticket Ponzi scheme. They were accused of soliciting investors to fund a business of buying and reselling blocks of tickets to music, entertainment and sporting events. Joseph Meli is currently serving 6½ years in prison for the scheme. Carton has pleaded not guilty.

INTERNATIONAL PONZI SCHEME NEWS 

China

Ten people were sentenced in connection with an $8 billion Ponzi scheme. Xu Qin, a founder of Zhongjin Capital, was given a life sentence, and nine others were given sentences ranging from five to 12 years. 

India

Prakash Uttekar, 58, and Venkatraman Natrajan, 60, were arrested in connection with the Royal Twinkle Star Club scheme. The company’s managing director, Omprakash Goenka, was arrested earlier this year. About 18,000 investors are believed to have been defrauded.

Vivek Bhardwaj, the brother of Gain Bitcoin founder Amit Bhardwaj, was brought in for questioning about the scheme. 

Authorities in Arizona and Illinois wrote to India’s Criminal Investigation Department seeking assistance in recovering laundered assets for victims in connection with the Bitconnect cryptocurrency scheme. The scheme is believed to have defrauded investors out of $5.66 billion by promising them 800% returns per annum. Indian authorities are investigating whether they have authority to seize assets.

Nigeria

Micheno Multipurpose Cooperative Society is reportedly running a Ponzi scheme and has stopped paying investors. 

Philippines

Marcelino Ramojal, 51, and his son, Tishiri, 28, were arrested in connection with an alleged Ponzi scheme run through I-SURE and Maximum Care Solutions. Authorities are still looking for Marcelino’s wife, Flordefe, and another son, Cliff. 

Russia

Authorities found that a group of companies operating under the name Cashberry were running a Ponzi scheme.

South Africa

Jaco Jordan, 52, was charged on allegations that he ran a Ponzi scheme that defrauded about 120 victims by convincing them to invest half of their pension money into his scheme. He promised them they would double their money through their investments.

Thailand

Victims of an alleged Ponzi scheme run by Khon Kaen, 46, sought to have her arrested. The scheme involved 300 investors who were promised large returns but were cheated out of 40 million baht.

Uganda

Police arrested Simon Musinguzi and Daniel Kalyango in connection with an alleged scheme run by Adsan Enterprises that allegedly defrauded investors out of Shs812. The scheme involved cryptocurrency ventures. Adsan had started as a company that supplied chicks to poultry farmers at a subsidized price but later began channeling money into cryptocurrency.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A group of 836 foreign investors sued People’s United Bank in connection with the Jay Peak Ski Resort Ponzi scheme. The investors allege that the bank misappropriated their funds.

Investors are seeking to certify a class in a case against GAW Miners LLC and ZenMiner LLC in an alleged cryptocurrency Ponzi scheme involving the sale of “miners” of virtual currency. 

Notice of a previously sealed lawsuit brought by the SEC against 1 Global Capital LLC and its former CEO, Carl Ruderman, was made public. The lawsuit accused them of fraudulently raising more than $287 million and misappropriating at least $35 million of that. 

Proskauer Rose agreed to pay $63 million to settle claims brought by investors in the R. Allen Stanford Ponzi scheme. 

A court ruled that U.S. securities laws can be used to prosecute fraud cases relating to cryptocurrency offerings. The decision relates to charges that Maksim Zaslavskiy fraudulently took at least $300,000 from investors in a cryptocurrency scheme called REcoin, which he claimed was backed by real estate, and another cryptocurrency called Diamond, which he claimed was backed by diamonds. 

Friday, August 31, 2018

August 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for August 2018. The reported stories reflect at least 7 new Ponzi schemes worldwide; about 20 years of newly imposed sentences for people involved in Ponzi schemes; 2 guilty pleas or convictions, and an average age of approximately 53 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. 

Arthur Lamar Adams and Madison Timber Properties LLC were the subject of an SEC complaint accusing them of running a multi-million dollar Ponzi scheme. Adams had previously pleaded guilty to charges brought in Mississippi. Investors were told their money would be used by MT Properties to acquire timber-harvesting rights from landowners. Investors were promised returns of 12% to 15%. More than $100 million was invested by more than 250 investors. Adams’ sentencing in his criminal case has been delayed until October.

Michael D’Alessio, 52, was arrested on charges relating to an alleged Ponzi scheme in New York. Alessio sold investments for real estate projects through his firm, Michael Paul Enterprises. Instead of generating promised returns, however, Alessio use the funds to pay his own debt, to gamble and for other personal expenses.

Jerome H. Cohen, 63, and his son, Shaun D. Cohen, 39, were sued by the SEC in connection with an alleged $135 million Ponzi scheme run through Equitybuild Inc. and Equity Build Finance. The scheme allegedly defrauded about 900 investors and promised returns of 12% to 20% from a real estate scheme that supposedly identified undervalued property. EquityBuild is a Florida corporation with an office in Chicago and solicited funds from investments in Chicago real estate projects. 

John “Jack” William Cranney, 77, of Texas was sentenced to 5 years in prison in Massachusetts and ordered to pay more than $5.5 million in restitution in connection with a $6 million scheme that defrauded 15 investors. Cranney created shell companies and convinced victims to transfer their IRA and 401k retirement funds to him, including Employee Stock Ownership Plan. He spent the money on personal expenses and to prop up his failing nutrition products distributorship.

Randall Alan Finer, 55, pleaded guilty to running a Ponzi scheme in Iowa. Finer raised $887,700 from investors for his day-trading operation but used more than half the money on personal expenses and to pay promised returns to earlier investors.

Gilbert Fluetsch, 52, was barred by the SEC from the securities industry. Fluetsch was the chief operating officer of California-based Hoplon Financial Group and was alleged to have assisted Daniel B. Vazquez Sr., the company’s owner, in creating the New Economic Opportunities Fund I, or NEON. The Fund was to pool investor funds to purchase and flip real estate. They sold membership units in the fund totaling $2.18 million to 27 investors. The funds were misused on unrelated business or personal expenses.

Michael James Frew, 70, was indicted in Nevada on charges that he ran a real-estate related Ponzi scheme. Investors understood that Frew would invest their funds in real estate in the United States and abroad, but Frew instead spent the money on personal expenses, to speculate in the stock market, and to repay earlier victims a portion of their investment.

Evan Greebel, 45, was sentenced to 18 months in prison and ordered to pay $10 million in restitution for his role in the scheme run by Martin “Pharma Bro” Shrekli. Shrekli was previously found guilty of securities fraud for running a Ponzi scheme involving his biotechnology company Retrophin Inc. Greebel was outside counsel for Retrophin and was found guilty of scheming with Shkreli to commit fraud.

Barry M. Kornfeld, Ferne Kornfeld, Lynette M. Robbins, Andrew G. Costa, Albert D. Klager and their companies, including Knowles Systems Inc., were sued by the SEC and accused of selling retail investors more than $243 million in unregistered securities in Woodbridge Group of Companies LLC to more than 1,600 investors. Woodbridge was allegedly running a $1.2 billion Ponzi scheme. Robbins was the highest-earning external agent of Woodbridge, receiving at least $8.1 million in commissions.

Hector May, 77, was accused of running a Ponzi scheme that stole millions of dollars from a company’s pension plans. May was a financial adviser whose advisory firm, Securities America, operated as Executive Compensation Planners.

Edward Lee Moody Jr., 47, and his Virginia-based company, CM Capital Management LLC, were sued by the SEC, claiming that Moody embezzled over $2 million and paid out $1.4 million in a Ponzi-like fashion. 

John K. Moore aka Kevin Moore was found guilty of running a Ponzi scheme in Montana. Moore had been charged with defrauding 36 investors out of $2.7 million through his mining company called Big Sky Mineral Resources and a fine art investment company called Glacier Gala. Moore had previously been convicted in the late 1980s for defrauding a victim out of $75,000 in a gold coin scheme.

Daniel Rivera, 48, was indicted in New Jersey on charges that he ran a scheme through a company called Robbins Lane Properties, Inc. Rivera, a financial advisor, misrepresented that the company employed real estate professionals who would use the investments to fund real estate ventures. The investors were promised monthly returns based on “secure real estate investments in the company’s portfolio.” Rivera spent the money on personal expenses and his child’s tuition and sorority fees.

Brandon Walton Stewart, 33, pleaded guilty to charges that he ran a $13.5 million Ponzi scheme. Stewart was arrested in Dallas and extradited back to Orange County, California. He had promised investors that he would invest their money in stocks such as Facebook, but he instead spent the money on himself.

Cory Ryan Williams, 40, of Arizona, was sentenced to 7 years in prison for running a Ponzi scheme that brought in about $13 million from about 50 victims. Williams promised investors returns of 5% weekly but he lost more than $8 million in trading stock futures. Williams and his company, Williams Advisory Group, were previously charged by the CFTC with running a commodity futures fraud, promising to invest funds using his expertise and based on his supposed profitable past.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

Authorities have alleged that Todd Norman John Bezzasso, Bezzaz Holdings Group Ltd., Nexus Global Trading Ltd., Wei Kai Liao aka Kevin Liao, and Florino Corsi, were running a fraudulent investment scheme. Bezzasso was the sole director and officer of Bezzaz and Nexus, Liao was a finder for Bezzaz, and Corsi was a finder for Bezzaz and Nexus. About $5 million was raised from about 85 investors who were promised monthly returns in various investments. The returns promised ranged from 5% to 30% for periods of one to 6 months.

China

Linlijia Commerce and Trade wound up all of its stores when its sole investor, Shanlin Shanghai Financial Information Service, was busted for running a Ponzi scheme. Shanlin was running a peer-to-peer lending operation and when its accounts were frozen it was no longer able to inject cash into Linlijia’s accounts.

England

Freddy David, 49, was sentenced to 6 years in prison. He admitted to stealing about $19 million from about 55 people in a Ponzi scheme by selling them fake investments through HBFS Financial Services, a wealth management company. David targeted mostly Jewish victims from his synagogue. The rabbi of the congregation apologized for calling David up to read a blessing, not knowing that David had defrauded members of the congregation. David lost much of the money on gambling websites.

India

Ganesh Hazare, the director of Atharva4U Infra and Agro Pvt Ltd., and Shivaji Nikale, the managing director, were arrested in connection with an alleged Ponzi scheme run through the companies. The scheme promised investors that they would double their money in a period of 5 years, triple their money in 7 years, and make 4 times their money in 10 years. 

The Ponzi scheme run through GainBitcoin saw two more suspects arrested. The scheme defrauded victims out of $150 million. The individuals had close ties to Amit Bhardway, the individual who started GainBitcoin.

Divyesh Darji was arrested upon his arrival from Dubai for his role in the Bitconnect scheme. Darji is the Asia head of the scheme which was shut down by regulators in Texas and North Carolina.

Gardas Ramesh and four others were arrested at the premises of GRM Estates on charges that they defrauded over 1,200 investors out of $1.43 million in a Coinx Trading cryptocurrency scheme.

Taiwan

Thirteen executives and employees of Maxim Trader Group were found guilty of defrauding investors out of about $453 million. The firm was supposedly engaged in foreign exchange trading and other investment opportunities and promised investors between 3% and 8% per month, and as much as 98% per year. About 50,000 people from Taiwan, Southeast Asia, Hong Kong, China, Japan, South Korea and Australia invested with the company before it collapsed in 2015. Chang Chin-su, the chief executive, was sentenced to 11 years in prison, and Chia Hsiang-chieh, the chief assistant, was sentenced to 9 years. Chang’s sister, Chang Mu-tan, was sentenced to 5 years. Maxim had claimed that it was an affiliate of Royale Globe Holding, a NASDAQ-listed company. Malaysian authorities earlier this year indicted Andrew Lim Ann Hoe, the chief executive of Maxim Capital, and company executives Chin Ming Kam and Goh Seow Mooi on charges relating to a scheme known as the Maxim Trader Compensation Plan. Malaysian investigators estimated that 50,000 investors around Asia had lost a total of US $5 billion.

Thailand

Officials in Thailand are seeking the extradition of four Singapore citizens believed to be involved in the Eagle Gates Group Ponzi scheme. The scheme has resulted in losses of about $9.8 million and 250 Thai and foreign investors. U.S. national, Derrick Matthew Keller, has been detained as an alleged accomplice and has admitted that he was an actor that was hired by the CEO of Eagle Gates to deceive investors in China, Hong Kong, Macau, Malaysia and Thailand.

Uganda

Charles Nwabuikwu, 44, was arrested on charges that he ran a Ponzi scheme through Development Channel that defrauded Ugandans. The company described itself as “the world’s most comprehensive platform for increasing access to basis development needs between the developed and under developed countries and communities.” 

The Bank of Uganda released a statement cautioning the public against investing in businesses which sound too good to be true. The Bank stated that if a business guarantees high returns with little risks of losing the investment, it is false. 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

City National Bank agreed to pay $33 million to settle claims that it aided and abetted a Ponzi scheme run by Nationwide Automated Systems Inc. The scheme involved the sale of ATM machines to investors who were promised $.50 from each ATM transaction.

About $16 million is being distributed in the Thomas Petters Ponzi scheme case.  The payments will go to about 360 investors.

Proskauer Rose LLP and the receiver in the R. Allen Stanford $7 billion Ponzi scheme reached a $63 million settlement of claims against the law firm in connection with the scheme. The firm admits no wrongdoing in the settlement.

A putative class of investors settled with United Development Funding IV to resolve claims that the company and covered up its “Ponzi-like” nature.  The settlement is for $13.5 million.