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

Friday, January 31, 2020

January 2020 Ponzi Scheme Roundup


Below is a summary of the activity reported for January 2020. The reported stories reflect at least 5 new Ponzi schemes worldwide; at least 5 guilty pleas and convictions, over 24 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.
   
Malik Akbar’El aka Tyrone David Williams aka Skipper David Williams, 52, of Arkansas, was accused of running a Ponzi scheme. He ran the alleged scheme through Akbar Williams & Associates Legal Services Corporation and promised 300% to 480% returns from supposed investments in charities and organizations that would generate a profit. He allegedly defrauded 252 investors.

Bitmain was asked to suspend its IPO due to its connection with the BitClub Ponzi scheme. Bitmain sold mining equipment to BitClub, which defrauded victims out of over $722 million.
 
Kari M. Bracy was barred by FINRA from engaging in securities transactions in light of her involvement with Future Income Payments. Bracy sold investments in the scheme that recruited pension holders, including veterans of the armed forces. Investors were defrauded out of about $300 million.
 
Hal H. Brown Jr., 70, of North Carolina, pleaded guilty to running a $22 million Ponzi scheme that defrauded more than 23 victims. The scheme was run through Oodles Inc. Brown misrepresented that Oodles owned hundreds of millions of dollars in intellectual property and presented investors with false financial information and documentation.
 
Jeff Carpoff, 49, and Paulette Carpoff, 46, pleaded guilty to charges brought in connection with the $1 billion Ponzi scheme run through DC Solar Solutions. The scheme offered investors huge federal tax incentives to lease mobile solar generators typically used at racetracks and concert venues or to power remote cell phone towers during power outages. They used investor funds “to support a lavish lifestyle, which included payment for more than 150 luxury and collector vehicles, luxury real estate in Lake Tahoe, Las Vegas, the Caribbean, Cabo San Lucas, Mexico, and elsewhere, a suite at a professional football stadium, a private jet service, gambling, jewelry, and other personal property.”

Kenneth D. Courtright III, 49, of Illinois, was accused by the SEC or running a Ponzi-like scheme that raised more than $75 million from more than 500 investors through his company, Todays Growth Consultant Inc. Courtright is the owner of The Income Store through which he promised investors annual returns of up to 20% per year forever in return for a six-figure upfront fee used to build and operate websites.

Michael J. DaCorta, 55, was charged in connection with the Ponzi scheme run through Oasis International Group Ltd. DaCorta allegedly defrauded about 700 investors investors out of $72 million, but he has entered a plea of not guilty. Oasis president Joseph S. Anile II pleaded guilty to the scheme last year and is cooperating with authorities.

Andres Fernandez, 38, was sentenced to 10 years in prison in connection with a scheme that defrauded at least 81 people out of $14.98 million. Fernandez solicited investors to invest in concerts that his company, Kadaee Entertainment, helped produce. Fernandez promised investors that they could double their money and he promised them free tickets to concerts. He showed his clients fake contracts and spent the funds largely on his personal expenses and to pay earlier investors.
 
Guy Griffithe and Robert Russell were charged by the SEC with fraudulently selling fake interests in a cannabis company called SMRB. The sales took place through two firms controlled by Griffithe, Renewable Technologies Solution and Green Acres Pharms. The scheme defrauded at least 25 investors out of $4.85 million.
 
Ryan Guidry, 43, pleaded guilty to participating in a Ponzi scheme that defrauded investors out of $1 billion. The scheme was run through DC Solar and sold solar generators mounted on trailers to be used for emergency power for cellphone companies or to provide lighting and sporting and other events. Joseph W. Bayliss, 44, Ronald J. Roach, and Robert A. Karmann, 53, each previously pleaded guilty to related charges.

Edward Matthes was accused of running a Ponzi-like investment scheme that defrauded investors in Wisconsin out of $2.4 million. The SEC alleged that he defrauded 26 people, who were mostly elderly brokerage customers, by promising them returns of 4% in safe investments.

Robert Menard, a Milwaukee attorney was accused of running a Ponzi scheme and stealing about $250,000 from his clients.
 
Robert C. Morgan was ordered to pay back more than $63 million to defrauded investors. The SEC obtained the order after charging Morgan with fraudulently raising money from more than 200 investors, promising them a return of 11%. Morgan owned multi-family properties but he ordered employees to falsify financial documents to get larger loans on the acquisition of the properties.

Gerald Ortiz of Colorado was ordered to pay $1.2 billion in restitution by the Colorado Division of Securities. Ortiz, through his company, Colorado Retirement Specialists LLC sold unlicensed securities from Woodbridge Group of Companies LLC. Woodbridge was charged by the SEC with operating a Ponzi scheme.
 
Steven Pagartanis, 60, was sentenced to 14 years and 2 months in prison and ordered to pay $6.5 million in restitution in connection with a Ponzi scheme that spanned 18 years and scammed 17 victims. Pagartanis solicited elderly victims to invest in real estate-related investments and promised returns of between 4.5% to 8%. Investors were told that their money was being invested in a publicly traded Canadian company called Genesis Land Development. Instead, he used the money to pay for his personal expenses and on luxury items such a jewelry, airline tickets, massages and cigars.

Christopher Parris, 39, of New York was accused of running a Ponzi scheme with Perry Santillo, using their business, Lucian Development. They are accused of defrauded almost 1,000 investors out of at least $115,500,000. Santillo pleaded guilty last year.

Jason Rhodes, 47, of Connecticut, pleaded guilty to charges in connection with a scheme to defraud approximately 25 investors in Sentinel Growth Fund Management LLC. The scheme solicited about $19.6 million into a hedge fund by promising returns from investments in securities. Sentinel co-founder, Mark Varacchi, previously pleaded guilty to the scheme.

Steve Schwartz, 76, was accused of assisting an alleged $287 million Ponzi scheme run through 1 Global Capital LLC. The investment program purported to offer short-terms loans at high interest rates to small and medium-sized businesses.

Landon M. Smith, of Utah, settled with the SEC and agreed to pay more than $1.1 million in disgorgement and interest. Smith was sentenced to 3 months in prison in connection with a scheme that defrauded over 50 investors out of $2.5 million. Smith represented that he was a real estate wholesaler who would use investor funds to purchase and then resell properties.

INTERNATIONAL PONZI SCHEME NEWS
 
Philippines

Cease and desist orders were entered against 5 investment companies that were promising large returns. Rigen Marketing, offered returns of up to 400%; Ever Arm Marketing, offered returns of up to 400%; Organico Agribusiness offered returns of up to 66.67% percent return after 90 days; and Kapa Community Ministry International Inc. offered 30% monthly “blessing or love gift” per month on donation for life.

Turkey

Orhan Tath and Irfan Alkan were accused of running a scheme through Sutbank, or Milk Bank, that defrauded about 1,300 people. The scheme offered investors returns from investing in the purchase of five cows and receiving monthly payments from the sale of milk from the cows.
 
Uganda

More than 5,000 victims have appealed for a refund of money they invested in Dunamiscoin Resource Ltd., a cryptocurrency scheme that has been alleged to be running a Ponzi scheme and that was shut down last year. The scheme promised returns of 30% to 40% in a short period.

Tuesday, December 31, 2019

December 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for December 2019. The reported stories reflect at least 7 new Ponzi schemes worldwide; at least 4 guilty pleas and convictions, over 34 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 51 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
   
Matthew Brent Goettsche, 37, Iovadiah Sinclair Weeks, 38, and Joseph Franks Abel, 49, were charged in connection with an alleged high-tech Ponzi scheme run through BitClub Network. A fourth man, Silviu Catalin Balaci, was arrested in Germany in connection with the scheme. The scheme defrauded investors out of $722 million and took funds from investors to purportedly purchase shares of cryptocurrency mining pools. Internal chat messages intercepted by authorities state that the internal business model was built “on the back s of idiots” by targeting the “typical dumb MLM investor” who will convince other “morons” to join.
   
Lester Burroughs, 60, of Connecticut, pleaded guilty to charges that he ran a $575,000 Ponzi scheme through Burroughs Investment Group, a financial consulting firm. Burroughs was registered as an investment adviser and broker and guaranteed returns to his clients of 4% or 7%. He used investor funds to pay his own expenses and to pay the guaranteed returns to other clients.

Joey Stanton Dodson, 55, was indicted on charges relating to a $15 million Ponzi scheme involving about 50 victims. The scheme was run through Citadel Energy LLC, in which he solicited investments in three limited partnerships that were supposedly providing water-related services to oil and gas companies in North Dakota.

Edward Espinal, of New Jersey, and his company, Cash Flow Partners LLC, were charged by the SEC in connection with a $5 million Ponzi scheme that defrauded at least 90 investors. Many of the investors were members of the Hispanic community. Investors believed they were investing in a pooled fund that would purchase and renovate houses and they were promised guaranteed returns of between 1.25% and 4% per month.
 
Richard E. Gearhart, 69, pleaded guilty to charges that he ran a Ponzi scheme through Asset Preservation Specialists that took more than $6 million from more than 25 investors, resulting in losses of $3.5 million. Gearhart ran the scheme with George R. McKown, 66. They promised returns of 6% to 8% and persuaded investors to invest their existing retirement funds into the scheme.

International Investment Group lost its license due to “a string of frauds” in connection with its investment program in diversified trade finance portfolios. IIG was charged with concealing defaulted loans in its hedge fund and selling at least $60 million in fake loan assets to other clients.
 
Samuel Israel, 60, lost his bid for an early release from his 22-year prison sentence due to medical issues. Israel orchestrated the Bayou Group Ponzi scheme that defrauded investors out of $450 million.

Robert A. Karmann, 53, pleaded guilty to charges relating to his participation in the $960 million Ponzi scheme run though DC Solar that involved the sale and leaseback of mobile solar electrical generators. Investors would supposedly buy mobile solar electrical generators but did not take possession of them. Karmann was the CFO and disseminated false financial information to investors. Ronald J. Roach, 53, of California, pleaded guilty in October and was barred by the SEC this month. Joseph Bayliss, 44, also pleaded guilty to the scheme in October.

Perry Santillo aka King Perry, 39, pleaded guilty to charges in Pennsylvania that he defrauded 1,000 investors out of $113 million. Perry pleaded guilty last month to charges brought in New York.
 
Jamie Smith, 42, of Wisconsin was sentenced to 4 ½ years in prison for defrauding elderly people out of more than $1 million. Smith ran the scheme through American Platinum Gold & Silver Inc. aka American Independent Gold & Silver Inc.
 
Kari Sonovich, 48, was sentenced to 2 years and 3 months in prison in connection with a Ponzi scheme that promised returns of 500% every 90 days. Sonovich told investors their funds would be invested through her Las Vegas company, B&B Consulting Group LLC, by an international trader who would produce high returns.

Randy Wayne Sprinkle, 54, was sentenced to 15 years in prison for defrauding investors out of more than $300,000 in a scheme that misappropriated funds in connection with remodeling projects.

Robert C. Walberg, 58, was charged with running a Ponzi scheme that defrauded more than 20 investors out of more than $5.5 million.
 
Susan Margaret Werth, 58, of California, was sentenced to 5 years and 10 months in prison and ordered to pay $6.3 million in restitution for operating a $6 million Ponzi scheme through Commercial Exchange Solutions Inc. and Exchange Solutions Company Inc. Investors were promised returns  of 15% from purported short-terms construction loans.

Alvin Wilkinson, 61, was sentenced to 7 years in prison and ordered to pay $8 million in restitution in connection with a Ponzi scheme that spanned two decades. Wilkinson is an investment manager who pleaded guilty to defrauding friends, family members and others in a $13.5 million scheme that he ran through Chicago Index Partners LP and Wilkinson Financial Opportunity Fund LP. He promised returns from investments in options and futures.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Tanya Pluckhahn, 41, and Aaron Parsons, 44, were charged with running a $900,000 scam that took money from investors under the pretense of kickstarting the career of country music singer Alys Ffion, who knew nothing of the scheme. The pair defrauded investors and then paid some money back so investors believed they were getting their money back.

China

Seventy-two people were arrested in connection with an alleged cryptocurrency scheme called CloudToken on charges that they defrauded more than 300 victims out of over $4 million. CloudToken promised 10% to 15% returns on investments. The scheme started in China but was also promoted in Korea, Japan, Indonesia, Malaysia and some countries in Africa.

India

Ajay Chakraborty and Sanjit Chakraborty were arrested in connection with an alleged Ponzi scheme run through Jugantor Realty and Jugantor Gold and Jewellery.

Nanda Chanda, the director of Amanat Group of Companies, was arrested after it was found that the companies were running a Ponzi scheme.

South Korea

Lime Asset Management is facing an investigation over suspicions that it continued to sell investments despite knowledge that certain fund options were invested with a U.S. hedge fund engaged in fraud. The SEC had revoked the registration of International Investment Group in November.
 
Uganda

Samson Lwanga was arrested in connection with an alleged scheme run through Dunamiscoins Resources Limited. The company is allegedly a cryptocurrency scam that defrauded over 10,000 people out of $2.7 million.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Texas Supreme Court found that a Stanford International Bank Ltd. investor could not claim good faith in response to a fraudulent transfer claim seeking recovery of $79 million. The court found that investor Gary Magness suspected fraud and had a duty to investigate that something fraudulent was happening. The court held that a defendant on inquiry notice who does not investigate is not entitled to the good faith defense even if inquiry would have been futile.