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

Wednesday, October 31, 2018

October 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for October 2018. The reported stories reflect at least 9 new Ponzi schemes worldwide; about 46 years of newly imposed sentences for people involved in Ponzi schemes; 5 guilty pleas or convictions, 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.

Arthur Lamar Adams, 58, of Mississippi was sentenced to 19½ years in prison in connection with a Ponzi scheme run through Madison Timber Properties, LLC. Adams obtained over $100 million from more than 250 investors located in at least 14 different states. Madison Timber held itself out as being in the business of buying timber rights from landowners and then reselling those rights to lumber mills at a higher price. The investors understood they were providing the financing for the purchase contracts for the timber rights. Investors were guaranteed returns of 12-13% interest. Adams had previously pleaded guilty and admitted it was a Ponzi scheme.

Yehuda Belsky aka Jay Bell, was charged with running a $1.25 million commodities scheme that defrauded at least 14 customers. Belsky, the owner of Y Trading LLC, had previously been barred for life by the CFTC from trading in commodities, but was holding himself out as a successful commodities trader.

Dawn Bennett, 56, was found guilty of defrauding investors in a $20 million Ponzi scheme. Bennett testified at her trial that she paid approximately $720,000 to arrange for priests to perform religious ceremonies to help her and she cast “hoodoo” spells on investigators to ward off a federal investigation. Bennett raised more than $20 million from 46 investors in connection with her luxury sportswear business, DJB Holdings later known as Province of the Dragon. Bennett and coworker, Bradley Mascho, overstated the company’s sales and liabilities to their investors. Mascho previously pleaded guilty. Bennett used the investors’ money to pay for jewelry, cosmetic medical procedures, and a $500,000 annual lease for a luxury suite at the Dallas Cowboys’ home stadium.

J.T. Bramlette, 40, Anthony Hartman, 58, Travis Kozlowski, 38, and Aaron Wernli, 39,were charged by the SEC in Utah with alleged securities violations in connection with a $10.8 million investment scheme. The scheme involved the Melrose Resort in which investors were promised false returns of up to 24% and were provided false reports and statements. Bramlette was the “ringleader of the fraud” and the others raised funds for the project through Private Placement Capital Notes II, LLC, Synergy Capital Management LLC, and Pelorus Group. Bramlette used at least $1.5 million to pay personal expenses, including trips to Disneyland, shopping sprees on Rodeo Drive, Las Vegas trips, and a Land Rover.

Kevin Brody, 54, and Matthew Eckstein, 48, of New York, were charged in connection with a $10 million scheme that allegedly defrauded 40 senior citizens. Brody and Eckstein are financial advisors who convinced clients to invest their retirement savings in their company, Conmac Funding Corp., with assurances that the investments were safe and that they would earn 4% interest.

Craig Carton, 48, has filed papers asking a court to prevent prosecutors from calling his alleged ticket scheme a Ponzi scheme or using the words “sham,” “fleece” and “fraudulent.” The court denied his request. Carton was arrested last year on charges that he was running a $4.6 million scheme in which he used money from investors in a ticket reselling business to pay his gambling debts. Carton was accused along with Michael Wright, 42, and Joseph Meli of running a ticket Ponzi scheme by soliciting investors to fund a business of buying and reselling blocks of tickets to music, entertainment and sporting events. Meli is currently serving 6½ years in prison for the scheme. Carton has pleaded not guilty.

Jean Danhong Chen, 53, and her husband, Tony Jianyun Ye, 50, along with Kai Hao Robinson, 45, Kuansheng Chen, 60, the Law Offices of Jean D. Chen,  and Tree Lined Holdings, LLC fka Tree Lined Properties, LLC were named in a lawsuit filed by the SEC in connection with an EB-5 scheme in California. The scheme brought in millions of dollars from foreign investors seeking permanent U.S. residency through the EB-5 Immigrant Investor Program. The defendants were paid over $10 million in commissions in connection with the scheme. The SEC also alleged that Chen and Ye secretly acquired and operated an EB-5 regional center, Golden State Regional Center LLC.

Kevin Cecil Drost, 61, was charged in connection with a $5 million offering fraud through Maryland-based Owings Group, LLC. Drost was a salesman, along with Brian Koslow and David Waltzer, for the scheme run by Mark Johnson. The SEC had charged the group with securities fraud earlier in the year.

Nicholas Gelfman of New York entered into a consent order with the CFTC and a default judgment was entered against and his company, Gelfman Blueprint, Inc. A $2.5 million fine was levied against Gelfman and his firm. Gelfman took in more than $600,000 from at least 80 customers who understood they were entering into contracts of sale of Bitcoin through electronic web-based Bitcoin trading platforms. Gelfman represented he had a high performing algorithmic trading computer program named Jigsaw that generated monthly profits of 7% to 11% and protected against risk. The CFTC had alleged that Gelfman created false performance reports showing positive Bitcoin trading gains and then staged a fake computer hack to further conceal losses and misappropriation.

Kevin Kyes, 70, was sentenced to 5 years in prison and ordered to pay more than $3.6 million in restitution in connection with a $7 million Ponzi scheme that targeted 60 Japanese investors. Kyes worked with a partner, John Holdaway, 74, to defraud investors through their business, Money Management Strategies. They represented that they could do high-speed trading with 100% returns on investments.

Wayne McKelvey, 55, was convicted for his role in a $54 million Ponzi scheme run through Mantria Corp. McKelvey is a former insurance salesman who raised money for the scheme run by Troy Wragg and Amanda Knorr, both of whom previously pleaded guilty. The scheme promised profits from green technology that would turn trash into fuel and “carbon-negative” housing developments. McKelvey had raised money for the scheme through his “Speed of Wealth” seminars, telling investors that Mantria was the next Microsoft and that it was “on the cusp of a revolutionary technology that’s going to change the world, and you guys can benefit from it by putting money in and getting stinkin’ wealthy.”

Raymond K. Montoya, 70, pleaded guilty to charges that he ran scheme through a pooled investment known as RMA Strategic Opportunity Fund LLC for 8 years. Montoya represented to investors that they were earning substantial returns when the fund was actually sustaining significant losses. Montoya promised investors returns from investments in stocks and bonds, but only a portion of the money was actually invested. The rest was diverted for his personal expenses such as luxury vehicles and the mortgage on his son’s residence. Montoya told investors he had $5 billion in assets in his fund when the highest amount he ever had was about $20 million.

Edward Lee Moody Jr., 47, of Virginia, was criminally charged and then pleaded guilty in connection with a 13-year scheme that collected $6.1 million from 53 investors. Moody had previously been named in an SEC lawsuit, along with his companies, CM Capital Management LLC and G.E. Holdings Corp. Moody used at least $1.4 million of the investor funds to pay business expenses, purchase a home, make car loan payments, shop, and travel to Las Vegas and other destinations.

Stephen Condon Peters, 45, of North Carolina, faced additional charges in connection with an alleged $15 million Ponzi scheme run through VisionQuest Wealth Management. Peters ran the alleged scheme by selling notes in VisionQuest Capital, and the notes were then sold to clients of VisionQuest Management. Both companies were owned by Peters. Investors were promised returns of 8%, or 9% if they chose to forego interest and reinvest. The investor funds were used by Peters to purchase, among other things, luxury vacation home in Costa Rica, a horse farm in Wake County where he lived, a Cadillac Escalade, properties in Jacksonville and Ferguson, N.C., farm equipment, a gun collection with rifles and pistols, and diamond jewelry.

Jason Rhodes, 46, of Connecticut, was arrested on charges that he allegedly misappropriated nearly $20 million in a Ponzi scheme. The scheme involved investments into a hedge fund that was supposedly purchasing securities. Rhodes allegedly defrauded 25 investors and falsified an investor account statement in at least one instance.

Ernie Julius Romer III, 57, was accused of one additional charge in connection with an alleged $3 million Ponzi scheme. Romer has been in jail for 13 months, unable to afford the $1 million bond. He has pleaded no contest and is awaiting sentencing.

Carl Frederick Sealey, 43, of New Jersey, was sentenced to 78 months in prison in connection with a Ponzi scheme that defrauded about 20 investors out of $1.6 million. Sealey is the ex-chairman and CEO of Global Standard Industries and SEK Industries and misrepresented to investors that their investments were risk free and were earn 10% interest in 90 days. He falsely claimed that his equity-investment firms had almost $50 billion in assets. Instead, Sealey spent the investors’ funds on his personal expenses for things like spa treatments, jewelry and helicopter-flying lessons and rides.

Karl James Stehlin aka Carl Davis, 63, was sentenced to 10 years in prison in connection with a $10 million scheme that he ran through Marble Bridge Funding Group. Stehin would fake invoices to companies that offered factoring services.

Carlos Uresti, 54, and Stanley Bates, 46, were charged by the SEC in connection with an alleged $11 million oil and gas fracking Ponzi scheme. Uresti, who had been found guilty by a jury on criminal charges dropped his appeal of his conviction and 12 year sentence. He also surrendered his license to practice law and resigned from the Texas Senate.

Frederick Alan Voight, 61, was charged in Nebraska in connection with an alleged $40.9 million Ponzi scheme. Voight ran the scheme through several entities, including F.A. Voight & Associates and Daystar Funding. He represented to investors that he provided financing to companies to take them through ‘commercialization to profitability.” Voight allegedly raised about $76 million from 608 investors, but only about $22 million of the funds were loaned.

Susan Margaret Werth, 57, of San Diego, California, was charged and pleaded not guilty in connection with an alleged Ponzi scheme that raised approximately $26 million. Werth ran the scheme through Commercial Exchange Solutions and Exchange Solutions Company and falsely claimed that she would use investor funds for short-term construction loans. She represented that the investments were 100% guaranteed and promised rates of returns of at least 15% on 30 to 90-day terms. Werth allegedly spent $2 million of the funds to fund her lifestyle.

Lucita “Lu” A. Zamoras, 55, of Illinois, was charged in connection with an alleged $3.5 million Ponzi scheme that defrauded at least 12 victims. Zamoras is a financial advisor who alleged preyed upon elderly Filipino families by falsely promising them safe, low-risk investments in retirement products and custom insurance services. Zamoras instead used their money to feed her gambling habit and pay her personal expenses. Zamoras operated through several businesses, including First Fidelity Tax, JQH Ventures, and Cornerstone Home Solutions.

INTERNATIONAL PONZI SCHEME NEWS

Australia

The Berlin Group, an MLM cryptocurrency scheme, is believed to be a Ponzi scheme. Joachim Pydde is the director of The Berlin Group. Laurie Suarez aka Lorenzo Suarez is the Executive Operations Manager and is a ‘convicted fraudster.’ Peter Ohanyan, the company’s Chief Marketing Officer, was promoting 3T Networks, an illegal unregistered securities offering, as well as GroceryBit, a failed crypto cashback scheme.

Belgium

The Financial Services and Markets Authority updated its fraudulent crypto site with 21 new crypto sites that have been blacklisted. Five of those sites are no longer available, where 16 others are still operational. One of them changed its business model to video on demand services after being blacklisted.

China

More than 20 suspects were detained in connection with an alleged $14 billion Ponzi scheme called Data Tycoon involving latex bedding. Instead of selling latex products, however, they sold financial products to investors who were encouraged to bring in new investors. Investors became members of the DT Group, and over 1 million-member accounts were opened from June 2016 to August 2018.

England

Victoria Smith, 29, was sentenced to 4½ years in jail in connection with a Ponzi scheme. Smith defrauded investors by offering preferential rates in fake foreign currency schemes.

India

Asif Ashrak Malkani was arrested after evading authorities for 9 months. Malkani is the founder of Kashh Coin and defrauded investors out of hundreds of thousands of dollars. Malkani was gearing up to launch a new scheme called V-Tube.

Aalima Nowhera Shaikh, 45, the chairperson of Heera Group, was arrested on charges that investors were defrauded in Shaikh’s “Halal investment programmes.” Shaikh is accused of defrauding 10,000 investors out of Rs 500 crore.

New Zealand

Kelvin Clive Wood, 69, was charged with running a Ponzi scheme through a foreign exchange brokerage and trading business. The scheme allegedly involved 18 investors who lost $7 million. Wood entered a no plea.

Nigeria

Lizzy Efah was arrested while trying to flee from Nigeria. She has been accused of operating a Ponzi scheme named Golden Achievers, which is a Swiss gold scheme.

Poland

The DasCoin scheme is being criminally investigated. Polish authorities seized over $11.6 million from what is believed to be a Ponzi scheme involving cryptocurrency. Das Coin was a cryptocurrency launched to raise funds for a company known as Net Leaders.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

An appellate court upheld a lower court’s rejection of a stipulated amount of restitution pursuant to a plea agreement by Dean Hamilton. Hamilton had pleaded guilty to one count of securities fraud in connection with a Ponzi scheme run through Galileo Financial LLC. He had sold securities to four investors who lost a total of about $512,000. The stipulation for restitution provided that he pay $38,000 to victims at the rate of $500 per month. The court disagreed to ordered restitution in the amount of $382,085, which order was upheld on appeal. State of Utah v. Hamilton, 2018 UT App 202 (Oct. 25, 2018).

The bankruptcy judge approved the plan of liquidation for the Woodbridge Group of Companies, LLC. Woodbridge was a high-end real estate developer and operated through at least 279 companies. The scheme involved about $1 billion.  The liquidation plan was approved over the objection of some of the 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.