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 on 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

Saturday, September 30, 2017

September 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for September 2017. The reported stories reflect: 7 guilty pleas or convictions in pending cases; over 100 years plus one life sentence of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 58 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Nicholas Baratoff, 80, pleaded guilty and was sentenced to 5 years’ probation in connection with a Ponzi scheme in which he promised to invest money for others but instead used the money to fund his lavish lifestyle and to pay other clients with new funds.

Larry Bates, 73, was sentenced to 21 years and 10 months in prison and ordered to pay more than $21 million for operating a Ponzi scheme through First American Monetary Consultants that defrauded more than 400 victims. Bates told listeners of his Christian broadcast programs that they should buy gold and silver coins as financial protection from a supposedly imminent religious and economic collapse called “Mystery Babylon.” Investors paid $87 million into the scheme to buy precious metals, but Bates and his two sons, Chuck Bates and Robert Bates, and daughter-in-law, Kinsey Bates, kept the money for their personal use. Chuck and Robert were sentenced to more than 12 years and Kinsey received more than 5 years.

Brian R. Callahan, 47, was sentenced to 12 years in prison and ordered to pay almost $67.6 million in connection with a $118 million Ponzi scheme in which Callahan allegedly siphoned off $96 million. The scheme involved 40 investors whom he promised returns from investments in mutual funds, hedge funds and other securities. Instead, Callahan purchased Panoramic View, a struggling 117 unit beachfront resort and residence development that he owned with his brother-in-law and co-defendant Adam Manson.

Craig Carton, 48, was charged with running a Ponzi scheme involving the ticket-resale industry. Carton has hosted the WFAN radio show, Boomer and Carton in the Morning, with NFL quarterback Boomer Esiason since 2007, but Esiason is not accused of any wrongdoing. Michael Wright, 41, was also charged alongside Carton. Carton has also been sued for fraud by the SEC, which accused Carton and Joseph Meli, 43, of raising more than $5 million from investors claiming access to tickets for resale. Mark Varacchi has pleaded guilty to charges in connection with the scam. Carton allegedly used the money to repay a $2.5 million gambling debt. Carton resigned from the WFAN after his arrest for allegedly being part of a $5.6 million Ponzi scheme.

Bryan Coats and Jonathan Davey, 52, lost a partial summary judgment to the CFTC and a preliminary injunction was ordered against them in connection with a $40 million Ponzi scheme run through Black Diamond involving a currency trading platform which didn’t actually exist. Coats and Davey were previously sentenced to 21 years and 15 years, respectively, in connection with the scheme.

Nicholas Gelfman and his firm, Gelfman Blueprint Inc. (GBI) were sued by the CFTC and accused of running a $600,000 Bitcoin Ponzi scheme. The scheme promised 7% to 9% monthly increase in bitcoin from supposedly sponsoring a high-frequency bitcoin trading algorithm called “Jigsaw.” Gelfman allegedly tried to conceal the Ponzi scheme by claiming that the company had been hacked and that all customer funds had been stolen. The scheme took in $60,000 from 80 investors.

Robert Allen Helms and Janniece Kaelin were sentenced to 78 months in prison for a Ponzi scheme they ran through Vendetta Royal Properties. They had promised at least 80 investors that they would use their funds to acquire oil and gas royalty interests.
  
Michael S. Holcomb, 74, Gary L. Holcomb, 72, Jennifer L. Chalmers, and Kristen S. Van Breemen all pleaded guilty to charges that they operated a Ponzi scheme through their businesses, Berjac of Oregon and Berjac of Portland. Prosecutors alleged that the scheme defrauded more than 400 investors out of more than $40 million.

Jeremy R. Lundin, 30, was charged in connection with an alleged scheme run through his company, Big Island Capital. Lundin solicited more than $1 million from at least 51 investors and promised 67% to 97.8% returns through options trading. Lundin used the money to buy a Maserati and a boat and to pay off personal debts and take a trip to Paris. Lundin was previously booked for choking is wife and threatening to stab her with a broken lamp, and was convicted of assaulting a police officer after spitting on an officer’s arm during a traffic stop. Lundin pleaded guilty, acknowledging that he created phony account statements and provided investors online access to fictitious quarterly statements.

Hamlet Peralta, 38, was sentenced to 5 years in prison and ordered to pay $5 million in restitution in connection with a $12 million Ponzi scheme that he ran under the guise of a wholesale liquor business.

Stephen Peters and his company, VisionQuest Wealth Management, LLC, had their assets frozen in connection with allegations that Peters took millions of dollars from more than 70 investors. No charges have been filed, but a civil case that has been filed names Peters his companies and his wife, Amy Peters.

David Petersen lost his appeal of his conviction and 5 year sentence in connection with a Ponzi scheme run through Westover Energy Trading LLC and Ramco and Associates LLC. The Eleventh Circuit denied his appeal.  U.S. v. Petersen, 2017 U.S. App. LEXIS 17671 (Sept. 13, 2017).

Hasan Sarwar aka Alexander Sarwar dba Profit Management Int. and his spouse, Rachida Elfimi dba Profit Management, were charged by the CFTC with running an alleged $1.2 million Ponzi scheme through a futures commodity pool. The scheme allegedly defrauded more than 40 investors, promising them that they would double their money in less than 5 months.

Sen. Carlos Uresti, a Texas state senator under a fraud indictment, pleaded not guilty but acknowledged that the company FourWinds Logistics “might have been a Ponzi scheme.”

Leon Vaccarelli, 40, was charged with running an alleged Ponzi scheme. Vaccaerelli and his financial advisory firm, Lux Financial Services, allegedly defrauded at least nine victims in a scheme that lasted more than four years and took in more than $1 million.

James VanBlaricum, 78, was sentenced to 7 years in prison and ordered to pay $322 million in restitution in connection with a Ponzi scheme that he ran through Signal Oil and Gas Co. and Texas Energy Management. VanBlaricum previously pleaded guilty to defrauding investors into buying securities in his oil and gas companies.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

James Harvey Cameron, 66, was sentenced to 11 years in prison, ordered to pay $1.8 million in restitution and a $550,000 fine for tax evasion in connection with a $9 million Ponzi scheme that he ran through Venture Trading Inc. About 160 people invested in the scheme.

Benoit Senecal, 61, was sentenced to 2 years and 10 months in prison in connection with a Ponzi scheme that defrauded more than 200 investors out of $19 million. Sophie Jolicoeur, 48, and Jean-Mark Lavallee, 69, have also been charged in connection with the scheme.

Harold Backer, 54, is facing disciplinary proceedings over an alleged Ponzi scheme involving about $1,230,000 taken from at least 6 clients and 2 individuals. Backer disappeared in 2015 after failing to cooperate with an investigation into his conduct, but turned himself in about 18 months later.

Yian “Ethan” Sun and Yulan “Amy” Hu have been sued by both employees and investors in Istuary Innovation Labs Ltd. who allege that the tech company is running a Ponzi scheme. The company has 400 workers in North America and 1100 in China and has now closed its Vancouver office. The company was started in 2013 with the goal of linking high tech start-up companies in Canada with potential customers in China.

China

Ding Ning, the founder of Ezubao and chairman of its holding company Anhui Yucheng Holdings Group, was sentenced to life imprisonment in connection with the $7.6 billion Ponzi scheme that defrauded about 900,000 investors. Ding Dian, brother of Ding Ning, was also sentenced to life imprisonment, and 24 others received sentences ranging from 3 to 15 years. 

India

Kamalakanta Pattnaik, the founder of Sai Pragati Assets and Properties Pvt Ltd. was arrested in connection with an alleged Ponzi scheme.

Sanjit Bhowmik and Mithun Chatterjee were arrested in connection with alleged Ponzi schemes run through Sagarika Realtors Projects India Ltd. and Sagarika Mutual Benefits Funds Ltd.

Mugundhan Gangam, Sellathrurai Bhaskar, Chella Dhuri, Amal Raj, Ram Krishna Murthy and Kamal K Bakshi were charged in connection with an alleged Ponzi scheme run through Unipay 2U Marketing Pvt Ltd and Unigateway 2U Trading Pvt Ltd.

New Zealand

Hamish McIntosh, a defrauded investor in the scheme run by Ross Asset Management, is liable for interest on the $454,047 judgment against him to return fictitious profits received from the scheme. The High Court ruled that not only must the fictitious profits be returned, but McIntosh is liable for interest at 5%. The McIntosh case is a test case and the liquidators of Ross Asset Management intend to pursue other investors as well.

Shane Richard Scott, 60, pleaded guilty to running a $5.4 million Ponzi scheme that promised investors high returns from property developments and overseas investments. Scott told investors he was investing their money in brokering deals in Thailand, the diamond trade, South African trade deals, and a chicken farm in New Caledonia.

South Africa

Sandile Mantsoe, 27, has been accused of running a Ponzi scheme through his company, Trillion Dollar Legacy. At least 124 people claim that Mantsoe scammed them through his forex trading company. Mantsoe was previously arrested for the murder of his girlfriend, Karabo Mokoena.

Graeme Minne, 54, and his wife, Carolina Minne, 52, were sentenced 15 years and three year house arrest, respectively, for a Ponzi scheme that promised high returns of up to 65% from forex trading. The scheme took in about R278,786,853 from about 934 investors.
  
Thailand

Officials raided the house of Pudit Kittihradilok, the managing director of The System Plug and Play Company and Innovation Holding Company. The scheme is alleged to have defrauded over 5,000 investors.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Eleventh Circuit affirmed a lower court order denying the motion of the United States to dismiss a complaint against it filed by a bankruptcy trustee seeking avoidance of the debtor’s federal tax payment.  The trustee alleges that the tax payments were fraudulent made by DBSI, Inc. Zazzali v. U.S. (In re DBSI, Inc.), 2017 U.S. App. LEXIS (9th Cir. Aug. 31, 2017).

Thema International Fund PLC, an Irish fund that sent investor money to Bernard Madoff, agreed to pay the trustee over the Madoff scheme $687 million to settle claims.

The receiver in the Arthur Nadel Ponzi scheme made an additional distribution of $5 million to about 400 victims who were defrauded in the scheme. This brought the investors’ total recovery to 52% of their losses. This was the seventh distribution, bringing the total to $68 million.

Ritchie Capital Management lost its request to terminate the receivership over the assets of Thomas Petters. U.S. v. Petters, 2017 U.S Dist. LEXIS 158769 (Sept. 27, 2017).

The liquidating trustee of Banyon 1030-32 LLC, one of the feeder funds in the Scott Rothstein $1.2 billion Ponzi scheme, filed a lawsuit against Harden & Associates, claiming that the insurance broker’s negligence caused the fund’s insurers to deny coverage. The firm had been hired to obtain $70 million in commercial crime insurance to protect the fund from theft by Rothstein.

Prosecutors withdrew a motion to shorten Scott Rothstein’s 50 year prison sentence, saying that he lied to the government and violated the terms of his plea deal. They had asked the judge to reduce Rothstein’s sentence because of his help in bringing down about 30 others in connection with the scheme. Rothstein intends to object to the prosecutors' decision.

Hunton & Williams LLP settled allegations that it aided Robert Allen Stanford in his $7 million Ponzi scheme. The settlement involves payment of $34 million that will go to benefit some of Stanford’s thousands of victims.

The receiver of the Stanford Financial Ponzi scheme was denied his post-verdict request to revive an $88 million fraudulent transfer claim against Gary Magness. The receiver, who believes that court gave improper jury instructions on the standard for a good faith defense, has vowed to appeal the ruling.

Thursday, August 31, 2017

August 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for August 2017.  The report stories reflect: 5 guilty pleas or convictions in pending cases; over 51 years of newly imposed sentences for people involved in Ponzi schemes; at least 14 new Ponzi schemes worldwide; 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. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Connie Apostelos aka Connie Coleman, 51, was sentenced to 2½ years in prison for her role in the $70 million Ponzi scheme run along with her husband, William Apostelos. The scheme defrauded about 480 victims who lost about $20 million in the scheme. Connie Apostelos operated and oversaw multiple companies, including Coleman Capital Inc. and Silver Bridle Racing LLC. The scheme promised investors returns from stock, real estate, gold and silver, and loans to businesses.  William Apostelos previously plead guilty and was sentenced to 180 months in prison. Steven Scudder, 62, previously plead guilty to using his position as an attorney to facilitate the scheme. Scudder was previously sentenced to 14 months in prison.

Dawn J. Bennett, 55, was charged by the SEC with running a $20 million Ponzi scheme through her companies, DJB Holdings and DJBennett Holding LLC. The scheme involved selling notes issued by a luxury sports apparel firm to elderly and unsophisticated investors. Bennett promoted her standing as Barron’s-ranked top woman advisor and had a self-financed weekly radio show called Financial Myth Busting with Dawn Bennett. She also ran Bennett Group Financial Services. Bennett spent the money to support an extravagant lifestyle including purchases of jewelry, clothing, payments on a penthouse condo and a $500,000 annual 20-year lease for a suite at the Dallas Cowboys stadium. Bennett tried to cast spells on SEC investigators, including a “Beef Tongue Shut Up Hoodoo Spell.”

Louis Martin Blazer III agreed to pay $2 million and to be barred from the financial advisory business in connection with his activities run through Blazer Investment Advisors and Blazer Capital Management. Blazer agreed to settle the SEC charges but without admitting to the alleged Ponzi-like scheme. Blazer took money from professional athletes to fund movie projects: one titled Mafia: The Movie and another called Sibling.

Christopher Bohnenkamp, 42, who pleaded guilty to charges relating to a Ponzi scheme in April, was sentenced to 5 years and 3 months for his operation of a Ponzi scheme run through his companies, Treasure Valley Marine and Bohnencamp’s Whitewater Customs. His companies built boats and trailers, but victims lost $3.2 million in the scheme.

Michael S. Burnos, 72, was charged with fraud in connection with the sale or purchase of securities. He promised investors 20% returns from the purchase and sale of collectibles. Burnos had previously been sentenced to more than 7 years in prison for defrauding over 1,300 victims out of more than $14 million, telling investors that he was buying and reselling musical instruments for a profit.

Cardis International, a credit card company, is under investigation for allegedly running a Ponzi scheme that may have involved over $70 million. The scheme involved at least 31 investors who were promised returns of 12 to 18%. Cardis allegedly faked ties to Jay-Z’s company Roc Nation to lure investors.

Darren Dash was accused of running a Ponzi scheme that allegedly defrauded about two dozen athletes. Dash once headed Pro Player Funding, which is a subsidiary of Platinum Partners, also accused of running a $1 billion Ponzi scheme.

Timothy Durham, 55, the former CEO of National Lampoon Inc. was ordered to pay a $1.3 million penalty in connection with the SEC’s action against him, but the SEC’s request for $230 million in disgorgement was denied. Durham ran a Ponzi scheme through Fair Finance, defrauding about 5,000 investors. Durham was previously sentenced to 50 years in prison in connection with the scheme.

Robert H. Edmunds III, 75, pleaded guilty to charges relating to his solicitation of at least $1 million to invest in various Ponzi schemes such as Web Booth Inc., Branson City Limits, Inc., Douglas Network Enterprises, and Sunshine Real Estate Development Inc. Edmunds was under investigation in 2004 but remained at large, living in Belize for almost 12 years.

Tzvi Erez, 49, was sentenced to 8 years in prison in connection with a Ponzi scheme that defrauded 12 investors out of 6.2 million. Erez offered investors 30% interest per year from printing contracts that actually never existed. He showed investors bogus printing contracts to lure them into the scheme.

Daniel J. Flynn III, 53, had his plea agreement approved, which provides for Flynn to pay back more than $20 million to the 73 victims of his scheme. Flynn pleaded guilty to certain counts relating to his real estate investment scheme that prosecutors called “similar to a Ponzi scheme.”

Brianne Ghallagher, 32, is wanted in connection with an alleged Ponzi scheme that she ran while employed with Bromm’ Sod Farm. Ghallager, who ran the sod division, collected cash payments from customers but never turned the money over to her employer. Instead, she unlawfully used customers’ credit cards to pay on accounts of customers who previously paid in cash.

Rick Koerber, 44, started his trial for allegedly running one of the largest Ponzi schemes in Utah. He allegedly took in $100 million in a real estate scheme run through Founder’s Capital and FranklinSquires Cos. Investments. The funds were to be used for “equity milling” in real estate transactions – buying homes and renting or reselling them. Koerber has pleaded not guilty and has accused regulators and prosecutors of misconduct.

Thomas Lanzana and his company Blackbox Pulse (Unique Forex), and Nikolay Masanko and his company White Cloud Mountain, LLC were sued by the CFTC on allegations that they were running a $700,000 Ponzi scheme. They solicited investors to participate in forex trading pools and other investments. The scheme defrauded at least 31 investors.

Wayde McKelvy, 54, sought to dismiss a 10 count indictment on charges relating to his role in the $54.5 million Ponzi scheme through green energy company, Mantria Inc. Mantria was run by Troy Wragg and Amanda Knorr and promised investors returns of up to 484%. McKelvy pitched the scheme through get-rich-quick seminars promising to make investors “filthy, stinking rich.”

Raymond K. Montoya, 69, was charged with running a Ponzi scheme through RMA Strategic Opportunity Fund LLC. 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.

Jason Nissen, 44, pleaded not guilty to charges that he ran a Ponzi scheme through National Event Co., although it is believed that he is trying to work out a plea deal. The scheme involved $70 million invested in connection with a buy and resell ticket business. Nissen was also denied leave to travel to Las Vegas in advance of the Mayweather-McGregor fight.

Ariel Quiros, 59, consented to a preliminary injunction sought by the SEC who alleged that Quiros ran a “Ponzi-like” scheme to supposedly fund upgrades at the Vermont Jay Peak ski resort. A separate investigation is pending against Quiros and his partner, Bill Stenger, by the U.S. Attorney’s office, but no criminal charges have yet been filed.

Benjamin Rose, 35, was arrested on charges that he ran a Ponzi scheme that allegedly defrauded victims out of over $450,000. The scheme involved returns supposedly generated from the remodel and resale of properties that he purchased using investor funds.

Randall Rye, 26, was sentenced to 5 years and 10 months in prison in connection with a $1.7 million Ponzi scheme run through Faster Than Light Trading. Rye claimed to have a “propriety algorithmic trading program” for options and futures trading.

Martin Shkreli, 34, was found guilty on two counts of securities fraud and acquitted on 5 other charges relating to what prosecutors called a Ponzi scheme. Shkreli used investor funds to form a new drug company, Retrophin. Shkreli called the case against him “a witch hunt” and stated in a streaming video after the conviction, “I don’t think I’m going to prison, by the way.”

Douglas Swenson, 69, and his sons, Jeremy Swenson, 44, and David Swenson, 40, and Mark Ellison, 69, saw their criminal convictions upheld on appeal. The three were convicted in connection with a Ponzi scheme run through Diversified Business Services and Investment. Douglas Swenson was sentenced to 20 years in prison. Ellison was sentenced to 5 years and the younger Swensons were sentenced to three years each.

Richard Paul Underwood, 65, and Colin P. Purcell, 56, were arrested in connection with their roles in an alleged $15 million oil Ponzi scheme. The arrests came after the indictment was unsealed, which followed guilty pleas from David R. Greenlee, 41, and David A. Stewart, 46, who admitted their involvement in the investment scheme. The scheme involved the companies, Southern Energy Group Inc., Black Gold Resources, and TennStar Energy Inc. At least 150 investors were promised returns of 15% to 50% per year from supposed drilling opportunities. Underwood was also charged with securities fraud for allegedly running a boiler room of telemarketers in Florida to sell the fake oil investments.

Kevin D. Wanner reached a settlement with the North Dakota Securities Department in connection with the Ponzi scheme run through Questar Capital Corporation. Wanner was a securities agent doing business through Precision Financial and allegedly sold fictitious certificates of deposit and unregistered interests in pooled investments to 66 victims.

Paul David Ward, 61, was charged with running a Ponzi-style” scheme that took in $700,000. Ward operated an aviation fuel supply business through Lebanon Aviation Service Inc. and wrote promissory notes and post-dated checks as part of the scheme.

Chris Young Yoo, 44, was sentenced to 9 years in prison and ordered to pay nearly $3.7 million in restitution in connection with a Ponzi scheme that he ran through Summit Asset Strategies. The scheme defrauded 17 investors.

Joseph Paul Zada, 59, lost his appear to the Eleventh Circuit seeking to overturn his conviction and 210 month prison sentence. Zada was convicted in connection with a scheme that defrauded more than 20 investors. He represented that he had connections to Saudi Arabian oil ventures but instead used the funds for his personal expenses. On appeal, Zada said that he borrowed money from people in good faith and anticipated paying them from an expected inheritance of $250 million.

INTERNATIONAL PONZI SCHEME NEWS 

Argentina

The Ponzi scheme, PayDiamond, is alleged to have claimed 30,000 victims and involve $60 million. The scheme, which started in Brazil, is targeting Bolivian immigrants in Argentina.

Australia

Michael Christopher Samra, 57, pleaded guilty to charges that he ran a $2 million Ponzi scheme. He was sentenced to 8 years and nine months in prison.

Cayman Islands

CWM FX is under investigation for running an alleged Ponzi scheme.

Finland

OncCoin is under investigation as part of a global crackdown against the scheme. The scheme is under investigation in India, Italy, and the United Kingdom.

India

Pradeep Sethy, the Group Chief of Artha Tatwa, along with directors Manoj Patnaik and Sri Krushna Padhi, were sentenced to 7 years in prison in connection with a Ponzi scheme run through the Artha Tatwa Group.

Devi Prasad Moharana, the head of Bandhan Financial Services, was arrested on charges that hundreds of investors were defrauded in a Ponzi scheme. Moharana has pleaded innocence.

Michael Ferreira, 77, had his bail plea rejected, along with Malcom Desai, in connection with an alleged Ponzi scheme run through Vihaan Direct Selling (India), a subsidiary of the Hong-Kong based direct selling company, ONet.

Sudhir Patil has been held in connection with an alleged Ponzi scheme run through Jeeo India. Seventeen people have been arrested in connection with the scheme that promised investors 1% profit per day. Customers were asked to become members and buy the company’s e-currency.

The government was authorized to sell at auction properties of Land India Real Estate Private Ltd. and Land India Assets Ltd. The proceeds are to be paid to investors defrauded in scheme run by the companies.

Malaysia

Arunmaguam has been accused of running a Ponzi scheme through Uni Pay Group.

Datuk Seri and Pahang and Kota Baru were arrested on charges that they ran a Ponzi scheme through MGCfx. The scheme promised investors returns of 10% per week through foreign exchange trading.

Philippines

Barbara May Garcia, Herley Jesuitas, Anthony Kierulf, Jose Tengco III, Oudine Santos, Nicoline Mendoza and Maria Pamela Morris were ordered to be put on trial in connection with their role as agents or brokers for Philippine International Planning Center Corp.