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

Monday, July 31, 2017

July 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for July 2017. The reported stories reflect at least 10 new Ponzi schemes worldwide: over 58 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 49 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.

David Brian Binder, 61, was sentenced to 2 years and 6 months in prison for his role in helping Roberto Trinidad Del Carpio Frescas, 40, in running a $14 million Ponzi scheme. Del Carpio represented that he was a licensed investment broker and energy market expert. He ran the scheme through SMI International Institute LLC aka Stock Market Investment, Del Carpio Trading Institute LLC, and Del Carpio Holdings. Del Carpio was previously sentenced to more than 19 years in prison. Binder previously pleaded guilty to assisting Del Carpio in keeping proceeds away from creditors and lying to investors about protecting their investments.

Seth Adam Depiano, 36, was charged in connection with an alleged $20 million real estate Ponzi scheme that he ran through The Rental Group, U.S. Funding and Home Services LLC, and Draymond Homes. Depiano allegedly promised investors returns from investments generated from the renovation and resale of residential properties and rental income.

Joey Stanton Dodson, 52, was accused by the SEC of running an alleged $15.5 million Ponzi scheme through Citadel Energy Partners LLC. The scheme allegedly defrauded about 50 investors.

Mark Dulik, 31, was charged in connection with a $100,000 alleged scheme run through Rework, Inc. Rework claimed to provide cloud-based software services.

Stephen  S. Eubanks, 48, was sentenced to 2½ years in prison and was ordered to pay more than $437,000 in restitution in connection with a Ponzi scheme that he ran through Eubiquity Capital. He took in more than $700,000 from more than 20 investors, posing as a hedge fund manager.

Renwick Haddow aka Jonathan Black was charged in connection with an alleged fraud run through Bar Works and Bitcoin Store Inc. Haddow collected $37 million from over 200 Bar Work investors. Bar Works purportedly would rent or buy retail spaces, turn them into offices with a bar and sublet desks. The scheme solicited investments to fund expansion and promised guaranteed double digit returns. Haddow was also named in a lawsuit brought by 51 plaintiffs against Bar Works alleging $4.1 million in lost investments and $20 million in punitive damages. The investors allege that they were guaranteed annual return of 16% and a return of principal in 10 years. Another lawsuit filed by 71 investors against Haddow also names his wife, Zoya Kiselova aka Zoe Miller, alleging that she assisted Haddow in connection with the Bar Work entities. Haddow had been a fugitive since he was charged, but was apprehended in Morocco later in the month.

Michael S. Holcomb, 74, Gary L. Holcomb, 72, Jennifer L. Chalmers, 46, and Kristen S. Van Breemen, 44, had new charges issued against them in connection with an alleged $40 million Ponzi scheme they ran through Berjac of Oregon and Berjac of Portland. The scheme allegedly defrauded more than 400 investors through their insurance premium finance businesses. They were first indicted in 2015 but new charges of mail fraud were added. Michael Holcomb and Gary Holcomb, who are brothers, managed the entities, and Michael’s daughters, Chalmers and Van Breemen ultimately took over day to day operations at the businesses. In 1994, Peter R. Snook was convicted in connection with the operation of Berjac of Washington as a Ponzi scheme, and in 2013, Michael J. Turnock was convicted of operating Bridge Premium Financing, fka Berjac of Colorada, as a Ponzi scheme.

Cheryl L. Jones, 62, was sued by the SEC in connection with the Ponzi scheme run by her brother, Mark A. Jones. The scheme involved investments for a bridge loan program for Jamaican businesses. Jones was paid 10% commissions for soliciting investors into the Bridge Fund and was repaid her full investment, a higher rate of return than other investors and a monthly legal retainer. Other investors lost most of their money.  Mark Jones pleaded guilty earlier this year and is currently serving a 70 month prison sentence.

Shamika Luciano, 34, was sentenced to 5 years of probation for her role in the Ponzi scheme run by Nicholas Cosmo. Luciano was Cosmo’s executive assistance while Cosmo ran a $400,000 million Ponzi scheme that defrauded more than 5,000 investors.
  
Joseph Wayne McCool, 70, was indicted on charges that he defrauded investors out of $10 million. Two other individuals, Donald Manning, and Cameron Campbell, were indicted in 2006, but McCool has been missing since then. The three allegedly ran a scheme through Brixon Group Ltd. in which investors were promised 15% per month returns in connection with a high-yield insurance portfolio through a supposed European investment company. From their returns, 5% was to be put back into the scheme to buy insurance on the original investment.

Mark Moskowitz, 48, was sentenced to 33 months in prison in connection with a $675,000 Ponzi scheme that he ran through Edge Trading LLC and Edge Trading Partners L.P. Separately, Moskowitz had previously been ordered to pay a $1 million civil penalty for selling fraudulent securities and misusing investor funds. Moskowitz told investors that Edge Trading was invested in U.S. and foreign equities, futures contracts, and option contracts.

Jason Nissen and his brother, Robert Nissen, were enjoined from selling about 300 tickets for this year’s U.S. Open Tennis Championships. Their company, National Events Holdings LLC, got approval from the bankruptcy court to sell about 11,000 of remaining ticket stock, stating that the tickets would become worthless if not sold soon.

Carl Frederic Sealey, 42, and Eric Enge, 44, were indicted on charges that they were running a Ponzi scheme through Global Standard Industries and SEK Industries. They used their investment firms to allegedly defraud about 21 investors out of $1.6 million, promising 8.5% to 10% returns from investments in short-terms loans, operating expenses and real estate transactions.

Shirley Sooy, 66, began her 4 year, 2 month prison term for her $42 million Ponzi scheme. Sooy ran the scheme through a collection of companies known as TransVantage Group. The companies provided firms with audited freight bills generated by carriers and freight forwarders hired by those firms and was supposed to pay the carriers with funds provided by the firms.

Justin Troy Spearman, 29, was accused of selling royalty interests in oil and gas leases on land in Texas in what is alleged to be a Ponzi scheme. Spearman, who was recently released from prison after serving time on wire fraud charges, is being held in prison in lieu of bail.

Christopher Swartz, 46, was sentenced to 11½ years in prison in connection with a Ponzi scheme that defrauded investors out of more than $19 million. Swartz devised a promissory note scheme in which he defrauded investors through food and restaurant entities such as Jreck Subs, North Country Hospitality, Ultimate Franchise Systems, Caffino Live Roast, Madeline Ventures, Grace Ventures, and Obees.

Germaine Theodore, 37, was sentenced to 5 years in prison in connection with a Ponzi scheme that he ran through TGC Movement and Save My Future. The scheme promised customers “big reductions” in their monthly bills, up to 35%, and defrauded over 200 victims out of approximately $298,000. Theodore promised them the reductions if they paid 65% of the outstanding balance on those bills plus fees, and Theodore would supposedly pay the clients’ creditors.

Carol J. Wayland, 80, and her son John C. Mueller aka John Clark aka Bob Allison, 53, were sued by the SEC, along with their Wyoming entity, Kentucky-Tennessee 50 Wells/400 BBLPD Block LP, on allegations that they ran a $2.4 million Ponzi scheme that defrauded 41 investors. The complaint alleges that they raised the money by cold-calling investors from a California boiler room, using the fictitious name “Sahara Wealth Advisors.” Also named in the SEC complaint are defendants HP Operations LLC, C.A.R. Leasing LLC, Mitchell B. Dow aka Dave Baker, 54, Barry Liss, 59, and Steve G. Blasko aka Steve Gerald, 47.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Michael Christopher Samra was accused of running a $2 million Ponzi scheme that defrauded at least 6 victims through his failing business, ALC Group Pty Ltd.

Bradley Keith Silber was charged by authorities with fraud in connection with a property development scheme run through Capital Growth International Club and All About Property Development. The scheme promised mostly elderly victims returns of up to 20%.

China

Members of Shan Xin Hui (Kindness Exchange), an investment firm, protested in Beijing, seeking the release of founder Zhang Tianming. Authorities say the investment scheme is a fraud, but some protesters say that Shan Xin Hui has benefited a lot of people in need. The scheme has recruited more than 4 million members in the past 12 months, promising returns of 30% and bonuses for those who introduce new investors. 67 people were detained in connection with the protest.

Chu Hoi-yan, 36, and her husband, Kevin Au Yeung, 39, were accused of defrauding 14 people in Hong Kong in an alleged Ponzi scheme involving luxury bags and watches which were to be sold at a profit.

England

David Dixon had two years added to his sentence when he failed to pay $353,000 pursuant to a confiscation order. The two year default sentence was added on to the original 3 year, 10 month sentence he is serving after pleading guilty to running an alleged no-risk gambling syndicate through Arboretum Sports (U.K.) Limited.

India

Ashok Kumar Patnaik was sentenced to 3½ years in prison in connection with a Ponzi scheme that he ran through six companies including: Micro Leasing and Funding, Micro Hotels, Micro Constructions, Micro Hospitals and Micro Media.

A charge sheet against OneCoin in India, a purported digital currency scheme, includes Bulgarian national Rjua Ignatova, the founder and CEO of OneCoin.

Charges were filed against Basudeb Bagchi and Avik Bagchi in connection with their role in the operations of Prayag Infotech Hi-Rise Limited and Prayag Infotech Network Private Limited. The total amount collected from investors is believed to be Rs 2,862.

Authorities conducted searches of five locations relating to an alleged Ponzi scheme called Uni Pay Group run by Kamal K. Bakshi and A K Singh. Bakshi was taken into custody in connection with the alleged scheme.

Philippines

Veronica Macpherson, 37, and her company, Macro Realty Developments Pte Ltd. are under investigation by authorities for running a suspected Ponzi scheme. The scheme promised investors up to 18% returns from investment in property developments and took in over $110 million. The scheme is being investigated in Australia, Singapore, and Malaysia as well. 

South Africa

Graeme Minne, 54, and Carolina Frederika Minne, 52, were convicted on fraud charges relating to a multi-million rand Ponzi scheme that defrauded over 930 victims. The scheme took in R278,786,853 and promised victims returns on forex trading of up to 65%.

Thailand

Chatchayont Pornbaiyok and Patthachak Theppasorn were accused of running a Ponzi scheme that defrauded about 700 people out of at least 100 million baht.

Vietnam

Ly Senleap, 31, and So Sothearoth, 30, were arrested in connection with an alleged Ponzi scheme run through FUGI Investment Excellence. The scheme allegedly promised investors a 9.8% monthly return on investments and defrauded about 150 victims. 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Eleventh circuit ruled that a group of federal employees who lost funds in the Ponzi scheme run by Wayne McLeod could not sue the government for having hired McLeod to give them financial advice. The court found that sovereign immunity applies because the claims were based on misrepresentations.

The Eighth Circuit declines to rehear argument on whether Ponzi scheme losses were covered by insurance. The court previously ruled that 3M’s insurers did not have to cover losses in connection with the WG Trading Co. LP Ponzi scheme.

The  CFTC sought default judgments against Cory Williams and his investment company, Williams Advisory Group LLC, seeking a civil monetary penalty of more than $9.7 million along with restitution.

Friday, June 30, 2017

June 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for June 2017. The reported stories reflect: 4 guilty pleas or convictions in pending cases; over 44 years of newly imposed sentences for people involved in Ponzi schemes; at least 6 new Ponzi schemes worldwide; and an average age of approximately 57 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.


Rodney Allen, 65, is missing amid allegations that he was running a fraudulent scheme through his securities investment company, KA Investments Inc. Allen owes more than $1.1 million to investors. His accounts were frozen after his disappearance. Allen’s wife said that Allen took his passport, gun and cash from their safe.

William Apostelos, 55, was sentenced to 15 years in prison and ordered to pay restitution in excess of $32 million. Apostelos ran a $70 million Ponzi scheme through his firm, WMA Enterprises LLC, in which about 480 victims lost about $20 million.


Hugh Monroe Dyson, 67, was convicted of running a Ponzi scheme through his fictitious oil and gas drilling firm called Keyport Oil. He used scissors, tape and a copier to fabricate stock certificates for investors, who lost more than $289,000.


GAW Miners and ZenMiner, founded by Homero Joshua Garza, were ordered to pay $10.3 million in disgorgement and interest, plus a $1 million penalty, in an SEC action against them. Garza offered investors shares in a bitcoin mining operation and allegedly defrauded over 10,000 investors out of nearly $20 million.

Omar Hafez, 25, was sentenced to 46 months in prison and ordered to pay $1.5 million in restitution after pleading guilty to charges that he ran a Ponzi scheme through a number of entities, including Lotus Global. Hafez misrepresented that he had access to shares of companies before their high-profile initial public offerings. Over $1.5 million was invested in the scheme.


Stephen J. Hatch, 68, was sentenced to 5 years in prison for running a $70 million Ponzi scheme that defrauded 110 investors. The scheme involved investments in land in Arizona and Hatch preyed on Christian victims to invest in the real estate scheme. Hatch had previously pleaded guilty and one of the terms was that Hatch’s children, Stephen D. Hatch, Adam Hatch, Ryan Hatch, and Jessica Hatch, would not be charged.


Merl William Hickman Sr., 68, sought commutation of his 160 year prison sentence in connection with a scheme run through The Hickman Agency. His request was denied. About 160 investors lost more than $8 million. Investors were promised returns of 20% but no money was ever invested. Hickman’s son, Merl William “Billy” Hickman Jr., served a 5 year prison terms in connection with the scheme.

Patrick Kiley
, 79, had his 20 year prison sentence upheld by an appellate court. Kiley sold investments in foreign currencies on the radio on his show “Follow the Money” which was broadcast on a Christian radio network. He defrauded more than 700 people nationwide in a $194 million Ponzi scheme.


Karen McClaflin, 58, pleaded guilty to charges alleging she was running a Ponzi scheme through her franchise of “We Buy Ugly Houses” which she named Trademark Properties and Trademark Reality. The business used investor money to supposedly purchase and renovate distressed houses, then reselling the houses at a profit. Trademark filed bankruptcy and McClaflin moved the investors to a new company called Homesource Partners which did the same fix and flip business model. She promised them 6% to 15% profits and offered them trust deeds to secure their position. 


Randy Miland, 63, was sentenced to 7 years and 6 months in prison and ordered to pay $214,000 in restitution for operating a Ponzi scheme that defrauded investors out of $500,000. Miland fraudulently solicited money from 10 investors, promising them to invest in futures and other investments. He had previously been convicted in another fraudulent scheme and sentenced to 55 months in prison.


Raymond K. Montoya was charged with running a $30 million Ponzi scheme through his companies, Research Magnate Advisors LLC and Resource Managed Assets LLC. He allegedly use investors’ money for his personal benefit and was able to raise funds by exaggerating the size of his investment funds and by inflating returns.

John Kevin Moore pleaded not guilty to charges relating to an alleged $2 million Ponzi scheme run through a mining company called Big Sky Mineral Resources and a fine art investment company called Glacier Gala.


Jason Nissen, 44, was accused of running a $70 million Ponzi scheme that he ran through his ticket company, National Event Co. found at NECO.com. Nissen deceived a private equity firm and a diamond wholesaler into loaning him money to buy tickets to the Super Bowl, “Hamilton,” Adele concerts, and the US Open. National Event Holdings LLC filed a Chapter 11 bankruptcy petition as a result of the alleged fraud conducted by Nissen. The company’s subsidiaries National Event Co. II LLC, National Event Co. III LLC, National Events Intermediate LLC and World Events Group LLC also filed their own Chapter 11 bankruptcy petitions.

Rodney Scott Phelps (no relation to the author) was indicted on charges that he ran a Ponzi scheme through Maverick Asset Management LLC along with Jason Castenir. The scheme involved an alleged oil and gas venture in Belize as well as a supposed investment in a casino.


David Phoenix has been accused by former clients of running a Ponzi scheme in a lawsuit filed in Los Angeles. Phoenix is an interior designer for many celebrities and has been accused of taking millions of dollars to buy goods but instead delivering cheaper goods or no goods at all.


Peter Ressler, 70, pleaded guilty to running a $3 million fraudulent scheme. Ressler is a former partner with Groob, Ressler & Mulgueen, which was one of Connecticut’s oldest bankruptcy firms. The scheme was equated to a Ponzi scheme in the plea agreement. Ressler took retainers from at least 30 clients that were earmarked for bankruptcy and tax matters, but instead used the money on personal and business expenses.


Timothy Sammons, 61, is facing extradition to the U.S. in connection with an alleged Ponzi scheme involving artwork. Sammons would acquire art from collectors, promise to find a buyer, and then sell or borrow against the artwork and use the money for himself.


Steven Scudder, 62, was sentenced to 14 months in prison for his role in the $70 million Ponzi scheme run by William Apostelos. Scudder served as trustee of the WMA Trust, a land trust that purported to secure investments made with Apostelos. Apostelos pleaded guilty and was sentenced to 25 years in prison for the scheme.


Gary Todd Smith, 47, pleaded guilty to charges relating to his role in a $64 million Ponzi scheme. The scheme was a complicated lending program in which old loans were repaid with new loans.

Jeffrey M. Stauffer, 69, lost his appeal in the Sixth Circuit regarding his conviction and 10 year prison sentence. Stauffer was convicted on charges relating to his $1.9 million foreign exchange Ponzi scheme.


Cecily Sturge, 69, was arrested on charges that she made material false charges to a federal agent regarding Scott Wolas’, her ex-husband’s whereabouts. Sturge allegedly passed off Wolas as her brother, named Cameron Sturge.  Wolas, 67, is a disbarred lawyer who is charged with operating a $1.5 million real estate investment scheme.

Cory Williams was the subject of an asset freeze requested by the CFTC for an alleged Ponzi scheme run through Williams Advisory Group LLC. The CFTC accused Williams of running a $13 million trading scheme that defrauded members of the Mormon Church.


Roger Williams was scheduled for trial in connection with an alleged Ponzi scheme in which about 100 investors lost about $2 million.

Michael Wright, 30, was accused of running a Ponzi scheme through a company called Wright Time Capital Group. The scheme took in more than $400,000 from investors and, although he represented that he invested those funds in foreign currency transactions, he used the funds to pay personal expenses and to make payments to earlier investors.


INTERNATIONAL PONZI SCHEME NEWS


Abu Dhabi

Officials arrested 54 people in connection with a luxury car scam that defrauded over 1,000 victims. The scheme involved the purchase of second-hand cars using post-dated checks. The cars would then be sold to the victims, but not delivered. The money would be used to pay back previous investors. Investors were initially promised 100% returns on their money, which was later revised to 70 – 80%.

Australia


Bill Vlahos faced charges that he defrauded more than $120 million from members of his punting club in a Ponzi scheme. It is alleged that Vlahos defrauded hundreds of investors through his scam betting syndicate, The Edge

Cambodia


Teng Saroeun and Teng Makara were arrested and questioned with respect to the operations of Investment Consultant Association and Empire Big Capital Limited. The companies are believed to be operating a Ponzi scheme, promising monthly returns of 10%. The scheme allegedly defrauded 7,000 people out of $60 million.


Canada


Jeremy James (Jay) Peers was sentenced to 3½ years in connection with a Ponzi scheme that he ran through Federal Mortgage Co. and the related management company, Peers Foster Kristiansen Inc. The companies went bankrupt, leaving $77 million in debt.


India


Sunil Panda, the director of Green India, was sentenced to 3 years in prison for his involvement in a Ponzi scheme.


Venkatachari Sampath, the head of Sastra Enterprises, Ltd. was sentenced to 4 years in prison. Sastra had collected 50 crore from investors, offering high returns, but did not return at least 3.3 crore.

Ashraf Khan was arrested after having jumped bail several years ago. Khan is accused of involvement in several Ponzi schemes from 2011.

Regulators began investigation of an alleged Ponzi scheme run through Webwork Trade Links, a cash-for-clicks scheme. The scheme allegedly involved about $772 million, with payouts in bitcoin.



New Zealand


We Grow Bitcoins was accused of running a fraudulent scheme. The scheme promised investors $148,300 monthly returns and required a NZ$30 million entry fee.

Paul Hibbs was charged with defrauding investors in a Ponzi scheme run through Hansa Limited and Cameron Gladstone Investments Limited.


Guy Edwards Sayers was accused of soliciting investors to invest in Arena Capital, trading as BlackfortFX, which is believed to be a Ponzi scheme. 


South Africa


Myles Ndlovu, 34, was arrested in connection with an alleged scheme run through Ponzi Scheme Profit Trading.


Uganda


Equity Bank, under the instruction of its parent Bank of Uganda, suspended an account belonging to Magara Smart Protus, the promoter of an online sports trading platform called D9 Club. The club promotes high returns from sports trading on a site called BetFair which places bets on different sports and offers “bonuses” every Monday for 52 weeks through bitcoins. BetFair was founded in Brazil last year by Danilo Santana and recruits in Uganda and Kenya.

Vietnam


The government issued a strong statement against OneCoin, an alleged Ponzi scheme. The government says that it did not license the company and the Vietnamese license it claims to have is a forgery. Norway and Belize are also investing this scheme.


NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES


The Second Circuit affirmed a decision that backed the decision of the trustee of the Bernard Madoff scheme to ignore inter-account transfers when calculating claims of customers.

The trustee over the Bernard Madoff investment firm case settled with the estates of Madoff’s two sons. The settlement of $23 million will leave the estates of each brother with $3.75 million combined.


The Eighth Circuit upheld a lower court ruling that the insurers of 3M Co. do not have to cover 3M’s losses in the Ponzi scheme of WG Trading


The receiver over JCS Enterprises which operated Virtual Concierge Machine filed a new round of fraudulent transfer lawsuits seeking to recover funds for the defrauded victims. The scheme defrauded about 1,800 victims out of $80.8 million. Investors believes they were purchasing more than 22,500 Virtual Concierge machines which they were told would be placed in hotels, casinos and sports venues. They were promised $300 a month from advertising on the machines. In reality, only 84 machines were ever produced.

A court approved a settlement of more than $4.2 million between the receiver of the Arthur Nadel $168 million Ponzi scheme and Wells Fargo Bank.

A court declined to dismiss a lawsuit against General Electric Capital Corp. for its alleged participation in the $3.6 billion Ponzi scheme run by Tom Petters. The court allowed a lawsuit by the trustee of Palm Beach Finance Partners LP to proceed against GECC, finding that the trustee had standing to bring the lawsuit and that the trustee of the Petters case did not have exclusive standing to bring the claim.


The Eighth Circuit upheld a lower court’s ruling denying 69 investor plaintiffs the ability to recover from St. Louis Bank in connection with the Martin Sigillito Ponzi scheme.