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

Kathy is a senior business trial attorney with more than 28 years experience prosecuting and defending claims for high net worth 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 detailed knowledge about 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, July 31, 2020

July 2020 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps
Below is a summary of the activity reported for July 2020. The reported stories reflect at least 10 new Ponzi schemes worldwide, 5 guilty pleas, 95 years of prison sentences, and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
   
Gregory Altieri, 53, the president of LNA Associates, was charged in New York with running a Ponzi scheme that took in between $75 million and $85 million from more than 80 investors. Altieri promised investors a 30% to 70% return within months from nonexistence wholesale jewelry deals where he would supposedly buy jewelry at closeout prices and resell it at a high profit.

Will D. Allen was sentenced to 6 years in prison for his role in a Ponzi scheme that he ran with his business partner, Susan Daub. They ran the scheme through Capital Financial Partners, which offered short-terms loans to professional athletes. The $31 million scheme defrauded investors out of $14 million. 

Silviu Catalin Balaci, 35, pleaded guilty to charges that he conspired to engage in wire fraud and sell unregistered securities linked to Bitclub Network. Balaci had been charged along with co-defendants, Matthew Brent Goettsche, Russ Albert Medlin, Jobadiah Sinclair Weeks, and Joseph Frank Abel. Balaci confirmed that the scheme brought in at least $722 million worth of bitcoin from investors and that BitClub never ran the bitcoin mining pools that had been represented to investors. 

Matthew Benjamin, 53, was charged in connection with an alleged scheme that defrauded investors out of $1.525 million. Investors thought they were investing in Benjamin’s cosmetics company, Clear Solutions, even though there was not really a company.

John D. Black aka John Barnes and his entities Financial Tree, Financial Solution Group and New Money Advisors, along with Christopher Mancuso and Joseph Tufo, were charged by the CFTC with operating a binary options and foreign exchange trading scheme. The scheme allegedly defrauded about 90 investors out of $14.5 million. Some investors were promised triple returns on their investment in 4 months, and one person was promised that a $100,000 investment would be quadrupled in three months. The FBI is currently searching for Black, and Mancuso and Tufo were arrested by authorities.

Hal H. Brown, Jr. was sentenced to 17½ years in prison and ordered to pay more than $17 million in restitution for his role in a $22.5 million scheme that defrauded at least 60 investors. He ran the scheme through OODLES, falsely claiming that the company owned hundreds of millions of dollars in intellectual property.

Gina Champion-Cain, 55, of California, pleaded guilty to charges stemming from a $400 million Ponzi scheme. Champion-Cain was the founder of American National Investments, which was charged by the SEC last year relating to an investment program that promised investors returns from loans to people seeking California liquor licenses. Crispin Torres, 53, the former CFO of American National Investments, also pleaded guilty to charges related to the scheme. Champion-Cain used at least $60 million of investor funds to pay expenses at her businesses and to pay for residences in Mission Beach and Rancho Mirage. 

Marvin Courson, and his company Alista Group LLC were charged by the CFTC on allegations that they were running a $900,000 Ponzi scheme involving precious metals. Company employees Christopher Kertatos and Luis Pineda Palacios were also named in the civil enforcement action. 

Christopher Dougherty, 47, was sentenced to 12 years in connection with a $7 million Ponzi scheme that he ran. Dougherty promised returns to his victims from investments in a 100-acre organic cattle ranch and a marijuana growing project.

William Neil “Doc” Gallagher, 79, was found liable for SEC charges related to a $29 million Ponzi scheme. Gallagher is a Christian radio personality and the author of “Jesus Christ, Money Master.”

Savraj “Sam” Gata-Aura, 33, co-conspirator of Renwick Haddow, pleaded guilty to running a workspace rental scheme that defrauded more than 800 investors out of about $36 million. Gata-Aura was sentenced to 4 years in prison and 3 years of supervised release for his role in the Ponzi scheme involving a co-working space company called Bar Works.

Alan Hansen, 49, of California, pleaded guilty to charges related to his role in the Ponzi scheme run by DC Solar. Hansen admitted that he signed fraudulent documents to convince a telecommunications company to invest in DC Solar. The scheme was run by Jeff and Paulette Carpoff, both of whom pleaded guilty earlier this year. Other co-conspirators were Joseph W. Bayliss, 44, Ronald J. Roach, Robert A. Karmann, 53, and Ryan Guidry, 53.

GPB Capital Holdings, which has been accused of running a Ponzi scheme, took between $3 million and $7 million in PPP loans. GPB previously represented that it had reported $1.8 billion from about 2,000 investors, but GPB has not paid redemption since 2018.

David Hu, 62, of International Investment Group, was arrested on charges that he ran a Ponzi scheme involving more than $100 million based on overvalued loans and fake assets. Hu represented that he specialized in trade-finance lending but allegedly mismarked millions of dollars of loan assets to cover up millions in losses. The company agreed to pay $35 million in March to settle fraud charges by the SEC. The SEC has also charged Hu, alleging that he sold at least $60 million in fake trade finance loans to other investors.

Naim Ismail, 60, was arrested on charges that he defrauded investors out of $15 million through a Ponzi scheme that targeted an Afghan Bank. Ismail convinced investors to invest in real estate projects that did not exist and used the money to fund his lavish lifestyle. 

John Law, 41, was indicted on charges that he conspired with Perry Santillo as part of a Ponzi scheme that took in approximately $115 million and resulted in losses to investors of $70.7 million. Santillo was the CEO of First Nationle Solution LLC, and Law offered and sold securities for the company.

Philip Lochmiller, 72, was granted a compassionate release due to his worsening dementia. Lochmiller had defrauded 400 people and was sentenced to 33 years in connection with a scheme run through his home mortgage companies, Valley Mortgage, Inc. and Valley Investments.

Professional Financial Investors Inc. and its primary fund, Professional Investors Security Fund Inc., filed for Chapter 11 bankruptcy protection in California. The corporate restructuring officer identified the Ponzi scheme-like operation that had been run by the late owner, Kenneth Casey.  The filing estimated that there were about 1,000 victims.

Philip Elvin Riehl, 68, of Pennsylvania was sentenced to 10 years in prison for his role in a $60 million Ponzi scheme that targeted members of the Amish and Mennonite communities. Riehl previously pleaded guilty. He operated Trickling Springs Creamery, which he abruptly closed following an FBI investigation.

William “Willie” Rittenbaugh, 49, of Texas was sentenced to 37 years in prison and ordered to pay restitution of $588,500 in connection with a cattle Ponzi scheme. 

Denise Gunderson Rust, 60, the wife of Ponzi schemer Gaylen Dean Rust, 59, pleaded guilty to charges that she held her husband run a $200 million Ponzi scheme. The scheme was run through Rust Rare Coin and involved a fake silver trading program. Gaylen Rust and his son, Joshua Daniel Rust, 37, are charged with fraud and money laundering conspiracy. Denise Rust admitted that she knew that Gaylen Rust’s accounts were not being used for silver trading.

Ronald “Wayne” Snyder, 47, an employee of Texas Express Funding, which is a subsidiary of the Bank of San Antonio, was said to be running a Ponzi-style scheme that involved $13.2 million. No criminal charges have yet been filed.

Troy Wragg, 38, was denied his request for early release due to COVID-19, after having served less than 2 years of his 22-year sentence. Wragg perpetrated a $54 million Ponzi scheme through Mantria Corp.


INTERNATIONAL PONZI SCHEME NEWS

Canada

Authorities ordered Todd Norman John Bezzasso, Wei Kai (aka Kevin) Liao, and Bezzaz Holdings Group Ltd. and Nexus Global Trading Ltd. to pay a total of $6.3 million in connection with a Ponzi scheme that defrauded 85 investors.

China

Authorities detained Zhao Don, co-founder of the crypto lending platform, RenrenBit.

Authorities arrested 109 individuals in connection with the PlusToken bitcoin scheme. The arrests put an end to the scheme that had more than 2 million participants, and it involved digital currencies exceeding $5.8 billion.

Mexico

Two promoters of the OneCoin Ponzi scheme were found dead in Mexico. The bodies of Oscar Brito Ibarra and Ignacio Ibarra were found stuffed in suitcases and dumped in a vacant lot.

New Zealand

Barry Edward Kloogh, 57, was sentenced to almost 9 years in prison for his role in a Ponzi scheme that defrauded victims out of at least $15.7 million.
Nigeria

Umanah Umanah, 62, was arrested in connection with his involvement in the Ponzi scheme, No Burn Global Limited. Umanah promised investors 50% interest within one week from his company that he said was a consultancy and entrepreneurship service provider.

Philippines

Authorities have warned against Forsage, a gifting scheme run by Lado Okhotnikov, as a possible Ponzi scheme. The scheme uses fees collected from new members to compensate existing members.

Singapore

Fok Fook Seng, 52, was convicted for his role in marketing the OneCoin scheme. OneCoin has been determined to be a fraudulent scheme run by Ruja Ignatova and Konstantin Ignatov. OneCoin’s lawyer, Mark Scott, was convicted on charges that he laundered $400 million for the scheme.

South Korea

Authorities are investigating an alleged cryptocurrency scheme known as Futurenet that allegedly defrauded at least 950 investors our of $16.66 million. Futurenet was founded by Stephan Morgenstern and Roman Ziemian

Tuesday, June 30, 2020

June 2020 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps 

Below is a summary of the activity reported for June 2020. The reported stories reflect at least 8 new Ponzi schemes worldwide and an average age of approximately 55 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Timothy J. Allcott, 58, and Thomas D. Renison, were charged in connection with an alleged Ponzi scheme run through ARO Equity LLC. In a parallel proceeding commenced by the SEC, it was alleged that Allcott and Renison raised more than $6 million from at least 15 investors, promising interest payments between 8% and 12% per year.

Dee Dee Brooks aka Doris Takooshian accepted a determination from FINRA that she be barred from association with any FINRA member as a result of her participation in unapproved private securities transactions totaling more than $1.77 million, including investments related to Woodbridge Group of Companies and Future Income Payments. Brooks did not admit or deny the allegations but agreed to FINRA’s sanction.

Rhoda Burkholz had a final judgment against her in connection with an options trading Ponzi scheme conducted by her husband that defrauded at least 55 investors.

Craig Carton, 51, was released from prison after serving only 14 months of his 42-month sentence. Carton, a popular radio host, used his position to defraud investors in an event ticket scheme that involved $5.6 million.

Craig L. Clavin, 61, was charged in connection with an alleged $500,000 Ponzi scheme run through Lighthouse Futures Ltd. Clavin solicited investments into a fund known as Lighthouse Futures Commodity Pool that guaranteed returns from the commodities market.

William S. Evans of Kentucky was charged by the CFTC on allegations that he was running a Ponzi scheme through Turning Point Investments. The scheme allegedly solicited at least $10 million from investors and promised returns from a commodity fund that traded S&P futures.

Vincent P. Falci, 60, was denied his request for a compassionate release due to the coronavirus. He has only served one of a 15-year prison term. Falci had been convicted or running a Ponzi scheme through his investment vehicles, Saber Funds and Vicor Tax Receivables LLP.

Maurice Fayne aka Arkansas Mo, 37, of Georgia was indicted on charges that he used funds received from the Payback Protection Program that were intended to help small businesses survive the COVID-19 pandemic to help fund a Ponzi scheme and his lavish lifestyle. He used some of the PPP loan proceeds to assist him with the alleged scheme that had allegedly been running for 5 years. Over 20 individuals invested over $5 million in his company, Flame Trucking

Erik Hass was charged in connection with a $2.1 million scheme that defrauded at least 21 investors out of about $1 million. The CFTC is seeking an injunction against Hass and his company, Simply Gains.

Todd H. Lahr, 59, of Pennsylvania, agreed to settle with the SEC and pay more than $1.14 million on charges that he defrauded at 10 of his law firm clients. Lahr ran the scheme with Thomas Megas and they promised returns in business ventures included mining operations in Papua New Guinea and real estate investments in Barcelona and London.

Robert Cortez Marshall must pay the SEC more than $3.2 million in disgorgement and fines for a mobile advertising scheme he ran through R.B.J. Generational Wealth Management LLC which did business as Adz on Wheelz.

Jialin Niu and Troy McBride of Washington were sued on allegations that they defrauded investors in a Ponzi scheme based in China. The scheme promised returns through a company called Golden Sun Finance Education that was supposedly to finance expansion of a Seattle-area commercial real estate empire.

Modern Money Team was charged by the SEC for running a Ponzi-like cryptocurrency scheme. That raised over $12 million. The SEC sought to freeze the assets of Daniel Putnam, Jean Paul Ramirez Rico, and Anges A. Rodriguez. The scheme was run through MMT Distribution LLC and R&D Global LLC.

Nathan Ward Pyles and his real estate company, Shiloh Management Services, of Idaho had a judgment entered against him for his role in the Ponzi scheme that raised over $28 million from 55 investors.

Nevin Shapiro, 51, was released from prison due to COVID-19 and will be allowed to serve the rest of his 20-year sentence at home. He was scheduled for release in 2027. Shapiro was convicted in connection with a $930 million Ponzi scheme.

Brenda Smith, 59, of Philadelphia, was charged on allegations that she was running a Ponzi scheme. The scheme took in more than $68 million from about 40 investors and promised returns as high as 33%. Smith transferred tens of millions of dollars out of Broad Reach Capital to entities she controlled.

Paul Horton Smith, 56, of California was charged by the SEC on allegations that he defrauded senior citizens out of millions of dollars in a Ponzi scheme. Smith allegedly ran the scheme through Northstar Communications and promoted advisory, tax and financial planning services to create a trusting relationship used to solicit investors.

Phillip Roy Wasserman, 62, and Kenneth Murry Rossman, 62, were indicted on charges that they were running an alleged “fraudulent insurance venture” that included Ponzi-style payments to investors. Wasserman is a former lawyer and licensed insurance agent, and Rossman is a certified public accountant and licensed insurance agent. They defrauded victims out of at least $6.3 million. Wasserman is the self-described “Annuity King” and ran other investment businesses through Phillip Roy Financial Consultants and Phillip Roy Financial Services.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Stephen John Anderson, 32, pleaded guilty to charged related to an automatic teller machine fraud. Anderson falsely stated that OneCash had purchased 143 ATMs, and 11 investors lost over $1.2 million in the scheme.

Gunter Lang, 80, was imprisoned in connection with a $6.5 million Ponzi scheme through the online platform, IG Markets. Lang was an unlicensed financial trader who defrauded about 32 investors.

Canada

The Ontario Securities Commission reports that QuadrigaCX is essentially a Ponzi scheme and that the firm collapsed due to fraud by the company’s co-founder and CEO, Gerald Cotten. The firm lost about $115 million from Cotten’s fraudulent trading. The scheme had about 76,000 clients. Cotten died in India in December 2018 at the age of 30.

Det. Sgt. Larry Renton, 56, is being investigated for an alleged Ponzi scheme that promised investors 21% to 26% returns. The scheme targeted fellow officers and about 40 officers and other civilians invested between $15 million and $20 million.

China

Chinese authorities are investigating the disappearance of the Iranian-based crypto exchanged called Bitisis. It is believed that the cryptocurrency exchange platform that targeted Chinese investors is a Ponzi scheme.

India

Authorities filed charges against 12 people in connection with an alleged Ponzi scheme run through Gold Sukh Trade India Limited.

Indonesia

Russ Albert Medlin was arrested as the suspected head of the $722 million Bitcoin Ponzi scheme known as BitClub Network. Medlin was arrested on sex charges and faces extradition to the U.S.

Taiwan

Ronald Aai was accused of defrauding 1,000 Taiwanese out of $30.32 million in an alleged cryptocurrency scheme known as Cloud Token.

Litigation News

The Eighth Circuit revived a hedge funds lawsuit against JP Morgan Chase & Co. in connection with the Thomas Petters Ponzi scheme. Ritchie Capital Mgmt. v. JP Morgan Chase & Co., 2020 U.S. App. LEXIS 17471 (8th Cir. June 3, 2020)

The Eleventh Circuit affirmed the dismissal of the Receiver’s lawsuit against JP Morgan Chase Bank NA in connection with the Coravca Distributions LLC and Timeline Trading Corp.

The U.S. Supreme Court declined to stop lawsuits by the trustee of the Bernie Madoff Ponzi scheme against foreign banks and investors. The claims are for about $3 billion that was paid out to them before the collapse of the Madoff scheme.