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

Tuesday, July 31, 2018

July 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for July 2018. The reported stories reflect at least 10 new Ponzi schemes worldwide; over 40 years of newly imposed sentences for people involved in Ponzi schemes; 3 guilty pleas or convictions, 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.

Michael R. Casey, 71, faced charges in Texas that he defrauded 700 people through an online commodities business called Commodities Online LLC that allegedly ran a $19 million Ponzi scheme.  Casey had been on the run for 4 years. He had first worked as outside counsel for the business and later became its president. Investors were promised returns of 33% to 35%.

Dillon Dean, 26, was fined $1.9 million for defrauding about 600 investors in a Bitcoin scheme. A court in New York ordered a default judgment against Dean and his company, The Entrepreneurs Headquarters Limited, finding that they engaged in a fraudulent scheme involving Bitcoin. Dean, who has disappeared, claimed that investors could earn returns between 15% and 50%. Starting in August 2017, Dean claimed that his site had been hacked and he stopped paying returns. Meanwhile, Dean started another website called “Real Trade Profits,” which also solicited investments in Bitcoin.

Sergio Delmico and his companies MNV Energy LLC and MNV-K LLC were sued by a group of investors accusing the gas station operators of running a fraudulent scheme. Wellington Siqueira Vilela and Ricardo Botos da Silva Neves were also named in the lawsuit. The defendants are alleged to have been running a Ponzi scheme, which promised investors 1% returns per month from the gas station operations.

Francisco Plascencia Esparza, 46, was sentenced to 6½ years in prison in connection with a $12 million real estate Ponzi scheme. Esparza previously pleaded guilty to the scheme in which he told investors he would be acquiring real estate with their funds. About 70 investors were defrauded in the scheme.

Carolyn Grant, 63, was sentenced to 6½ years in prison in North Carolina and was ordered to pay restitution of $13.5 million for her role in a Ponzi scheme that defrauded more than 65 people out of $13 million.

Bobby Eugene Guess, 66, was sentenced to 12 years in prison for his role in a $6 million Ponzi scheme. The scheme defrauded investors by promising them returns from an internet advertising company. Guess hosted a radio show called “Dollars & Sense” and held investment seminars.

Cameron J. Hager, 42, pleaded guilty to charges in connection with a $4.7 million Ponzi scheme relating to the sale of cattle. The scheme, run in Missouri, defrauded 89 investors through a business called 5A Holdings, LLC. Investors understood that their funds would be used to purchase herds of cattle that Hager said he could sell for substantial profit. Investors were promised returns of 23% to 28%.

Michael Kwasnik, 48, formerly of Kwasnik & Associates, and his father, William Kwasnik, 69, were ordered to pay $36.88 million to the New Jersey Fund for Client Protection and the Pennsylvania Lawyers Fund for Client Security. Both men have been charged with operating a Ponzi scheme and diverting money to their business entities, including Liberty State Financial Holdings Corp., Liberty State Benefits of Delaware, Liberty State Insurance Services, Oxbridge Investors Fund, OPIS Management Fund and Capital Management of Delaware. About $13 million was taken from about 40 clients.

Luxe Vacation Homes and its owner, Justin Steubs, have been accused of running a rental Ponzi scheme, using current rental income to pay off future rentals. The company was an agency that rented out short-term rentals for homeowners in Palm Springs, California. Luxe was taking money from future rentals to pay off current rentals.

Edward Lee Moody, Jr., 47, and CM Capital Management LLC were charged with defrauding 60 investors in a $4.94 million Ponzi scheme in Virginia. The SEC is also seeking disgorgement from G.E. Holdings, a company allegedly controlled by Moody.

Vance Moore II, 64, was arrested in connection with an alleged Ponzi scheme run with co-defendant, Walter Netschi, 62. The scheme involved $80 million in an ATM scam in which investors believed they were buying automated teller machines to be placed in convenience stores, shopping centers, hotels and other locations. Investors believed that Moor and Netschi had 4,000 machines when in reality they only had about 400. Moore’s company, ATM Financial Services, would supposedly process, operate and maintain the machines.

Sergey Pevzner, 38, pleaded guilty to running a Ponzi scheme that involved 8 victims and $180,000.

Steven Pagartanis, 58, was arrested on charges that the he ran a real estate related Ponzi scheme for more than 18 years. The scheme allegedly defrauded at least 17 victims by promising them 4.5% to 8% annually. The victims, mostly elderly women, invested over $13 million and sustained losses of over $8 million. The money was supposed to be invested in Genesis Land Development, a publicly traded company based in Canada, but Pagartanis instead invested the money into a shell company that he controlled called Genesis I Holdings.

Daniel B. Rudden, 71, confessed to running a $55 million Ponzi scheme through his business, Financial Visions. The scheme promised returns of 12% from supposed funeral funding services to more than 600 funeral homes and cemeteries. About 150 investors were defrauded in the scheme. Rudden was subsequently arrested in Colorado. The SEC then froze the assets of a group of companies operating under the Financial Visions name.

Perry C. Santillo Jr., First Nationale Solution LLC, Christopher Parris, Paul Anthony Larocco, John Piccarreto, Thomas Brenner, Percipience Global Corporation, and United RL Capital Services were sued by the SEC and accused of running a Ponzi scheme that defrauded 637 investors. The scheme allegedly defrauded investors by falsely representing that their funds would be invested in in fields such as financial services, insurance, real estate development, and medical laboratories. Some of the assets frozen in connection with the alleged $102 million Ponzi scheme were unfrozen when found to be part of a separate business.

Sherman C. Vaughn Jr., 47, was ordered to forfeit $8 million generated by him and former Philadelphia Eagles linebacker Merrill Robertson Jr., 38, in a Ponzi scheme run through Cavalier Union Investments LLC.

Kevin Wanner, 56, was sentenced to more than 11 years in prison in connection with a Ponzi scheme he ran through Questar Capital Corporation dba Precision Financial. Wanner defrauded 66 investors in North Dakota by selling fictitious brokered certificates of deposits and unregistered interests in pooled investments.

INTERNATIONAL PONZI SCHEME NEWS

Canada

Timothy Ray Carruthers, 59, was charged with running a fraudulent scheme through Wakina Consulting Inc.  The scheme involved $5.5 million in what has been labeled as a mortgage Ponzi scheme. It is alleged that Carruthers facilitated 257 fraudulent loans, promising investors monthly interest payments and administration fees on the loans.

England

Freddy David was sentenced to 6 years in prison for defrauding 55 victims out of £14.5 million in a Ponzi scheme. David, a wealth manager, pleaded guilty to defrauding his victims by promising them 8% interest per year when their money was locked in a bank account for 3 months to 5 years. 

Germany

Jörg Biehl, 56, was sentenced to 8 years in prison in connection with a Ponzi scheme run through 22 companies known as the Infinus Group. Biehl was accused of defrauding 22,000 investors out of $375 million, although it is believed that the scheme involved more than 50,000 investors and €2 billion. Infinus started in 2001, buying life insurance policies and offering the owners improved surrender values. The money that was freed up as a result was then invested in other products offered by Infinus, such as fixed-interest bonds, registered bonds, and profit participation rights.

India

The offices of Pailan Group and the home of Apurba Saha were raided by authorities after the company was accused of running a Ponzi scheme.

Regulators claim that Heera Islamic Business Group, aka Heera Gold, were running a Ponzi scheme.  Heera Gold is headed by Dr. Aalima Shaikh Nowhera and the company claims to be a gold trading company with businesses all over the world. The company targeted the Muslim community, promising high returns and making references to “Allah” to convey a devout image to investors.

Amit Bhardwaj, the promoter of the GainBitcoin scheme who is currently in prison, has offered to pay investors back their principal investment. There are over 100,000 investors who were promised monthly returns of 10%. The victims have demanded that they be compensated in an amount equal to the value of the bitcoins today.

Charges were filed against the directors of Samruddha Jeevan Multi-State Multi Purpose Co-operative Society Ltd, Mahesh Kisan Motewar and Prasad Kishor Paraswar. The scheme promised to provide cattle and goats as well as high rates of return to investors.

New Zealand

Lance Jack Ryan aka Lance Jared Thompson, 44, and Jimmie Kevin McNicholl, 56, were convicted in connection with a Ponzi scheme that defrauded 900 investors. Ryan was sentenced to 7½ years in prison while McNicholl received 11 months’ home detention and community service. The scheme was run through BlackfortFX and promised returns from a “straight through processing” foreign exchange trading platform.

Thailand

Chinnawat Noiwan was arrested in connection with a scheme he operated through OD Capital. It is believed that 500,000 people may have been defrauded in connection with the scheme. 

Turkey

The founders of Turcoin, an alternative digital currency, were arrested. Sadun Kaya and Muhammed Satiroğlu were arrested after the scheme involving $211 million was revealed to be a Ponzi scheme. Turcoin was established by Hipper and stopped paying returns in June. Satiroğlu denies the claims and stated, “I have not fled with the money. I will return all the money to the members if authorities unblock my bank accounts. Actually they are the ones who are involved in serious corruption.”

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A class action against JPMorgan Chase & Co. was settled for $4.6 million in connection with the Ponzi scheme run by William Wise. Almost 200 investors alleged that JPMorgan overlooked suspicious activity in connection with the scheme, accusing it of aiding and abetting the scheme run from Millennium Bank.

YouTube was added as a defendant to a class action lawsuit against BitConnect. Thousands of investors were reached through YouTube, and YouTube was accused of failing to protect its users from BitConnect-promoting content, by not delisting and demonetizing videos about it. Reports state that the scheme’s promoters posted over 70,000 hours of BitConnect-related content on YouTube, which received over 58 million views. Google, Facebook and Twitter have all banned crypto-currency-related ads.

JPMorgan Chase & Co. was accused by investors of aiding and abetting a Ponzi scheme run by Renwick Haddow. The investors in Bar Works Inc. claim that the bank turned a blind eye to the scheme. Haddow, who identified himself as Haddow, then used a fake alias, Jonathan Black, to raise funds from investors. Haddow solicited investments in start-up companies he created, including Bitcoin Store (a purported online platform for Bitcoin trading) and Bar Works (an entity that claims it was adapting former restaurants and bars into co-working spaces). The investments were solicited through InCrowd Equity, Inc., which claimed it was a crowdfunding portal through which investors could purchase shares. 

A proposed class of investors reached an $18.5 million settlement with the law firm Tonkton Torp LLP in connection with the scheme run through Aequitas Management LLC.

Saturday, June 30, 2018

June 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for June 2018. The reported stories reflect at least 9 new Ponzi schemes worldwide and an average age of approximately 51 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Matthew Eckstein, 48, was charged in connection with an alleged $5 million Ponzi scheme that defrauded 14 people. Eckstein ran the alleged scheme through Conmac Funding, promising a risk-free investment at 4% over 2 years. Eckstein is a financial advisor who started Sisk Investment Services Inc. in 2015, but used the money to fund other business enterprises or for his personal use, rather than investing into Conmac Funding. Eckstein pleaded not guilty.

Randall Finer, 54, pleaded guilty to charges relations to a Ponzi scheme run in Iowa. The scheme brought in more than $800,000, and he is accused of diverting 52% of the money into his own accounts for living expenses.

Jesse Harris and his company Harris Custom Projects were the subject of an asset freeze sought by the Kansas Securities Commissioner who alleged that Harris was running a $5.5 million Ponzi scheme. Harris used investor funds to purchase a house, car and furnishings for his home.

James E. Hocker, 48, was charged by the SEC in connection with an alleged Ponzi scheme that promised investors 10% to 30% returns from an insurance scheme. Hocker promised guaranteed returns from investments he would supposedly make on the investors’ behalf in the S&P 500 and other investment vehicles. Hocker was selling insurance products and annuities under the name James E. Hocker & Associates. The investors withdrew money from their life insurance policies or retirement accounts to invest with Hocker. Hocker raised approximately $1.27 million from about 25 investors.

Ralph T. Iannelli and his leasing company, Essex Capital Corp., were accused by the SEC of running an $80 million Ponzi scheme. The scheme involved 70 investors and promised them returns of 8.5% to 10%. Essex Capital was supposedly going to use 100% of investor funds to purchase equipment and investors would be paid back within 3 years. The SEC alleged that Essex only spent about 9% of the capital raised from investors and through bank loans.

Brian D. Jones, 38, pleaded guilty to charges that he ran a Ponzi scheme in connection with his cattle broker business in Indiana. Jones took $473,000 from his victims, promising them large returns from the buying and selling of bull calves from dairy farms in Wisconsin to cattle ranches in Texas and Missouri. Jones used investor funds from gambling and his personal benefit.

Mitchell Klein faced sentencing in connection with a Ponzi scheme that defrauded investors out of $60 million. Klein had pleaded guilty in February to running the scheme with John Magee and Burton Dorfman through FKF 3 LLC. Magee and Dorfman were not charged in the case.

Alex Reaves Lundin, 26, was sentenced to 2 years in prison in connection with her role in a Ponzi scheme run by her husband, Jeremy Lundin. Jeremy Lundin previously pleaded guilty to the scheme he ran through Big Island Capital in which he defrauded at least 51 people out of $1 million. Alex Lundin assisted her husband in soliciting new investors and assuring investors that their funds were safe.

Billy Wayne McClintock, 76, was sentenced to 10 years in prison for his role in a Ponzi scheme that brought in more than $20 million  from over 220 investors in Minnesota. McClintock ran the scheme with Diane Alexander, and they offered investors 38% annual returns from supposed investments in Europe.

Perry Santillo, 38, and Christopher Parris, 38 were charged along with Paul Anthony LaRocco, 55, John Piccarreto, 34, and Thomas Brenner, 55, in a civil lawsuit brought by the SEC with running a $102 million Ponzi scheme that defrauded 637 investors. Santillo and Parris would “buy or take over books of business of retiring investment professionals from around the country.” The other three defendants would then persuade clients to withdraw their money and invest in First Nationle Solution, Percipience Global Corp., and United RL Capital Services. Santillo used at least $13.4 million fund a lavish lifestyle. Investors have sued Bank of America along with the five individuals for allegedly aiding and abetting the $102 million scheme. 

Carl Frederic Sealey, 43, pleaded guilty to running a $1.6 million Ponzi scheme through Global Standard Industries Inc. and SEK Industries Inc. Sealey is a Philadelphia investment adviser who used investors funds to fund his own lavish lifestyle instead of using the money to finance real estate deals. Sealey claimed to have more than $15 billion in domestic assets and another $33 billion offshore. Investors were told their investment was risk-free and they would get their money back in 90 days. When there was a delay, they were told they could get their money back more quickly if they invested additional funds for other deals.

Carlos Uresti, 54, was sentenced to 12 years in prison and order to pay $6.3 million in restitution. Uresti, a Texas senator who was convicted on charges relating to a Ponzi scheme run with co-defendant Gary L. Cain, resigned from his senate seat in advance of his sentencing. Cain was sentenced to more than 5 years in prison. A jury found Uresti and Cain guilty in connection with the fracking enterprise run through FourWinds Logistics. FourWinds CEO Stanley P. Bates pleaded guilty earlier this year.

James VanBlaricum and six others were charged by the SEC in connection with an alleged oil and gas Ponzi scheme in Texas. The alleged scheme was run through Texas Energy Mutual LLC fka Texas Energy Management. Also included in the complaint were Rodney Pope, Chet Inglis, Robert  Gilliam, Matthew Leaverton, William Hill and Erik Rhodes. The complaint alleges that the defendants raised over $10 million by guaranteeing returns from the use of their funds to drill oil wells.

Thomas Michael White, 59, John Kevin Reech, 56, and Joseph Mario Genzone, 53, were indicted in Miami on charges relating to an alleged Ponzi scheme. The three defendants alleged solicited investors to buy shares of stock in First Call Ventures LLC and its subsidiaries, promising investors a 100% return and that their money was safe.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Poker professional William “Billy” Jordanou, 59, pleaded guilty to charges that he ran a $72 million Ponzi scheme, along with Robert Zaia, 54. Jordanou admitted to using forged documents to receive loans from clients to supposedly fund property development.

Canada

Rashida Samji was ordered to surrender herself following dismissal of her appeal on her conviction on charges that she defrauded nearly 284 investors in a $110 million Ponzi scheme. She was sentenced to serve 6 years in prison.

Cambodia

Authorities warned of risks of buying, selling or trading cryptocurrencies without getting a license. They warned investors of potential losses due to the volatile nature of cryptocurrency as well as the risk of hacking.

Cayman Islands

A Cayman Islands court dismissed rival claims made by a Saudi Arabian family and a Kuwaiti-born businessman, finding that both sides defrauded banks out of about $126 billion in a Ponzi scheme. The al-Gosabis and Maan al-Sanea blamed each other for their losses.  Ahmad Hamad al-Gosabi and Brothers (AHAB) and Saad Group are owned by al-Sanea, had sued each other for fraud relating to a Ponzi scheme run through a unit of AHAB known as the Money Exchange. Sanea had married into the al-Goasbi family and was managing director of Money Exchange. The al-Gosabis allowed al-Sanea to use the Money Exchange for “massive personal borrowing.” The Money Exchange had raised about $126 billion by fraudulently borrowing funds from at least 118 banks around the world.

India

Authorities detained Tah Kazi in connection with a cryptocurrency Ponzi scheme run through Finstone Group, called Money Trade Coin (MTC) estimated to have involved around Rs 300 crore to Rs 500 crore.  The director, Amit Lakhanpal, absconded along with four others. The scheme promised investors ten-fold returns in 5 to 6 months.

Authorities attached 47 properties of Royal Twinkle Star Club and Citrus Check Inns Ltd. The promoter of the scheme, Om Prakash Goenka, is currently in prison.

Authorities began searches of the offices of Atharva 4 U Infra and Agro Pvt Ltd. in connection with an alleged Ponzi scheme. The scheme promised investors that they could double their money from investments in construction, travel and tourism, educational institutions, hotels and resorts. Shivaji Niphade, Ganesh Hajare, Sachin Gosavi and Mukesh Sudesh are all named in the scheme.

Six people were charged in connection with an alleged crypto Ponzi scheme run through NCR Coin LLP. The director of the scheme, Rohit Kapopara, allegedly devised a fake kidnapping and said that all of the company’s digital holdings had been acquired by a kidnapper.

Turkey

Turcoin, an alternative digital currency, was revealed to be a Ponzi scheme. Turcoin was established by Hipper, which was founded by Muhammed Satiroğlu and Sadun Kaya. The scheme stopped paying returns in June and the Hipper executives left Turkey with 1 billion Turkish Lira ($211 million). Satiroğlu has joined investors in suing Kaya, alleging that his partners, and not he, stole the money. Kaya is also involved with Anafis, Inc., another company involved in the scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The trustee of the Bernard Madoff Ponzi scheme reached a settlement with J. Ezra Merkin and his two funds, Ascot Partners LP and Ascot Fund Ltd., along with Gabriel Capital Corp. Merkin and his companies, who lost money in the scheme, are to pay $280 million and will be allowed a $502 million claim in the case. The distribution, however, will be used to fund the settlement.

JPMorgan Chase agreed to pay $4.6 million to settle a proposed class action that accused the bank of aiding the Millennium Bank Ponzi scheme run by William Wise. Investors allege that JPMorgan allowed Wise to steal millions of dollars from accounts held at the bank despite numerous signs that he was running a fraud.