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

Thursday, May 31, 2018

May 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for May 2018. The reported stories reflect at least 15 new Ponzi schemes worldwide; 5 convictions and guilty pleas; over 26 years of newly imposed sentences for people involved in Ponzi schemes; 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. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Arthur Lamar Adams, 58, was charged in connection with his role in a Ponzi scheme in Mississippi. Adams pleaded guilty and admitted his company was a Ponzi scheme. The scheme was run through Madison Timber Properties LLC, Madison Timber Fund LLC, and Madison Timber LLC. More than $100 million was invested by more than 250 investors from at least 14 states. The criminal charges were filed after the SEC filed its lawsuit. Adams allegedly falsely represented that Madison Timber Properties was in the business of buying timber rights from landowners and then selling those rights to lumber mills at a higher price. Only a few such timber rights or contracts existed. The investors were guaranteed returns of 12% to 13%. The SEC then filed an action to appoint a receiver over the assets of Adams.

Kenneth Brewington, 53, of California was convicted on charges relating to a $3 million Ponzi scheme run through Compass Financial Solutions. Brewington and his co-conspirators, William E. Dawn, 80, and Brian G. Elrod, 61, previously pleaded guilty to their roles in the scheme.
  
John (Jack) William Cranney, 76, was convicted in connection with a $6 million Ponzi scheme that defrauded 15 investors. Cranney defrauded his friends and business associates by representing that he was investing their money in a fund or retirement plan. Instead, he spent the money on personal bills and put money into his failing nutrition products distributorship.

Seth Adam Depiano, 37, was sentenced to 12 years and seven months in prison and ordered to pay more than $19.6 million in restitution following his guilty plea regarding a Ponzi scheme he ran through The Rental Group, US Funding and Home Services LLC, and Draymond Homes. Depiano had promised investors returns from the purchase and resale, or rental of real properties. He falsely represented high occupancy rates to lure in investors.

Jeffrey Lynn Gentry, 40, was sentenced to 3 years in prison in Tennessee and ordered to pay back more than $10.4 million in restitution in connection with a $43 million Ponzi scheme run through Gentry Brothers Tractor Supply that caused losses of more than $10 million. Gentry convinced investors to pull money from their retirement and savings accounts, promising them returns of 6% to 10% from investments in farming equipment that would supposedly be used to fulfill state government contracts. The scheme defrauded more than 50 people. Gentry previously pleaded guilty to the scheme.

Barry and Fern Kornfeld, and their company FEK Enterprises dba First Financial Tax Group, were the subject of an administrative complaint by Florida regulators, who accused them of selling unregistered securities to investors in the Woodbridge Group of Cos. Ponzi scheme. The Kornfelds are accused of selling at least 529 unregistered notes in 5 Woodbridge related funds for approximately $40 million. Other defendants named in the case are Andrew Grigsby Costa and Costa Financial Insurance, James Gilchrist, Albert Klager and Atlantic Insurance & Financial Services Inc., Lynette Robbins, and Knowles Systems.

Kevin Kyes, 69, was found guilty in connection with a Ponzi scheme that defrauded Japanese investors. Codefendant John Holdaway, 73, pleaded guilty last year. The investors were defrauded out of $6.8 million through a business called Money Management Strategies. Investors were told that the high-speed trading programs had historic returns of more than 100% annually.

Yasuna J. Murakami, 45, was sentenced to 6 years in prison and ordered to pay about $10.5 million in restitution in connection with a scheme he ran through MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Murakami established the investment advisory firms and managed three hedge funds: the MC2 Capital Partners Fund, MC2 Capital Value Fund, and MC2 Capital Canadian Opportunities Fund. The SEC had filed charges against Murakami and his former business partner, Avi Chiat, last year and the Massachusetts Securities Division also filed civil fraud charges.

James Nickels, 67, of Wisconsin, was charged in connection with a scheme he ran through a business called “Fiscal Concierge.” The scheme brought in over $5 million from investors and caused losses of over $3 million.

Steven Pagartanis, 58, pleaded not guilty to charges that he ran a $7.5 million Ponzi scheme. The SEC, which also filed a complaint against Pagartanis, has alleged that the losses were $8 million.  Pagartanis ran the scheme through Omega Planning Associates and defrauded elderly investors. The SEC alleged that Pagartanis defrauded at least nine retail investors that were his long-standing brokerage customers.

Paul W. Smith, 63, was sentenced to 5 years in prison in Pennsylvania in connection with a $2 million Ponzi scheme. Smith had been accused criminal and by the SEC in a civil suit for running a scheme for 25 years. The scheme defrauded about 30 investors in an investment advisory scheme Smith ran through The Haverford Group.

Shawn Patrick Watkins, 48, pleaded guilty in connection with a $3.4 million real estate investment scheme. The scheme defrauded about 50 investors through real estate investment seminars conducted in California under the name The Equity Growth Group Inc. Victims were told that their money would be used to acquire or repair properties or that their money would be used as “bridge loans” to allow the company to acquire properties when money from another investor had not been received. Investors were told that there were hundreds of properties generating rental income and that the company was acquiring new properties to continue its growth. In reality, the company was not acquiring new properties and investor funds were used to pay mortgages on three homes purchased and occupied by Watkins and his family. Co-conspirator Angel Bronsgeest, 55, had earlier pleaded guilty to one count of wire fraud in connection with the scheme.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Aimee Pitman, 26, and a 32-year old man were charged with running a Ponzi scheme that defrauded investors out of $800,000. The scheme persuaded investors to buy a share of an automatic teller machine, but the ATMs either didn’t exist or were owned by someone else.

Botswana

Authorities shut down foreign exchange trader Aquapanel Limited after concluding that it was running a Ponzi scheme. The company is owned by Motswana Shima Moeng Phorie, 28.

Canada

Joshua James Tenhove was charged with fraud relating to an alleged $10 million Ponzi scheme. The scheme was run through Silvertip Energy that sold or rented light towers with the same serial number to multiple investors and sold or rented units that were never manufactured.

Arnold Breitkreutz, 70, and Susan Way, 67, were charged in connection with an alleged Ponzi scheme that lured in more than $27 million from investors. The scheme was run through Base Finance and involved mortgage lending.

China

Two suspects were detained in connection with an alleged Ponzi scheme that took in over 300 million yuan (US$47 million) from over 8,000 people. The scheme was run through an investment management firm called Jielang and promised investors an 8% to 12% return on financial products. Around 80% to 90% of the victims were retirees.

Six people were arrested for allegedly defrauding 3,000 Chinese investors by selling a cryptocurrency they claim was backed by a kind of tea. They had formed a firm named PEB which issued a blockchain-powered token called Pu’er Coin. The scheme promised investors that with each token they held a portion of the Pu’er Tibetan tea supposedly owned by the firm, which was worth billions of dollars. However, there was only very limited tea in stock.

Authorities arrested four more suspects in connection with the OneCoin scheme. OneCoin, known as “Weika Coin” in China, was a billion-yuan Ponzi scheme, and 98 people have been prosecuted so far. Authorities report that $267.5 million has been recovered so far from the cryptocurrency scheme. Companies associated with OneCoin and its founder, Ruja Ignatova, are being investigated in other countries as well.

Germany

P&R Group, once one of the world’s largest container lessors, has been accused of operating a Ponzi scheme. P&R, no longer operating, sold new and used containers to investors, rented them back and offered to repurchase them after 5 years for 65% of the original value. P&R claimed it had sold around 1,600,000 containers to around 54,000 investors. The firm is now accused of selling nearly one million more shipping containers than it owned.

India

Kamal Singh and Vijay Kumar were charged in connection a scheme run through their bitcoin company, bits2btc, which allegedly defrauded over 2,500 people out of more than $14.9 million. They have ties to Amit Bhardwaj who has been charged with running a bitcoin Ponzi scheme.

Rahesh Jain and Sanchit, agents of Amit Bhardwaj, were arrested in connection with their efforts to solicit investors. They operated two Hong Kong-based companies to lure investors and promised returns of 10% each month.

Akash Goud and others were arrested in connection with a scheme that promised investors high end cars at a 30% discount. Goud used references from the few people to whom he delivered cars to lure in other customers. About 60 cars were delivered, but there were about 200 additional orders.

The properties of Oscar Group of companies were attached and bank accounts frozen in connection with an alleged Ponzi scheme run by Prabhas Chandra Rout. Rout was arrested in 2016.

Omprakash Bansantlal Goenka was arrested in connection with an alleged Ponzi scheme run through Citrus Check-Inns Ltd. and Royal Twinkle Star Club.

Sunita Samal, director of Inter Ocean Videsh Limited, was arrested on charges that he defrauded investors in various schemes.

Chhotrai Majhi, 40, was arrested on charges that he ran a Ponzi scheme through a money deposit collection company known as Shree Bhumi Construction Limited. The scheme was run under the guise of a construction company and then moved into real estate, mining and hotels. 

New Zealand

Jimmie Kevin McNicholl, 56, director of Arena Capital Limited, which traded as BlackfortFX, pleaded guilty to charges that he ran a fraudulent scheme as a foreign exchange brokerage. About 900 people invested about $8.3 million into the scheme. Lance Jack Ryan aka Lance Jared Thompson, 44, was also charged but has maintained a plea of not guilty.

Philippines

Margarita Huang aka Irma Pascual was arrested on charges that she ran a Ponzi scheme that defrauded between 29 and 46 victims. The victims were promised returns of 15% per month, but many of them received bounced checks issued by Huang and her husband, Gary Chen Huang. The Huangs claimed to be co-partners in the lending facility they supposedly operated with a large employee cooperative under Comfoods Inc.

South Africa

Derek Bredekamp, 52, has been arrested in connection with the alleged Ponzi scheme run through Platinum Forex Trading Group. It is alleged that Bredenkamp colluded with Colin Davids, the director of Platinum, to defraud investors. Approximately 2,000 investors were defrauded.

Authorities are investigating Bitcaw Trading Company aka BTC Global for alleged investment fraud. More than 28,000 investors are believed to have lost over R1-billion. Investors were promised 2% interest per day, 14% per week, and 50% per month. The founder of BTC Global, known as Steven Twain, has disappeared.

QSG Consult International is under investigation and accused of defrauding 800 people out of R380 million.

South Korea

Two South Korean individuals whose names remain anonymous were arrested for running a $30 million cryptocurrency Ponzi scheme through a company known as Upbit. The scheme brought in money from 3,787 investors who were promised a daily profit of $4,000 and were told they could double their profit if they recruited more investors. 

Turkey

Police detained 28 suspects in connection with an alleged Ponzi scheme run through Detay Maxinet, a company specializing in search engine optimization. More than $16.3 million was collected from more than 18,000 members.

Monday, April 30, 2018

April 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for April 2018. The reported stories reflect at least 12 new Ponzi schemes worldwide; over 1,060 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 47 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

James Quinn Campbell, Jerald N. Kagarise, David Allen Bjorklund, Ronald E. Caskey, Erik K. Little and Timothy C. McGuire all agreed to cease-and-desist orders with the Colorado Division of Securities for their role in selling unregistered securities for the Woodbridge Group of Companies LLC. Laurent Carrier and his company, Carrier Financial Services, surrendered their Colorado securities licenses earlier this year.

Amrit Jaswant Singh Chahal, 30, and his company, The Kane Capital Investment Group, LLC, were charged by the CFTC in Virginia with running a commodities fraud. The alleged scheme solicited more than $1.2 million from approximately 50 investors.  The scheme promised trading profits of between 28% and 34% from the supposed trading in crude oil futures contracts. Chahal used some of the money for his personal benefit, including for a luxury car, rent, travel and dining.

David deBarardinis, 56, was indicted on new charges that he defrauded banks and investors in Louisiana out of $96 million in an alleged Ponzi scheme.  He pleaded not guilty to the charges. Investors were promised rates up to 17% with guaranteed returns and they understood that deBarardinis was a middleman in fossil fuel trades between energy companies.

Seyed Reza Ali Fazeli, 49, who has pleaded not guilty to running a sports ticket Ponzi scheme through Summit Entertainment Group, was sued by investors who alleged that the business was a Ponzi scheme. Fazeli represented that he would use the $1.3 million invested by the plaintiffs to purchase tickets to the 2017 NFL Super Bowl and resell them at a profit.

Daniel Glick, 64, was sentenced to more than 12 years in prison and ordered to pay $5.2 million in restitution in connection with a Ponzi scheme that he ran through Financial Management Strategies, Glick Accounting Services, and Glick & Associates in Chicago. The scheme involved $5.2 million taken from elderly investors.

Renwick Haddow, 49, was extradited to the U.S. after he fled to Morocco last year on charges that he was running a Ponzi scheme. Haddow, a British citizen, had relied on a fake identity using the name of Jonathan Black and a photo he stole from LinkedIn. Haddow had opened several Bar Works locations in New York and offered investors the opportunity to purchase desks at the locations for $25,000 each.

Bernard Ross Hansen, 57, and Diane Renee Erdmann, 45, were accused of running a Ponzi-like scheme that defrauded more than 3,000 investors out of $25 million. Hansen is the founder and CEO of Northwest Territorial Mint. The indictment alleges that the mint, which made coins and medallions and bought, sold and stored precious metals, lacked assets to fill customer orders. Hansen and Erdmann allegedly took $1 million of the investor funds to pay their personal expenses.

Jeffrey Mitchell Isaacs was ordered to pay $750,000 for selling New Jersey investors more than $7 million worth of unregistered securities for Woodbridge Group of Companies. Isaacs sold the unregistered securities through JB Financial Resources and JMI Associates LLC. The Woodbridge scheme defrauded 8,400 investors across the country.

Shayne Kniss, 42, was charged in Oregon for running an alleged scheme through his investment firm, Iris Capital Management Group. About 47 people invested over $4.3 million. Kniss promised investors returns of 8% to 12% returns from supposedly buying, rehabilitating and reselling houses. Instead Kniss used some money to pay back earlier investors, and about $500,000 for personal use, including investing in a retail marijuana business.

Robert Loya, 53, and Clarence Counterman, 60, had their convictions upheld by the Fifth Circuit. The two tax preparers had been convicted of running a $2.1 million Ponzi scheme. The scheme involved solicitation of investments into their solar energy related companies, including Renewable Energy Consultant Inc. (Nevada), EP Solar Technologies, Inc. (Nevada), LITTCE, Inc. (Texas) and Eco Global Corporation (Texas).

Joseph Meli, 43, and Steven Simmons, 49, were sentenced to 6½ years and 37 months, respectively, in connection with a $100 million Ponzi scheme run through Sentinel Growth Fund Management. Simmons pleaded guilty last year to charges that rose in connection with scheme that supposedly resold tickets to “Hamilton” and other shows. Meli and Simmons had assisted the hedge fund manager, Mark Varacchi, in raising money for the scheme. Varacchi pleaded guilty and has been cooperating with prosecutors.

Stephen Condon Peters, 44, saw additional assets seized in connection with alleged $15 million Ponzi scheme run through VisionQuest Wealth Management. Peters was indicted in December 2017 in connection with the scheme which promised investors returns of 8% to 9%.

Clifton E. Stanley, 66, and Michael E. Watts, 62, and their companies, The Lifepay Group LLC and SMDRE LLC, were charged by the SEC in Texas with running $2.4 million Ponzi scheme and a related $1.4 million scam involving an oil and gas company. About 30 elderly investors invested in the retirement planning and real estate investment company in which they were promised returns of up to 36% per year.

Michael Sullivan, 37, was sentenced to 160 years in prison and will serve an active prison sentence of 5 years in connection with this role a Ponzi scheme run through his company, Kenhill Financial. Sullivan was a day trader who stole about $1.4 million from 15 victims.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

Wade Robert Closson, 47, who pleaded guilty to 55 counts of fraud for running a Ponzi scheme, will be sentenced. Closson ran the scheme through Optam Holdings, Inc. and Infinivest Mortgage Investment Corporation. About 71 investors lost about $5.8 million in the scheme. 

China

Officials shut down a $13 million cryptocurrency Ponzi scheme run through Da Tang Coin (DTC). About 13,000 people were defrauded on promises that members would make about 80,000 yuan ($13,000) every day.

Eight individuals were charged in connection with the Shanlin Finance Ponzi scheme. Zhou Boyun, the legal representative of Shan Lin Financial, turned himself in earlier in the month. The scheme was a peer-to-peer lending platform. Shanlin had more than 500,000 registered users and had raised 5.4 billion yuan. The company had more than 1,000 outlets across the country to sell wealth management fund products packaged with lending to infrastructure and public-private partnership projects. Users were promised annual returns ranging from 5.4% to 15%.

Dubai

Each of the two Indian men, Sydney Lemos, 37, and Ryan D’Souza, 25, who ran the Exential Group foreign exchange fraud, received 517-year prison sentences, as did Lemos’ wife, Valany Lemos. Exential offered up to 120% annual returns in connection the fraudulent investment program that defrauded 7,000 investors.

India

Amit Bhardwaj, 35, was arrested for defrauding investors in a number of cryptocurrency schemes including GainBitcoin, GBMiners, MCAP and GB21. His scam is believed to have involved over 8,000 people adding up to $300 million. Two additional arrests were made of Sahil Baghla and Nikunj Jain in connection with the scheme.

Kalakahnu Bisoi and his wife Monalisha Senapati were arrested on charges that they ran a money deposit collection Ponzi scheme.

Naresh Navale, 35, was arrested on charges that he defrauded 500 investors through his company, S M Motors. The scheme involved a car rental business in which he said he would purchase expensive cars to rent them to five-star hotels and big companies. Investors were promised Rs 20,000 per month.

Pradeep Singhal was arrested on charges that he defrauded thousands of investors in a Ponzi scheme run though a number of companies, including Astonish Digital Advertising Services. The scheme involved companies who held themselves out as facilitator for increasing views of commercial websites.

Deepak Jangra and Deepak Malhotra were arrested in connection with a $2.6 million Ponzi scheme run through Bitmineplus. Investors deposited and bought bitcoins from the company which offered returns as high as 12% plus a 5% referral fee and 10% commissions for bringing in additional investors. The website advertised: “Bitmineplus is a unique service that allows you to immediately profit from your dormant Bitcoin. It takes just seconds to transfer your Bitcoin from your wallet to your Bitmineplus saving [sic] account and you will immediately begin to receive daily interest payments.” 

Nigeria

Swiss Golden Company Limited was accused of defrauding over 7,000 Nigerians out of N3 billion. The scheme involved the buying and selling of gold bars. Maxim Lobaty, a Russian, and two Nigerians, Austin Emenike and Dickson Nonso Onuchukwu, were picked up by authorities.

Philippines

Arnel Ordino and his wife Leonady were arrested on charges that they defrauded at least 50 investors out of $17.32 million through their company, New G Bitcoin Investment Trading. The scheme promised investors a 30% return every 15 days. The couple actually had no Bitcoin dealings and made payouts to investors using money from new victims.

Russia

Authorities sought to ban Telegram, a company run by Pavel Durov who has “decided to become the new Sergey Mavroidi.” Telegram has allegedly raised about $1.8 billion in the pre-sale stage of its ICO

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Madoff Victim Fund made a second distribution to victims of the Bernard L. Madoff Ponzi scheme. A distribution of $504 million was made to about 21,000 victims, bringing the total distributed through the Fund to more than $1.2 billion. A total of more than $4 billion could be distributed from the Fund. In the separate SIPC proceeding, the trustee has distributed about $11 billion to the customers of Madoff’s securities firm.

Investors in the Woodbridge Group of Companies, LLC sued sales agents Lynn Merritt and Annua Group LLC seeking to recover $1.86 million in losses from the alleged Ponzi scheme run by Robert H. Shapiro. The scheme allegedly defrauded 8,400 investors out of $1.2 billion. Shapiro and his sales agents promised returns of 5% to 10% on their investments. 

CRYPTOCURRENCY NEWS

Ifan and Pincoin, which were cryptocurrency startups in Singapore and Dubai, respectively, have gone silent after reports that they were fraudulent schemes. An estimated 32,000 investors were defrauded out of an alleged $660 million in tokens. Both schemes were under the control of Vietnam-based Modern Tech. Modern Tech had been promising users in Vietnam 48% returns monthly for iFan tokens if they made an initial investment of $1,000. Users were also given 8% commissions for referring new investors.