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

Kathy is a senior business trial attorney with more than 27 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

Friday, May 31, 2019

May 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for May 2019. The reported stories reflect at least 5 new Ponzi schemes worldwide; at least 2 guilty pleas, over 99 years of newly imposed sentences for people involved in Ponzi schemes; 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.

Anthony Norman Carta, 57, was sentenced to 9 to 40 years for his role in a scheme that defrauded more than 100 victims out of nearly $660,000. Carta owned Freedom by Faith Ministries which used short sales, mortgage modifications and other real estate scams to defraud victims.

Jose Angel Aman and his company, Argyle Coin, LLC, were accused by the SEC of running an alleged Ponzi scheme. The scheme involved cryptocurrency, and $30 million of funds were taken from more than 300 investors on promises of huge returns through the reselling of wholesale diamonds. Argyle Coin claimed it had full backing in diamonds. Aman’s other companies, Natural Diamonds Investment Co. and Eagle Financial Diamond Group Inc., along with Harold Seigel and Jonathan H. Seigel, were also named in the action.

Christopher Dean Dougherty, 46, of California, who was arrested last month, was charged by the SEC with defrauding about 50 investors out of $7 million. Dougherty used his company, C&D Professional Services, Inc. dba C&N Wealth Management, to offer investments in tax-free “private placements” that purportedly provided quarterly dividends of about 5%.

Vincent P. Falci, 59, was sentenced to 15 years in prison for running a $10 million Ponzi scheme. Falci defrauded victims through the Saber Funds and Vicor Tax Receivable LLP, providing fake investment gains on every monthly statement. Falci claimed that investors funds were “conservatively invested” in tax liens, but he diverted the funds to himself instead.

Edwin Fujinaga, 72, was sentenced to 50 years in prison and ordered to pay nearly $1.2 billion in restitution in connection with the $1.5 billion Ponzi scheme run through MRI International. The medical billing collections scheme was run out of Las Vegas and defrauded thousands of Japanese investors. Two other former executives of MRI, Junzo Suzuki, 70, and Paul Suzuki, 40, were extradited from Japan and are awaiting trial.
Michael Sean Graham, facing charges in Arizona for running a Ponzi scheme, was arrested in Mexico. Graham allegedly defrauded investors out of $2 million by misrepresenting that he owned software that would provide consistent returns on the foreign exchange market. Graham was handed over to U.S. authorities following his arrest.

Kevin B. Merrill, 53, pleaded guilty to running a $394 million Ponzi scheme with his partner, Jay B. Ledford, 55. Both had originally pleaded not guilty, but Ledford is expected to change his plea to guilty as well. Cameron Jezierski, 28, pleaded guilty. Merrill originally formed Delmarva Capital LLC to buy debt portfolios, but he asked Ledford to create phony sales bills to entice investors and Merrill sold investors phantom debt portfolios. They returned $248 million to investors and pocketed about $150 million, spending it on lavish lifestyles. Merrill himself bought 25 luxury cars and 6 homes, among other things.

Vincent Mitchell, 58, pleaded no contest and was sentenced to 8 years in prison in connection with a Ponzi scheme that defrauded 11 clients of his estate planning practice. Mitchell was a lawyer who set up a limited liability company to accept funds from his clients who believed they were getting estate planning services.

Robert C. Morgan, Morgan Management, Morgan Mezzanine Fund Manager LLC, and Morgan Acquisitions LLC of New York, were sued by the SEC in a regulatory action seeking to halt their operation of an alleged Ponzi-like scheme. More than $110 million was raised from investors through the sales of securities directly to retain investors. The funds were to be used to acquire, manage or operate multifamily properties, and more than 200 investors were promised 11% returns. Morgan was also criminally indicted and allegedly directed employees to falsify financial documents to get bigger loans for the acquisition of apartment buildings. Morgan Management then solicited funds from investors to pay off the loans. Others allegedly involved in the scheme are Todd Morgan, Kevin Morgan, Frank Giacobbe and Patrick Ogiony. Investors are owed $463 million and it is believed that there are approximately $500 million worth of fraudulently obtained mortgages.

James A. Nickels, 68, was sentenced to 3 years in prison and ordered to pay more than $3 million in restitution. The scheme was run through Fiscal Concierge and collected more than $5 million from investors.

Mark Nordlicht, accused of running a Ponzi scheme through Platinum Partners, spent one night in jail when a judge first revoked his $5 million bail and then ordered him released the next day. Nordlicht is on trial for allegedly running a scheme in which he defrauded investors by claiming that Platinum Partners had $1.7 billion.

David Pacheco of California and his companies, IPro Solutions LLC and IPro Network LLC were sued by the SEC on allegations that they operated a $26 million cryptocurrency Ponzi scheme. Investors would receive “points” that could be converted into a digital currency called PRO Currency.

Ariel Quiros, 63, and Bill Stenger, 70, were criminally charged in connection with an alleged immigration scheme run through the Jay Peak Ski Resort owned by Q Resorts Inc. and Q Burke Mountain Resort in northern Vermont. The scheme took in $200 million, promising foreigners the benefit of the EB-5 Immigration Investor Program, which allows foreigners who invest in U.S. companies to obtain green cards. The investors’ money was supposed to fund seven projects, including the resort’s expansion, an indoor water park, an ice rink, hotels, golf courses and a $200 million biotechnology plant. Quiros allegedly took $50 million of the funds to pay his income taxes and buy a luxury condominium in Trump Place in Manhattan.
Gabriel Ramos, 28, and Miguel A. Miranda Jr., 41, were charged with running a $500,000 Ponzi scheme that defrauded at least 11 investors. Ramos started raising funds through Social WebNet. Miranda, one of the early investors, solicited investors through his company, G/M Business Investments. They promised “huge profits” from investments with local small business borrowers.

Gaylean Dean Rust, 59, Denise Gunderson Rust, 59, and Joshua Daniel Rust, 37, were indicted on charges that their business, Rust Rare Coin, Inc., defrauded at least 500 investors out of $200 million. The Rusts are accused of defrauding investors in a silver trading program that started in 1996 and promised returns of 25% to 40% annually. They were not licensed to sell securities and issued false statements to investors that were not based on trades for silver. In addition to Rust Rare Coin, the Rust family owned and managed R Legacy Entertainment LLC; R. Legacy Racing, Inc.; R Legacy Investments LLC; R Legacy Ranch; and Legacy Music Alliance.

Fred Shipman, Whitney Shipman, and Winners Church International, had their assets frozen when they refused to turn over $1.7 million to the SEC. The SEC isn’t claiming that they orchestrated the scheme, but they have refused to turn over funds that the SEC says belongs to people defrauded in a $30 million Ponzi scheme.

James Siniscalchi of New York was charged by the SEC in connection with a ticket scheme that Siniscalchi rebranded. Siniscalchi is the cousin of Joseph Meli who pleaded guilty to securities fraud in connection with the scheme in a parallel criminal action. Siniscalchi rebranded the business and raised about $2.7 million from investors who were told their money would be used to purchase tickets to events like Broadway shows.

Leon Vaccarelli, 42, of Connecticut was found guilty in connection with a Ponzi scheme that defrauded investors out of more than $1 million in retirement funds. Vaccarelli is a former financial adviser and was a registered representative of The Investment Center, and was an investment adviser with IC Advisory Services, Inc. He also was the owner and only member of LWLVACC, LLC, and conducted business through an entity named Lux Financial Services.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Authorities banned Jeff Worboys and Matthew Barnett, former executives of Halifax Investment Services from working in financial services for 5 years. They were officers of Australian Mutual Holdings when it was the responsible entity for Courtney House Capital Investment Fund.

Goldsky Global Access, Goldsky Asset Management Australia and Goldsky Investments were found to have been engaged in unlicensed investment activity following an investigation into the companies on suspicion that the sole director and shareholder, Kenneth Charles Grace, was operating a Ponzi scheme.

Douglas Johnston and Maureen Johnston were found guilty in connection with a “Ponzi-style” investment scheme they ran through the Collingwood Football Club. The scheme defrauded investors out of $815,000.

Authorities warned the public that OneCoin “could be involved in a scam.” The warning noted that OneCoin did not obtain two major licenses needed to offer investment services in the country. OneCoin is allegedly a crypto Ponzi scheme that has raised about $3.8 billion. Ruja Ignatova and Konstantin Ignatov have been arrested in connection with the alleged scheme.

England

Freddy David was banned from engaging in any regulated financial activity following his guilty plea and 6-year prison sentence for running a Ponzi scheme. The scheme was run though HBFS Financial Services Limited and defrauded 55 victims out of more than £14.5m. David promised investors returns of between 4% and 8% a year paid monthly if they kept their money invested for three to five years.

India

Nowhera Shaikh, Molly Thomas and Biju Thomas were arrested in connection with an alleged Ponzi scheme run by the Heera group. It is alleged that Shaikh operated 24 entities in the name of the Heera group and that the scheme defrauded more than 1 million investors.

Isle of Man

Paul Deighton pleaded guilty to running an investment scam through his accountancy firm, Haven Administration.

Nigeria

Authorities are warning the public not to invest in Loom Nigeria, which is believed to be a Ponzi scheme. Promoters of the scheme ask people to invest in low amounts of N1000 or N13,000 and promise returns as much as eight times the value of the investment in 48 hours. The scheme is spreading through WhatsApp groups.

Russia

Andrei Nikolenko, 45, and Tatyana Nikolenko were charged with running a Ponzi scheme that allegedly defrauded at least 17 people, promising them profits from iPhone and MacBook imports. 

Singapore

Leong Lai Yee, 55, was sentenced to 14 years in prison for her role in running a $35 million Ponzi scheme that defrauded 53 people. Yee told investors their funds would be used to buy distressed properties and sell them at a profit and that their funds would be used to fund start-ups.

South Africa

Louis Jacob Tashakoane, 70, and his wife Komane Suzen Tshakoane, 55, are on the run following accusations that they ran an illegal investment scheme called Undercover Billionaires. Their son, Louis Tshakoane Jr., 29, was charged in connection with the alleged scheme. The Undercover Billionaires Facebook description said: “Undercover Billionaires is an exclusive business network of professionals who generate wealth with meaningful style.” 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Receiver in the Arthur Adams’ timber Ponzi case has sued a UPS store for its worker’s role in the scheme that defrauded about 300 investors out of $100 million.

Ruth Madoff settled claims brought by the trustee of the Bernard L. Madoff Investment Services Ponzi scheme case. She will pay back nearly $600,000 of funds she received before the Madoff scheme was revealed. 

A $79 million award previously obtained by the Receiver in the Stanford International Bank Ponzi scheme has been vacated, and the Fifth Circuit has asked the Texas Supreme Court for direction on how to interpret the good faith defense under the Texas Uniform Fraudulent Transfer Act. The issue relates to whether the good faith exception requires a transferee on inquiry notice to conduct an investigation or show that an investigation would have been futile.

The liquidating agent for the Woodbridge Group of Companies real estate scheme filed a lawsuit against Comerica Bank, alleged that Comerica turned a blind eye to the suspicious activity.


Tuesday, April 30, 2019

April 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for April 2019. The reported stories reflect at least 7 new Ponzi schemes worldwide; at least 4 guilty pleas, over 53 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 46 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Jason E. Adkins, 40, of Ohio, pleaded guilty to charges that he orchestrated a $50 million Ponzi scheme that defrauded at least 46 investors. Adkins promised returns of 15% to 20% from a supposed business that would buy over-sized tires commonly known as off-the-road-tires, that would then be re-sold to a buyer at a much higher price. He ran the scheme through his two companies, Landash Corp. and Midwest Coal LLC.

Mark Alan Blankespoor, 49, of Iowa, was charged in connection with an alleged $15 million Ponzi scheme. The scheme allegedly defrauded at least 150 investors by promising 40% returns in the development of “medically oriented gyms.” Blankenspoor is the owner of Blankenspoor Consulting of Pella. His lawyer states that Blankespoor is a “respected physical therapist and certified health coach.” Blankespoor has pleaded not guilty to the charges.

Monique Brady, 44, was charged on accusations that she ran a $4.4 million Ponzi-like investment scheme that involved foreclosed properties. Brady defrauded 32 investors who invested $10 million based on misrepresentations that she was overseeing major renovations at the properties which would generate profits. Brady owned MNB LLC, which did maintenance and upkeep for the home-loan providers on the foreclosed properties.

Angel Bronsgeest, 55, of California, was sentenced to 33 months in prison, 3 years under supervised release and was ordered to pay $2.5 million in restitution for her role in a Ponzi scheme that defrauded about 60 victims. The scheme was orchestrated by Shawn P. Watkins, 49, who conducted monthly real estate seminars to solicit investments into his company, The Equity Growth Group. Investors were promised returns from the supposed acquisition and repair of properties and bridge loans.

Antonio Carlos De Godoy Buzaneli, 57, was sentenced to 20 years in prison for his role in a $150 million investment fraud scheme that defrauded investors in Minnesota. He pleaded guilty last year, and one of his co-conspirators, Jose Manuel Ordonez Jr., was sentenced to 10 years earlier this year.

Anthony Norman Carta, 57, of Michigan, was accused of running a $300,000 Ponzi-type scheme. He is the owner and operator of Freedom by Faith Ministries and defrauded about 100 people, promising them assistance with short sales, mortgage modifications and other real estate transactions. Carta pleaded no contest.

Craig Carton was sentenced to 3½ years in prison for his role in a fake ticket Ponzi scheme. Carton pleaded for leniency, blaming his actions on “demons” stemming from abuse as a child and a gambling addiction. Michael Wright, 42, of New Jersey, was sentenced to 21 months in prison last month in connection with the ticket selling scheme. Carton raised $2 million from a hedge fund, Brigade Capital, to be invested in tickets, but Wright, a financial manager for the business, diverted funds to pay down his home equity line and to pay Carton’s gambling debts.

Michael J. DaCorta, Joseph S. Anile, II, Raymond P. Montie, III, Francisco "Frank" L. Duran, and John J. Haas, along with Oasis International Group, Limited in Florida, were charged by the CFTC. They were accused of misappropriating more than $47 million from investors in two commodities pools – Oasis Global FX, Limited and Oasis Global FX, SA – that were to trade in retail foreign exchange. The CFTC alleged that they were running a $75 million scheme that resembled the Black Diamond forex scheme from a decade ago. The scheme defrauded 700 investors and the funds were misappropriated or lost in forex trading.

Michael D’Alessio, 53, of New York, was sentenced to 6 years for his role in a $58 million Ponzi scheme. D’Alessio pleaded guilty last year to running the scheme through his real estate development company, Michael Paul Enterprises.

Christopher Dean Dougherty, 46, of California, was arrested on allegations that he ran an investment scheme that defrauded about 50 investors out of $7 million. Dougherty represented that the funds were invested in local businesses, including a 100-acre cattle ranch. Dougherty filed for bankruptcy earlier this month. The SEC also charged Dougherty, alleging that he and his firm, C&D Professionals, defrauded clients who were mostly district employees, hospital employees, veterans and neighbors.

Khemraj Dave Hardat, 50, pleaded guilty to charges that he ran a $5 million Ponzi scheme. Hardat posed as a beverage entrepreneur and misrepresented to at least one investor that Steph Curry would be endorsing one of the beverage products. The scheme defrauded at least 7 victims out of $5 million.

Thomas Huling, of Rhode Island, was indicted on charges relating to an alleged $14 million Ponzi scheme in which Huling posed as an investment manager. Over a 10-year period, Huling allegedly moved money between 50 different bank accounts under 8 names. Huling used several different schemes, including a supposed investment in technology to reduce car admissions, and another with a new internet advertising platform.

Cameron Jezierski, 28, of Texas, pleaded guilty to charges relating to his role in a $360 million Ponzi scheme that defrauded more than 400 investors. The scheme was run by Kevin Merrill, 53, and Jay Ledford, 55. Jezierski assisted by submitting false information on financial statements and setting up fake companies. Jezierski was the COO of Riverwalk Financial Group where he worked under Ledford.

Amanda Knorr, 35, was sentenced to 30 months in prison and ordered to pay $54 million in restitution for her role in the $54 million Ponzi scheme run by Mantria Corp. Knorr co-founded Mantria with Troy Wragg and they raised funds from hundreds of investors to produce a supposed clean energy product called “biochar.”

Thomas Lanzana and his company Blackbox Pulse (Unique Forex), and Nikolay Masanko and his company White Cloud Mountain, were ordered to pay $2.7 million for operating a Ponzi scheme that defrauded more than $700,000 from investors. The scheme involved the fraudulent solicitation of funds into foreign exchange trading pools and other investors. The CFTC had charged the operators in 2017 in connection with the fraud.

Brian Oliver pleaded guilty to charges relating to a $617 million fraud run through Aequitas Capital Management.  The SEC sued the company and the top three executives, Oliver, Robert Jesenik, and N. Scott Gillis, in 2016, alleging that they were running a Ponzi-like scheme.

Brent Thomas Sapp, 38, of Virginia, was sentenced to 9 years in prison in connection with a $9 million Ponzi scheme that caused $1.8 million in losses. The scheme was run through Sapp’s company, Novus Properties, which claimed to buy and resell distressed lender-owned properties in D.C., Virginia and Maryland. Sapp never actually closed on a single deal but instead spend the investor funds on golf trips, wealth-building seminars, and a Mercedes.

Robert Shapiro, 61, was arrested on charges that he ran a $1.3 billion Ponzi scheme through Woodbridge Group of Companies LLC. Dane R. Roseman, 35, and Ivan Acevedo, 42, were also arrested and pleaded not guilty. The real estate scheme allegedly defrauded about 10,000 investors by promising them returns in low risk real estate investments.

Junzo Suziki, 70, and his son Paul Suzuki, 40, were extradited to the U.S. from Japan in connection with a fraud run through MRI International, Inc., a Nevada investment company. Co-defendant Edwin Fujinaga, 72, was found guilty in November 2018 in connection with the Ponzi scheme that allegedly owed investors over $1.5 billion.

Eliyahu Weinstein and his company, Pine Projects, were ordered to pay victims $87 million in connection with his Ponzi scheme. Weinstein was sentenced to 264 months in prison in 2014 in connection with a real estate Ponzi scheme that caused $200 million in losses.

Kent Whitney and David Lee Parrish were charged in connection with an alleged Ponzi scheme that defrauded 442 victims in the Vietnamese community out of about $25 million. Whitney and Parrish were pastors who ran The Church for the Healthy Self, supposedly with a mission to promote opportunities for those in need. The SEC has alleged that they promised investors returns of up to 43% guaranteed, but used the money to fund their lavish lifestyles rather than for purposes of legitimate investments.

INTERNATIONAL PONZI SCHEME NEWS

Canada

A class action was certified against Virginia Tan, her husband, Patrick Tan, and her son, Marcus Tan, in connection with a $30 million Ponzi scheme. Tan previously admitted to running a fraudulent scheme. She defrauded 240 investors, promising them returns of 16% and 21%, and ran the money through 6 companies, including Letan Investments Management and Letan 88 Enterprises Inc.

Dubai

Canadian Aziz ‘Com’ Mirza has been accused of running a string of Ponzi schemes targeting Muslims. The majority of the victims belong to a UK-based online community platform called the Muslim Entrepreneur Network (MEN). Mirza allegedly ran the scheme with his brother, Rafaqat “Rocky” Mirza.

Germany

Officials are investigating Dexcar, a car rental company that allegedly ran a Ponzi scheme in Europe. The allegations are that Dexcar cheated several tens of thousands of customers, promising customers they would drive a new car for 24 months for a relatively small down payment. Of 40,000 cars ordered, officials allege that only 500 have been delivered. Dexcar founder and manager, Mario Gai, has denied the allegations.

India

Nicholas Koonis, 38, and Kaloso Cantigioni, 40, were accused of running a Ponzi scheme through Drego Consultants Pvt. Ltd. They allegedly ran several schemes using the name Global Inter Gold (GIG) and promised investors profits. Using a YouTube channel and other social media, they represented the company was a leader in financial security.

Mapple Innovative Promoters (MP) Private Limited was accused of running a Ponzi scheme involving bike taxis. The company offered investors five different plans promising monthly returns and had 12,000 investors. Written complaints were filed against the company’s managing directors, Rajesh Khantwal and Kapil Dhama, director Nitin Tyagi, CEO Sachin Raghuvanshi and managers Shubham Chaudhary, Sandeep Yadav, Pramod Kushwaha and Ajay Pandey.

Kuwait

Abdulaziz Houhou was sentenced to 10 years in prison in connection with a $240 million international Ponzi scheme. The scheme involved real estate deals in New York and other major U.S. cities. Houhou and his companies, including BinHouHou Enterprises HMG Group, bought or brokered houses in struggling neighborhoods. As many as 2,000 investors were promised 15% returns and were defrauded.

Nigeria

Babagana Dalori was arrested in connection with an alleged Ponzi scheme that defrauded 27,400 Nigerians. Dalori was the Chief Executive Officer of Galaxy Transportation and Construction Services Limited which defrauded investors out of N7 billion. The scheme initially promised investors 200% returns which were later reduced to 135%.

Samoa

Samoa’s Central Bank named the Samoa Worship Centre as one of two churches who may be involved in the OneCoin cryptocurrency scheme. Transactions relating to OneCoin had been banned last year due to security concerns, but OneCoin got around the restriction by moving at least $2.3 million through New Zealand-based Samoan churches.

South Korea

Officials arrested suspects known as Lee and Bae in connection with an alleged Ponzi scheme involving the sale of private digital tokens called M-Coins. The scheme involved $18.7 million and defrauded about 56,000 people. The scheme promised that the fake cryptocurrency could lead to profits of about 600%.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The trustee of Palm Beach Finance Partners L.P. and Palm Beach Finance II L.P. negotiated a $49 million settlement with General Electric Capital Corp. in connection with the Tom Petters Ponzi scheme. The Petters scheme involved fictitious wholesale to retail transactions. The trustee alleged that GE Capital discovered the scheme in 2000 but didn’t tell anyone.

Investors sued Wells Fargo bank, alleging that the bank knew of a real estate investment fraud run through a firm called EquityBuild. EquityBuild was run by Jerome Cohen, 63, and his son Shaun Cohen, and raised at least $135 million from more than 900 investors. The lawsuit claims that Wells Fargo aided the fraud by “financing the interest payments interest payments owed to other investors with new investors’ money, rather than with the income from real estate properties that were supposed to support those returns. Wells Fargo had actual knowledge that it held fiduciary funds in its accounts … and knew that those funds were actively being misused.”

The Fifth Circuit affirmed a lower court decision barring a lawsuit against Greenberg Traurig in connection with the R. Allen Stanford Ponzi scheme. The court found that the doctrine of attorney immunity barred the lawsuit. Troice v. Greenberg, 2019 U.S. App. LEXIS 11230 (5th Cir. Apr. 17, 2019).