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

Friday, November 30, 2018

November 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for November 2018. The reported stories reflect at least 12 new Ponzi schemes worldwide; about 60 years of newly imposed sentences for people involved in Ponzi schemes; 4 guilty pleas or convictions, and an average age of approximately 50 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Gary L. Cain, 61, was arrested in Texas just two days before he was to begin serving his prison sentence in connection with a Ponzi scheme run with former state Sen. Carlos Uresti, 54. A jury previously 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.

Craig Carton, 49, was convicted for his role in a ticket-selling Ponzi scheme. Prosecutors had alleged that Carton had misappropriated at least $5.6 million. Michael Wright, 42, pleaded guilty to charges related to the scheme in September. They were accused of soliciting investors to fund a business of buying and reselling blocks of tickets to music, entertainment and sporting events. Joseph Meli is currently serving 6½ years in prison for the scheme. Meli’s wife, Jessica Ingber Meli, was ordered to pay $4 million in connection with the SEC action in which she was named as a relief defendant.

Stephen Tudor Crozier, 66, of California, pleaded guilty to charges relating to a scheme that defrauded investors out of more than $1 million. Crozier held himself out as a financial advisor with knowledge of the European financial markets.

Michael D’Alessio, 53, pleaded guilty to charges related to an alleged Ponzi scheme run through Michael Paul Enterprises in New York. The scheme involved luxury real estate developments that defrauded investors out of approximately $58 million.

Rabbi Zvi Feiner of Chicago was accused of defrauding investors in his local Jewish community out of more than $35 million. Feiner is the head of Feiner Investment Corporation, which was running an alleged nursing home investment scheme.

Edwin Fujinaga,72, was convicted in connection with his role in the $1.5 billion Ponzi scheme run through MRI International Inc. The scheme defrauded more than 10,000 Japanese investors by promising them that their money would be used to purchase medical claims. Fujinaga used less than 2% of the investor funds for that purpose and instead used the money to pay earlier investors and to buy a private jet, a mansion, real estate in Hawaii and Beverly Hills, and luxury cars.

Sebastian Greenwood was arrested and extradited to the U.S. in connection with the OneCoin scheme. Greenwood was arrested in Thailand and is accused of being involved in a $400 million money laundering scheme through OneCoin. Greenwood is believed to have been second in command at OneCoin behind Ruja Ignatova.

Khemraj Dave Hardat, 50, was charged for allegedly defrauding investors out of $5 million in a Ponzi scheme. Hardat is a Canadian national who has been living in Los Angeles on an expired tourist visa. Hardat allegedly defrauded at least 7 investors by falsely claiming that NBA stars such as Stephen Curry and Shaquille O’Neal were endorsing his products. He misrepresented that he had a postgraduate doctoral degree from Yale and used falsified bank statements to lure in investors. Hardat used the funds for payments on his Maserati and Lamborghini, among other things.

Nathan Pyles, of Idaho, was accused by the Idaho Finance Department of defrauding victims out of at least $4.9 million through his company, Shiloh Management Services. The complaint also accused an investor, Roger Button, of recruiting new investors for commissions without being a registered agent. Investors were promised between 10% and 30% from the real estate scheme that involved fixing and flipping old houses and building houses on undeveloped property. Pyles raised at least $28.8 million from at least 55 investors.

Gaylen Dean Rust and Rust Rare Coin, Inc. of Utah were charged by the CFTC with running an alleged $170 million Ponzi scheme. The scheme allegedly defrauded at least 200 people in a commodities pool called Silver Pool. Investors were told they were buying into a share of a pool that purchased precious metals and were promised annual returns of 20% to 25%. The CFTC lawsuit also names Denise Gunderson Rust, Joshua Daniel Rust, Aleesha Rust Franklin, R. Legacy Racing Inc., R Legacy Entertainment LLC, and R Legacy Investments LLC as relief defendants.

Robert Shapiro, the former Chief Executive Officer of Woodbridge Group of Companies, agreed to pay $120 million to the SEC to settle allegations that he ran a $1.2 billion real estate Ponzi scheme. Shapiro did not admit or deny the allegations. The scheme targeted 8,400 investors and promised returns as high as 10% from investments in developers who flipped luxury real estate. Meanwhile, another broker, Dennis Ferwerda, was barred from FINRA for his involvement in selling investments in the Woodbridge Ponzi scheme.

Brandon Walton Stewart, 33, of California was sentenced to 35 years in prison in connection with $13.5 million Ponzi scheme. Stewart promised investors that he would use their money to buy stocks in companies such as Facebook.

Bobby Duane Vise, 53, of Texas, was sentenced to 13 years in prison and ordered to pay $1.27 million to 12 victims in connection with a Ponzi scheme that defrauded investors out of more than $1.2 million. Vise pleaded guilty to running a real estate investment scheme.

Roland Von Kurnatowski, 67, of New Orleans was accused of running a Ponzi scheme. A lawsuit filed against Von Kurnatowski alleges that he persuaded investors to invest in Bond Fund One, or BF-1, which would trade U.S. Treasury bills. The scheme defrauded investors out of hundreds of thousands of dollars.

April Vuong, 42, and Hao Quach, 41, were each sentenced to six years in prison in connection with a Ponzi scheme and will be sentenced to an additional 5 years in prison if they fail to pay restitution for the next 10 years.

INTERNATIONAL PONZI SCHEME NEWS

Canada

Robert Castano was permanently banned from any involvement in securities transactions. Castano previously pleaded guilty to defrauding investors by promising monthly returns of 5% from trades on the stock market. The scheme brought in more than $2.5 million through his company, Skyline Communications, $1.5 million of which was lost.

England

Essex and London Properties Limited was shut down following findings that the company misused £18.9 million of investor funds. The scheme involved more than 800 investors who were promised 8% returns annually if the money was held for 3 years, or 12% if the money was held for one year. The company claimed to generate the returns from the purchase and resell of properties or from rental income. In reality, the company only purchased one property.

Japan

Eight men were arrested in connection with an alleged $73 million cryptocurrency Ponzi scheme.  The scheme defrauded 6,000 people by promising them between 3% and 20% returns. The company, Sener Trader, claimed to be a U.S.-based investment firm. Sener Trader created a bogus Amazon ebook listing for its fictional CEO, “Spenser Brown” to try to hide the company’s Japanese origins. Six of the 8 men plead guilty and two have maintained their innocence. Sener Trader was formed after the demise of a prior scheme run by Eagle Gates Group.

India

Goodman Goqo, 33, pleaded not guilty to charges that he defrauded more than 4,000 people out of R76m. Goqo ran the scheme through his business, Ingede Mineral Holdings. He advised investors that he would invest their money on the stock exchange and offered them 30% monthly interest over six months with the principal guaranteed.

Sudipto Roy Choudhary, 44, was arrested in connection with the Rose Valley Ponzi scheme. The chairman of the scheme, Gautam Kunda, was arrested in 2015.

Braja Mohan Patnaik, 44, and his wife, Tridhara Mohanty, 40, were arrested on charges that they collected approximately Rs. 60 crore from over 1,550 investors in a number of schemes. They were directors of Datum Marketing Limited, which was used to lure in investors.

Gali Janardhan Reddy and Ali Khan were arrested in connection with an alleged $1 million Ponzi scheme that promised investors returns of 40% to 50% a month. Reddy is accused of taking Rs 20 crore from Syed Ahmed Fareed, the owner of Ambidant Marketing Pvt Ltd. to strike a deal with officials to drop the case they were investigating against Ambidant. Fareed and Ambidant are under investigation for defrauding hundreds of investors. Fareed is alleged to have run the scheme with his son, Syed Afaq. They are involved with the following other firms in India as well: Ambidant Constructions Ltd., Ambidant Marketing and Trading Company, Profit Theme, Ammar Enterprises, Ambidant Global Solutions, Ambisheltar, Perinet Technologies, Ambigold, Webworld, and Ambidant Marketing Financial Services LLC (Dubai).

Assets of Gold Sukh Trade India Ltd. and its directors Narendra Singh, Mahendra Kumar Nirwan, Manvendra Pratap Singh Chauhan and Bablu Sharma were seized by authorities in connection with an alleged Ponzi scheme.

Malay Banerjee and R P Dasora were arrested in connection with an alleged scheme involving Kim Infrastructure and Development Limited. The scheme allegedly defrauded 5,000 agents and investors who were promised that their money would be doubled or tripled.

Vinay Shah was arrested after being on the run for two weeks in connection with an alleged Ponzi scheme that defrauded investors out of Rs 260 crore. Shah’s wife, Bhargavi is still on run but Shah’s friend Chanda Thapa was also arrested.

Four people were charged in connection with the GainBitcoin cryptocurrency scheme.  Vivek Bharadwaj, Pankaj Adlakha, Hemant Bhope and Amit Bharadwaj will face trial in December.

Charges were filed against tviexpress.com and its promoters and associates, Tarun Trikha, Varun Trikha, Sikha Trikha, Shakti Sharad, and Anoop Kumar. They are accused of running a scheme involving share trading, commodities trading, holiday package booking, and air ticketing. Investors were promised that their money would double in a year, but the returns have not been paid.

Nigeria

Michael Eke, the founder of Micheno Micro Cooperative Society, was arrested in connection with an alleged N27 million Ponzi scheme.

Kayode Samuel and Kola Banji were arrested in connection with an alleged Ponzi scheme known as D9 Club. The scheme is believed to have defrauded at least 200 investors.

Wednesday, October 31, 2018

October 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for October 2018. The reported stories reflect at least 9 new Ponzi schemes worldwide; about 46 years of newly imposed sentences for people involved in Ponzi schemes; 5 guilty pleas or convictions, and an average age of approximately 52 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Arthur Lamar Adams, 58, of Mississippi was sentenced to 19½ years in prison in connection with a Ponzi scheme run through Madison Timber Properties, LLC. Adams obtained over $100 million from more than 250 investors located in at least 14 different states. Madison Timber held itself out as being in the business of buying timber rights from landowners and then reselling those rights to lumber mills at a higher price. The investors understood they were providing the financing for the purchase contracts for the timber rights. Investors were guaranteed returns of 12-13% interest. Adams had previously pleaded guilty and admitted it was a Ponzi scheme.

Yehuda Belsky aka Jay Bell, was charged with running a $1.25 million commodities scheme that defrauded at least 14 customers. Belsky, the owner of Y Trading LLC, had previously been barred for life by the CFTC from trading in commodities, but was holding himself out as a successful commodities trader.

Dawn Bennett, 56, was found guilty of defrauding investors in a $20 million Ponzi scheme. Bennett testified at her trial that she paid approximately $720,000 to arrange for priests to perform religious ceremonies to help her and she cast “hoodoo” spells on investigators to ward off a federal investigation. Bennett raised more than $20 million from 46 investors in connection with her luxury sportswear business, DJB Holdings later known as Province of the Dragon. Bennett and coworker, Bradley Mascho, overstated the company’s sales and liabilities to their investors. Mascho previously pleaded guilty. Bennett used the investors’ money to pay for jewelry, cosmetic medical procedures, and a $500,000 annual lease for a luxury suite at the Dallas Cowboys’ home stadium.

J.T. Bramlette, 40, Anthony Hartman, 58, Travis Kozlowski, 38, and Aaron Wernli, 39,were charged by the SEC in Utah with alleged securities violations in connection with a $10.8 million investment scheme. The scheme involved the Melrose Resort in which investors were promised false returns of up to 24% and were provided false reports and statements. Bramlette was the “ringleader of the fraud” and the others raised funds for the project through Private Placement Capital Notes II, LLC, Synergy Capital Management LLC, and Pelorus Group. Bramlette used at least $1.5 million to pay personal expenses, including trips to Disneyland, shopping sprees on Rodeo Drive, Las Vegas trips, and a Land Rover.

Kevin Brody, 54, and Matthew Eckstein, 48, of New York, were charged in connection with a $10 million scheme that allegedly defrauded 40 senior citizens. Brody and Eckstein are financial advisors who convinced clients to invest their retirement savings in their company, Conmac Funding Corp., with assurances that the investments were safe and that they would earn 4% interest.

Craig Carton, 48, has filed papers asking a court to prevent prosecutors from calling his alleged ticket scheme a Ponzi scheme or using the words “sham,” “fleece” and “fraudulent.” The court denied his request. Carton was arrested last year on charges that he was running a $4.6 million scheme in which he used money from investors in a ticket reselling business to pay his gambling debts. Carton was accused along with Michael Wright, 42, and Joseph Meli of running a ticket Ponzi scheme by soliciting investors to fund a business of buying and reselling blocks of tickets to music, entertainment and sporting events. Meli is currently serving 6½ years in prison for the scheme. Carton has pleaded not guilty.

Jean Danhong Chen, 53, and her husband, Tony Jianyun Ye, 50, along with Kai Hao Robinson, 45, Kuansheng Chen, 60, the Law Offices of Jean D. Chen,  and Tree Lined Holdings, LLC fka Tree Lined Properties, LLC were named in a lawsuit filed by the SEC in connection with an EB-5 scheme in California. The scheme brought in millions of dollars from foreign investors seeking permanent U.S. residency through the EB-5 Immigrant Investor Program. The defendants were paid over $10 million in commissions in connection with the scheme. The SEC also alleged that Chen and Ye secretly acquired and operated an EB-5 regional center, Golden State Regional Center LLC.

Kevin Cecil Drost, 61, was charged in connection with a $5 million offering fraud through Maryland-based Owings Group, LLC. Drost was a salesman, along with Brian Koslow and David Waltzer, for the scheme run by Mark Johnson. The SEC had charged the group with securities fraud earlier in the year.

Nicholas Gelfman of New York entered into a consent order with the CFTC and a default judgment was entered against and his company, Gelfman Blueprint, Inc. A $2.5 million fine was levied against Gelfman and his firm. Gelfman took in more than $600,000 from at least 80 customers who understood they were entering into contracts of sale of Bitcoin through electronic web-based Bitcoin trading platforms. Gelfman represented he had a high performing algorithmic trading computer program named Jigsaw that generated monthly profits of 7% to 11% and protected against risk. The CFTC had alleged that Gelfman created false performance reports showing positive Bitcoin trading gains and then staged a fake computer hack to further conceal losses and misappropriation.

Kevin Kyes, 70, was sentenced to 5 years in prison and ordered to pay more than $3.6 million in restitution in connection with a $7 million Ponzi scheme that targeted 60 Japanese investors. Kyes worked with a partner, John Holdaway, 74, to defraud investors through their business, Money Management Strategies. They represented that they could do high-speed trading with 100% returns on investments.

Wayne McKelvey, 55, was convicted for his role in a $54 million Ponzi scheme run through Mantria Corp. McKelvey is a former insurance salesman who raised money for the scheme run by Troy Wragg and Amanda Knorr, both of whom previously pleaded guilty. The scheme promised profits from green technology that would turn trash into fuel and “carbon-negative” housing developments. McKelvey had raised money for the scheme through his “Speed of Wealth” seminars, telling investors that Mantria was the next Microsoft and that it was “on the cusp of a revolutionary technology that’s going to change the world, and you guys can benefit from it by putting money in and getting stinkin’ wealthy.”

Raymond K. Montoya, 70, pleaded guilty to charges that he ran scheme through a pooled investment known as RMA Strategic Opportunity Fund LLC for 8 years. Montoya represented to investors that they were earning substantial returns when the fund was actually sustaining significant losses. Montoya promised investors returns from investments in stocks and bonds, but only a portion of the money was actually invested. The rest was diverted for his personal expenses such as luxury vehicles and the mortgage on his son’s residence. Montoya told investors he had $5 billion in assets in his fund when the highest amount he ever had was about $20 million.

Edward Lee Moody Jr., 47, of Virginia, was criminally charged and then pleaded guilty in connection with a 13-year scheme that collected $6.1 million from 53 investors. Moody had previously been named in an SEC lawsuit, along with his companies, CM Capital Management LLC and G.E. Holdings Corp. Moody used at least $1.4 million of the investor funds to pay business expenses, purchase a home, make car loan payments, shop, and travel to Las Vegas and other destinations.

Stephen Condon Peters, 45, of North Carolina, faced additional charges in connection with an alleged $15 million Ponzi scheme run through VisionQuest Wealth Management. Peters ran the alleged scheme by selling notes in VisionQuest Capital, and the notes were then sold to clients of VisionQuest Management. Both companies were owned by Peters. Investors were promised returns of 8%, or 9% if they chose to forego interest and reinvest. The investor funds were used by Peters to purchase, among other things, luxury vacation home in Costa Rica, a horse farm in Wake County where he lived, a Cadillac Escalade, properties in Jacksonville and Ferguson, N.C., farm equipment, a gun collection with rifles and pistols, and diamond jewelry.

Jason Rhodes, 46, of Connecticut, was arrested on charges that he allegedly misappropriated nearly $20 million in a Ponzi scheme. The scheme involved investments into a hedge fund that was supposedly purchasing securities. Rhodes allegedly defrauded 25 investors and falsified an investor account statement in at least one instance.

Ernie Julius Romer III, 57, was accused of one additional charge in connection with an alleged $3 million Ponzi scheme. Romer has been in jail for 13 months, unable to afford the $1 million bond. He has pleaded no contest and is awaiting sentencing.

Carl Frederick Sealey, 43, of New Jersey, was sentenced to 78 months in prison in connection with a Ponzi scheme that defrauded about 20 investors out of $1.6 million. Sealey is the ex-chairman and CEO of Global Standard Industries and SEK Industries and misrepresented to investors that their investments were risk free and were earn 10% interest in 90 days. He falsely claimed that his equity-investment firms had almost $50 billion in assets. Instead, Sealey spent the investors’ funds on his personal expenses for things like spa treatments, jewelry and helicopter-flying lessons and rides.

Karl James Stehlin aka Carl Davis, 63, was sentenced to 10 years in prison in connection with a $10 million scheme that he ran through Marble Bridge Funding Group. Stehin would fake invoices to companies that offered factoring services.

Carlos Uresti, 54, and Stanley Bates, 46, were charged by the SEC in connection with an alleged $11 million oil and gas fracking Ponzi scheme. Uresti, who had been found guilty by a jury on criminal charges dropped his appeal of his conviction and 12 year sentence. He also surrendered his license to practice law and resigned from the Texas Senate.

Frederick Alan Voight, 61, was charged in Nebraska in connection with an alleged $40.9 million Ponzi scheme. Voight ran the scheme through several entities, including F.A. Voight & Associates and Daystar Funding. He represented to investors that he provided financing to companies to take them through ‘commercialization to profitability.” Voight allegedly raised about $76 million from 608 investors, but only about $22 million of the funds were loaned.

Susan Margaret Werth, 57, of San Diego, California, was charged and pleaded not guilty in connection with an alleged Ponzi scheme that raised approximately $26 million. Werth ran the scheme through Commercial Exchange Solutions and Exchange Solutions Company and falsely claimed that she would use investor funds for short-term construction loans. She represented that the investments were 100% guaranteed and promised rates of returns of at least 15% on 30 to 90-day terms. Werth allegedly spent $2 million of the funds to fund her lifestyle.

Lucita “Lu” A. Zamoras, 55, of Illinois, was charged in connection with an alleged $3.5 million Ponzi scheme that defrauded at least 12 victims. Zamoras is a financial advisor who alleged preyed upon elderly Filipino families by falsely promising them safe, low-risk investments in retirement products and custom insurance services. Zamoras instead used their money to feed her gambling habit and pay her personal expenses. Zamoras operated through several businesses, including First Fidelity Tax, JQH Ventures, and Cornerstone Home Solutions.

INTERNATIONAL PONZI SCHEME NEWS

Australia

The Berlin Group, an MLM cryptocurrency scheme, is believed to be a Ponzi scheme. Joachim Pydde is the director of The Berlin Group. Laurie Suarez aka Lorenzo Suarez is the Executive Operations Manager and is a ‘convicted fraudster.’ Peter Ohanyan, the company’s Chief Marketing Officer, was promoting 3T Networks, an illegal unregistered securities offering.

Belgium

The Financial Services and Markets Authority updated its fraudulent crypto site with 21 new crypto sites that have been blacklisted. Five of those sites are no longer available, where 16 others are still operational. One of them changed its business model to video on demand services after being blacklisted.

China

More than 20 suspects were detained in connection with an alleged $14 billion Ponzi scheme called Data Tycoon involving latex bedding. Instead of selling latex products, however, they sold financial products to investors who were encouraged to bring in new investors. Investors became members of the DT Group, and over 1 million-member accounts were opened from June 2016 to August 2018.

England

Victoria Smith, 29, was sentenced to 4½ years in jail in connection with a Ponzi scheme. Smith defrauded investors by offering preferential rates in fake foreign currency schemes.

India

Asif Ashrak Malkani was arrested after evading authorities for 9 months. Malkani is the founder of Kashh Coin and defrauded investors out of hundreds of thousands of dollars. Malkani was gearing up to launch a new scheme called V-Tube.

Aalima Nowhera Shaikh, 45, the chairperson of Heera Group, was arrested on charges that investors were defrauded in Shaikh’s “Halal investment programmes.” Shaikh is accused of defrauding 10,000 investors out of Rs 500 crore.

New Zealand

Kelvin Clive Wood, 69, was charged with running a Ponzi scheme through a foreign exchange brokerage and trading business. The scheme allegedly involved 18 investors who lost $7 million. Wood entered a no plea.

Nigeria

Lizzy Efah was arrested while trying to flee from Nigeria. She has been accused of operating a Ponzi scheme named Golden Achievers, which is a Swiss gold scheme.

Poland

The DasCoin scheme is being criminally investigated. Polish authorities seized over $11.6 million from what is believed to be a Ponzi scheme involving cryptocurrency. Das Coin was a cryptocurrency launched to raise funds for a company known as Net Leaders.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

An appellate court upheld a lower court’s rejection of a stipulated amount of restitution pursuant to a plea agreement by Dean Hamilton. Hamilton had pleaded guilty to one count of securities fraud in connection with a Ponzi scheme run through Galileo Financial LLC. He had sold securities to four investors who lost a total of about $512,000. The stipulation for restitution provided that he pay $38,000 to victims at the rate of $500 per month. The court disagreed to ordered restitution in the amount of $382,085, which order was upheld on appeal. State of Utah v. Hamilton, 2018 UT App 202 (Oct. 25, 2018).

The bankruptcy judge approved the plan of liquidation for the Woodbridge Group of Companies, LLC. Woodbridge was a high-end real estate developer and operated through at least 279 companies. The scheme involved about $1 billion.  The liquidation plan was approved over the objection of some of the creditors.