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

Thursday, October 31, 2019

October 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for October 2019. The reported stories reflect at least 3 new Ponzi schemes worldwide; at least 10 guilty pleas, over 103 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 49 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
   
Kraig Aiken, 51, agreed to plead guilty to charges relating to an alleged $1 billion Ponzi scheme. The scheme was run through Future Income Payments and involved the sale of military benefits, preying upon veterans and other investors.

C. Dean Alford, 66, was accused by investors of running a $6 million Ponzi scheme. Alford was formerly on the Georgia Board of Regents setting policy for the state’s colleges and universities. A group of investors sued Alford, alleging that there were 436 investors defrauded by Alford and others, including Alford’s wife, Dlugolenski Alford, and her son, David Dlugolenski, who deny knowledge of the scheme. Alford raised funds from investors to supposedly build a waste-to-energy plant. The alleged scheme was run through Allied Energy Services and Augusta Waste to Energy. Others invested with Alford through the Georgia Power Solar Farm Project.

Joseph S. Anile II pleaded guilty to charges relating to the $72 million Ponzi scheme run through Oasis International Group Ltd. The scheme defrauded 700 investors who were promised returns from pooled investments in the foreign exchange market. The following other entities and individuals were charged in connection with the scheme: Oasis International Group, Limited; Oasis Management, LLC; Satellite Holdings Company; Michael J. DaCorta; Raymond P. Montie, III; Francisco “Frank” L. Duran; and John J. Haas.

Syed Arham Arbab, 22, pleaded guilty to running a $1 million Ponzi scheme from his fraternity house at the University of Georgia. Arbab defrauded 117 investors to invest in Artis Proficio Capital Management and Artis Proficio Capital Investments, representing that those were hedge funds paying returns of 22% or 56%.

Jan Douglas Atlas, 74, pleaded guilty to charges that he facilitated a Ponzi scheme run through 1 Global Capital LLC. The scheme raised more than $330 million from thousands of investors through a purported commercial lending program.

James T. Booth, 74, was indicted in New York on charges of securities fraud in connection with an alleged Ponzi scheme run through Booth Financial Associates. He pleaded guilty later in the month. Instead of investing funds as promised in securities, Booth used most of the nearly $5 million of investors’ money to pay his personal expenses. Booth represented he would invest the funds in advisory and brokerage accounts but directed the money to the bank account of Insurance Trends Inc., an entity he controlled. About 40 investors lost their funds in the scheme.

Hal Herring Brown, Jr., 69, of North Carolina, was charged in connection with an alleged $13.5 million Ponzi scheme. Using his company Oodles Company, Brown claimed he was selling intellectual property to large companies. At least 23 investors were defrauded in the scheme.

Michael S. Cohn, a former SEC employee, was charged with obstruction of justice, unauthorized computer access and unauthorized disclosure of confidential information in connection with an alleged Ponzi scheme run through GPB Capital Holdings. Cohn is accused of using his position as an SEC investigator to access sensitive information upon his departure from the SEC and his employment by GPB Capital. Cohn allegedly accessed data on the SEC servers relating to its investigation of GPB. Last month, GPB Capital fired David Rosenberg without explanation, which followed Rosenberg filing a lawsuit alleging that GPB Capital was running a Ponzi scheme and inflating dealership values.  A group of investors has also filed a class action against the company.
 
Christopher LuGrand Dawkins and his wife, Fern Carty Dawkins, were sued on allegations that they were running a real estate Ponzi scheme. The lawsuit alleges that they defrauded 35 investors out of at least $2 million.

Viktor Gjonaj, 42, of Michigan, has been accused in multiple lawsuits of running a real estate Ponzi scheme through Imperium Group, LLC. Gjonaj is real estate broker and denies the allegations.

Brian Lee Kissinger, 49, and Kenny Rojas, 41, of California, pleaded not guilty to charges that they were running a “scam resembling a Ponzi scheme.” Investors believed they were buying liens on distressed real estate properties through Kissinger’s company, Aria Management Group. The scheme involved about $1.5 million.

Rick Koerber was sentenced to 14 years in prison in connection with a Ponzi scheme that he ran through Founders Capital, Franklin Squires Investments, and Franklin Squires Companies. Koerber had promised returns of 24% to 60%.

Kevin B. Merrill, 54, was sentenced to 22 years in prison and ordered to pay $189.1 million in restitution in connection with a $396 million Ponzi scheme that defrauded investors out of $189.1 million.  His wife, Amanda Mahlstedt Merrill, 30, pleaded guilty to conspiring to remove property and obstruct justice in connection with the scheme. Amanda had been caught removing cash from a safe in their $11 million vacation home in Florida. Jay Ledford, 55, had pleaded guilty and was also sentenced this month to 14 years in prison. Cameron Jezierski, 28, has also previously pleaded guilty to the scheme.

Mark Ray, 59, of Illinois, was sued by the SEC in a complaint accusing Ray of running a Ponzi scheme through a cattle trading operation and marijuana business. Reva Stachniw, 67, was named as a co-defendant on charges that she allowed Ray to use bank accounts she opened.

Ronald L. Roach, 53, and Joseph W. Bayliss, 44, pleaded guilty to charges relating to an alleged $2.5 billion Ponzi scheme through DC Solar Solutions. Roach is a certified public accountant and Bayliss is an electrician, and both have agreed to cooperate with authorities in the ongoing investigation of the DC Solar scheme run by Jeffrey and Paulette Carpoff. The Carpoffs were named in the plea agreements and neither has been charged in the case. The scheme offered investors tax incentives to lease mobile solar generators that could be used at racetracks and concerts and to power remote cell phone towers during power outages. But only about 3,000 to 5,000 generators of the 12,000 represented had actually been produced. Roach and Bayliss admitted to providing false reports that misled investors. Investor losses are estimated at $1 billion. The auction of the Carpoff’s car collection by the U.S. Marshals netted $8.2 million.

Scott Rothstein, 57, lost his appeal to the Eleventh Circuit seeking to get a reduction in his 50-year prison sentence.
  
David Gilbert Saffron of Las Vegas was charged by the CFTC with running a Ponzi scheme that defrauded at least 14 investors out of $11 million worth of Bitcoin. The scheme was run through Circle Society Corp. Saffron claimed that investors could double their money in two weeks by using trading bots on 57 separate computers.

Perry Santillo aka King Perry, 39, pleaded guilty to running a Ponzi scheme that obtained at least $115.5 million from about 1,000 investors. Investors are still owed about $71 million. Santillo was sued along with Christopher Parris by the SEC last year. The scheme was run through Lucian Development in New York as well as Advice and Life Group, Poconos Investments, First American Securities, and Financial Planners Group of America.

Robert H. Shapiro, 62, was sentenced to 25 years in prison for orchestrating the $1.3 billion Ponzi scheme run through Woodbridge Group of Companies, LLC. The scheme defrauded more than 8,000 investors and had promised them returns of up to 10% from real estate loans to property developers. In reality, the real estate was often owned by Shapiro or didn’t exist at all.
 
INTERNATIONAL PONZI SCHEME NEWS
 
China

Fair Win, a gambling platform, was accused of running a Ponzi scheme when it was discovered that about $10.6 million in Ethereum had disappeared.  Fair Win has denied allegations that it is a Ponzi scheme.

India

About $1.2 million previously seized from a Bitcoin Ponzi scheme remain frozen in an Indian bank account because the bitcoin cannot be converted into rupees under Indian banking laws.

Ganesh Rajan Bhavanam, 34, Lonachan Kuriaoke Kuriapuram, 50, Kishore Rokade, 46, Ankush Aher, 50, SS Ramesh, 34, and Ramesh Mane, 49, were arrested in connection with an alleged scheme run through AM Pictures. Investors were promised interest of 1% per day in addition to incentives like foreign trips and free gifts.

Properties held by Injaz International Associates Group Company were seized on allegations that the company ran a Ponzi scheme that defrauded thousands of investors.

Poland

Marcin and Katarzyna P. were sentenced to 15 years and 12½ years, respectively, for a Ponzi scheme run through Amber Gold. The scheme defrauded 18,000 investors out of $225 million. Investors were promised that their money would be invested in gold or other precious metals and they were promised returns of up to 16% per year.
 
South Africa

David Wilmot, 47, was sentenced to 15 years in prison after pleaded guilty to running a scheme that defrauded investors out of R23m.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

Greenberg Traurig agreed to pay $65 million to settle charges relating to its alleged involvement with the $7 billion Ponzi scheme run by R. Allen Stanford.

Monday, September 30, 2019

September 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for September 2019. The reported stories reflect at least 17 new Ponzi schemes worldwide; at least 4 guilty pleas, over 52 years of newly imposed sentences for people involved in Ponzi schemes; 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.
   
Joseph S. Anile II has agreed to plead guilty in connection with a scheme run through the Oasis International Group Ltd. Anile is the co-founder of Oasis, which ran a $75 million trading scheme that defrauded 700 investors. The scheme promised investors a minimum of 12% per year returns and was shut down by the CFTC in April. Other defendants named in the CFTC case are Oasis Management, LLC, Satellite Holdings Company, Michael J. DaCorta, Raymond P. Montie, III, Francisco "Frank" L. Duran, and John J. Haas.

Jan Douglas Atlas was accused of aiding the 1 Global Capital LLC Ponzi scheme. Meanwhile, a liquidation plan was approved in 1 Global’s bankruptcy case in Florida. The company was involved in a $330 million Ponzi scheme.

Kevin Brody, 56, of Pennsylvania, was sentenced to more than 2 years in prison for a scheme that defrauded at least 50 people out of more than $12 million. The scheme was run with co-defendant Matthew Eckstein through Conmac Funding Corp.

Hal Herring Brown, 49, of North Carolina, was charged in connection with an alleged $10 million Ponzi scheme run through “Oodles Company.” Brown claimed that his company was selling intellectual property to large companies like Disney and Apple. He claimed that he owned, produced and distributed family entertainment shows and movies worth hundreds of millions of dollars. The FBI alleges that Brown did not sell any shows or entertainment at all.

Brian R. Callahan, 50, was again denied bail when the Second Circuit affirmed the denial of bail to the former investment fund manager. Callahan was convicted in a $96 million Ponzi scheme and is seeking to overturn his sentence.

Jin K. Chung, 56, a South Korean citizen, is due for sentencing in connection with a scheme run through SNC Asset Management, Inc. that targeted Korean-Americans. His co-conspirator, Peter C. Son, 47, is currently serving a 15-year sentence in connection with their role in a scheme that caused more than 400 victims to lose $60,300,000. The scheme promised returns of up to 36% per year.

Natalie Cochran, 38, was arrested on charges that she ran a Ponzi scheme with her late husband, Michael Cochran. Cochran allegedly defrauded 11 people out of more than $2.5 million. The alleged scheme was run through Tactical Solutions Group and Technology Management Systems, which were government contractors. Cochran filed bankruptcy following the fraud charges.

David L. Downey, 50, of Indiana, pleaded guilty to running a scheme that caused $9.4 million in losses to clients of his payroll service business. Downey ran his payroll service business through Time Payroll, bringing in about $20 million but only returning $11 million of those funds to the IRS for employment taxes.

Gary Dragul and his businesses, GDA Real Estate Services and GDA Real Estate Management, were labeled as a Ponzi scheme by the receiver assigned to administering the assets. The accounting reveals that Dragul used funds to pay gambling debts of almost $9 million, he paid off more than $8.3 million in charges on his wife’s credit cards, and he bought a condo for his son.

Joseph Esposito, 43, and Salvatore Esposito, 47, two Florida brothers, pleaded guilty to charges in connection with an alleged $7.9 million Ponzi scheme run through U.S. Coin Bullion, LLC, a precious metals investment firm. They produced false account statements for customers who bought metals and stored them at U.S. Coin Bullion for “safekeeping.” More than 100 customers were defrauded and believed their purchased precious metals were safely held by U.S. Coin.

Zvi Feiner, 49, a Chicago rabbi, and his associate, Erez Baver, 39, settled charges with the SEC relating to an alleged $11.5 million nursing home scheme. Feiner, Baver and Feiner’s firm, FNR Healthcare, LLC, were accused of defrauding 62 or more investors in connection with the purchase of nursing homes and assisted-living facilities. Investors were promised returns around 15% from the operations of specific facilities. Baver’s company, Cedarbrook Management, Inc., and Feiner’s family investment company, Netzach Investments, were named as relief defendants.

Renwick Haddow entered a consent judgment with the SEC in connection with the charges that he ran a Ponzi scheme through Bar Works and Bitcoin Store, Inc.

Omar Khan of New York was sued by investors accusing him of running a fraudulent Ponzi scheme. Khan, an ex-NYPD cop and the head of Sensei International, is a business consultant. He allegedly defrauded investors through the International Business & Wine Society by luring investors to invest in his wine and dinner events businesses. Khan denies the allegations.

Scott A. Kohn, 65, was arrested in connection with criminal charges pending in South Carolina on charges that he and his partners ran a $1 billion Ponzi scheme through Future Income Payments LLC. The scheme targeted people receiving pensions and provided cash advances to veterans and others that would then be repaid by their pensions. The advances had interest rates at 240%, and the investors loaning the money were promised back 8%. Authorities believe that 2,600 people invested in Future Income Payments and lost more than $451 million. Kohn, of California, had been on the run since March.

Glenn C. Mueller, 72, was accused by the SEC of running a scheme through his company, Northridge Holdings. Mueller solicited investors to earn returns of 3% to 12% for investments in the purchase and renovation of apartment buildings. The scheme defrauded more than 300 investors out of at least $41.6 million.

Jack Nissen, 47, was sentenced to 2 years and 3 months in prison in connection with a $71 million Ponzi scheme run through National Event Co. Nissen had misrepresented that he would purchase and resell tickets to popular events such as the Broadway musical “Hamilton.” Craig Carton was sentenced to 3½ years in connection with the scheme.

Carol Ann Pedersen, 66, was sentenced to 97 months in prison. Pedersen, a Long Beach accountant, embezzled more than $27 million from clients who thought she was investing their money in low-risk securities. At least 56 people invested more than $40 million.

Stephen Condon Peters, 46, of North Carolina, was sentenced to 40 years in prison and ordered to pay back $15 million, for the scheme he ran through VisionQuest Wealth Management. Peters promised returns of 8% to 9% on low-risk investments that involved the sale of promissory notes.

Rodney Scott Phelps, 58, of Kentucky (no relation to the author), was convicted of running a Ponzi scheme that defrauded dozens of investors out of more than $2.2 million through their company, Maverick Asset Management. Phelps ran the scheme with Jason T. Castenir, in which they promised investors returns from an oil concession from the government of Belize. They promised investors royalties which were to be backed by a supposed multi-million trust, the Phelps Family Trust. The two also ran a scheme in which 3 victims were enticed to trade on commodities markets, and a third scheme in which they promised returns from the purchase of a casino in Mississippi. Castenir previously pleaded guilty.

Mark Ray, 59, of Colorado, was sued by the SEC on allegations that he was operating a cattle-flipping Ponzi scheme. Ray ran the scheme through multiple businesses including Custom Consulting and Product Services, LLC, RM Farm and Livestock, LLC, MR Cattle Production Services, LLC, Sunshine Enterprises, Universal Herbs, LLC, and DBC Limited, LLC. Ray promised returns of 10% to 20% over short periods of time from investors in his cattle-trading and marijuana businesses. Co-defendants Reva Stachniw, 67, and Ron Throgmartin, 55, are alleged to have substantially assisted Ray in the fraudulent scheme. The SEC alleges that, at the height of the scheme, more than $140 million per month was moving through the bank accounts controlled by Ray and Stachniw.

Matthew Taylor, 42, of Florida was arrested on charges that he was running a $1.5 million Ponzi scheme through his business, Savage Yachts, LLC. Taylor was a boat broker who was required to place deposits into an escrow account, but instead Taylor treated the account as a business operating and personal checking account. Authorities allege that Taylor operated the business as a Ponzi scheme, taking money from investors and promising a high return.

John F. Thomas, 74, and Thomas Becker, 72, were accused by the SEC of running a $29.5 million Ponzi scheme. The scheme allegedly defrauded more than 600 investors to put money in pooled investor funds to bet on sporting events. They used a network of at least 150 brokers and agents to solicit the investments and used the following six companies as part of the scheme:  Einstein Sports Advisory LLC, QSA LLC, Vegas Basketball Club LLC, Vegas Football Club LLC, Wellington Sports Club LLC, and Welscorp Inc.

Michael S. Young, Michael S. Stewart, Bryant E. Sewall, and Mediatrix Capital Inc. were the subject of an SEC action seeking an injunction and asset freeze to stop an allegedly fraudulent international trading program involving over $125 million. Investors were told that their money would be invested in an algorithmic trading strategy that had returned more than 1,600% since December 2013. The defendants diverted more than $35 million for their personal use and made “Ponzi-like” payments to investors. Mediatrix was awarded the Top Global Asset Manager Award in 2018.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Ralan Group, a developer, collapsed leaving 2,300 investors with almost $300 million in losses. Ralan asked homebuyers to release their deposits as loans to the company in return for 15% annual interest. The loans were not secured so the investors lost their deposits. Most of the investors targeted by the company are Chinese-Australians.

Canada

Steven Nowack, 56, was found guilty, sentenced to 9 years in prison, and ordered to pay $14.5 million in restitution in connection with a $20 million foreign exchange trading Ponzi scheme. Nowack had claimed that he had developed a “proprietary methodology” in which he would play on “dichotomies in the market” as between Asian, European and American investors.

England

Police are investigating Around The World Travel, owned by Hayley King, for running an alleged Ponzi scheme. Customers booked travel packages and substantially lower prices and would then learn that no rooms were available when they arrived at their hotels. It is alleged that newer customers who thought they were getting discounts were actually paying for other people’s flights and hotels.

India

Sanjeev Kumar, 37, was arrested on charges that he defrauded more than 500 people.

Sunil Kumar Choudhary, 36, Rijesh P, 36, and Rakesh K S, 41 were arrested on allegations that they were running a fraud through a funding firm named WAM Companies (OPC) Pvt Ltd
 
Garba Iliyasu and Umar Iliyasu were arrested on charges that they were running a scheme under the name, MGM Global Market. Mohammed Garba Iliyasu who is now on the run was the Managing Director of the company. Two of his brothers, Abubakar Garba Iliyasu and Ibrahim Garba Iliyasu, also part of the scheme, are equally on the run.

Charges have been brought against 8 people involved in an alleged Ponzi scheme run through Gold Express Pvt. Ltd., including directors Maajid Saliya and Amin Malpara. Investors were promised returns as high as 48% to 60% per year.

Assets of EBIZ.COM Pvt Ltd. and Pawan Malhan and Anita Malhan were attached on allegations that they were running a Ponzi scheme. Authorities allege that they defrauded investors with promises of quick returns from the sale of worthless products like free computer education packages.

Vikram Singh Rajput, 39, was arrested in connection with an alleged scheme run through ADG.

Asirbad Behera, the former honorary secretary of Odisha Cricket Association, was arrested on charges that he assisted Artha Tatwa Group in running a Ponzi scheme by boosting its credibility.

S. Sathiskkumar, 38, and S. Gunavathi, 36, were arrested on allegations that they were running a Ponzi scheme through an investment firm named Dream Makers Global Private Limited.

Mauritius

Authorities issues an investor alert regarding Cloud Token Mauritius and Cloud Token Indian Ocean and Africa, a cryptocurrency Ponzi scheme advertised on social media.

New Zealand

Tom Tanaka aka Masatomo Ashikaga, died, giving rise to claims of victims that he had been running a $45 million Ponzi scheme through East Winds Group. Tanaka had promised investors 8% returns on their investments into supposedly profitable foreign exchange trading businesses.

Nigeria

Operators of Bluekey Investment Club were arrested on allegations that they were running a Ponzi scheme promising 10% per week returns.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

Defendant law firm in a case brought by the receiver of Madison Timber, run by Arthur Lamar Adams, would not force the receiver into arbitration. A Mississippi federal judge held that the contract between the Ponzi scheme and the law firm was ambiguous as to the parties’ intent on how to resolve disputes.
 
FINRA arbitrators ordered UBS Financial Services to pay $555,000 to an elderly customer who claims she was defrauded by a former employee of UBS, William A. Hightower. Hightower had been accused of taking funds from clients through his company, Hightower Capital, and invested them in a Ponzi scheme run through Isospec Technologies and Reproductive Research Technologies. A 2018 indictment against Hightower alleged that Hightower took $10 million from clients to invest in a Ponzi scheme.