Thursday, June 30, 2016

June 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for June 2016. The reported stories reflect: 4 guilty pleas or convictions in pending cases; over 39 years of newly imposed sentences for people involved in Ponzi schemes; at least 14 new Ponzi schemes worldwide; and an average age of approximately 59 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.

    Charles E. Bennett, 57, was disbarred from the Bar of the State of New York. Matter of Bennett, 2016 N.Y. App. Div. LEXIS 4176 (Sup. NY, June 2, 2016). Bennett is a former corporate lawyer at Skadden, Arps, Slate, Meagher & Flom, who was sentenced to 5 years in prison for running a $5 million Ponzi scheme. Bennett had left a suicide note before trying to kill himself which revealed the scheme that defrauded 30 friends and family members. Bennett survived the suicide attempt.

    Andrew Caspersen, 39, was indicted on allegations that he ran a $40 million Ponzi scheme over an 18 month period. Caspersen pleaded not guilty to the charges, claiming that he had uncontrollable gambling addiction. Caspersen told the judge that he had been treated for “compulsive gambling and mental health illness.” He is expected to plead guilty next month.

    Thomas J. Connerton, 64, was charged by the SEC with defrauding 50 people, including 6 women that he met on an online dating site, to invest in his surgical glove company, Safety Technologies LLC. Connerton claimed that his company was developing a material to make surgical gloves more resistant to cuts or punctures and that major glove manufacturers wanted the technology.

    Charles Leif Erickson, 73, was sentenced to 2 years in prison and ordered to pay about $1.6 million in restitution in connection with a Ponzi scheme that he carried out on members of the church in which he was a pastor. He had 25 investors invest $3.5 million into the scheme and promised them 96% returns over a two year period. Court records show that “Erickson believed that the Holy Spirit had given him a proprietary system for day trading a particularly volatile type of futures contract.”

    Eduardo Galan, 65, was sentenced to 3 years in prison in connection with a $1 million Ponzi scheme. Galan ran a financial services business called S&G Unlimited Services as a registered securities broker. He represented that he was investing funds in private mortgage transactions.

    Bobby Hamby, 56, was sentenced to 4 years in prison in connection with a $2 million Ponzi scheme that he operated. Hamby is a chiropractor who solicited funds from investors in a real estate scheme that he ran through B+E Family Investments LLC. The scheme defrauded at least 22 investors, falsely assuring them that their investments would be secure because he would put their names on the property deeds. Hamby also fraudulently solicited funds to supposedly finance laser equipment for his chiropractic office, but only about $5,000 of the $150,000 collected was actually used on the equipment.

    Allen Hess, 51, rejected a plea deal that would have sent him to prison for 10 to 30 years for his role in an alleged $600,000 Ponzi scheme. Hess is accused of soliciting investors to invest in “foreign oil.” He remains in jail with no bail.

    John Holdaway, 72, and Kevin Kyes, 68, were indicted on charges that they ran a $7 million Ponzi scheme. The indictment alleges that they ran a scheme that targeted Japanese investors, offering them the opportunity to invest in a group of entities referred to as “Money Management Strategies.” The investors were promised 100% annual returns from currency and derivatives trading and were told their principal would be safe because their money would never leave the bank accounts and that any trading losses would be borne by Money Management Strategies.

    Joseph J. Lampariello, 62, was sentenced to 10 years and one month in prison and ordered to pay nearly $40 million in restitution in connection with the Ponzi scheme run through Medical Capital Holdings that defrauded more than 700 investors. Lampariello was the president and chief operating officer. Another former executive of the company, Sidney Field, reached a settlement with the SEC and agreed to pay $2.8 million, but he was not charged criminally. 

    Ronald Mason, 47, pleaded guilty to charges that he defrauded 5 investors out of more than $625,000. Mason had previously served a prison term in connection with a $30 million Ponzi scheme that he had run with Scott Farah and Donald Dodge through Financial Resources Management. When Mason was released from prison he contacted more than 100 investors that Farah and Dodge had previously defrauded, inviting them to invest in the construction and sale of condominiums.

    Ronald Earl McCullough, 44, is wanted by the FBI in connection with an alleged Ponzi scheme that defrauded mostly Christian victims out of hundreds of thousands of dollars. The FBI announced that it is offering a $5,000 for information leading to the arrest of McCullough, who has been on the lam for nearly 3 years. David Christopher Mayhew, 43, who ran the scheme with McCullough, was sentenced to 26 years in prison in January.

    Randy Miland, 62, was indicted for allegedly running a $575, 000 Ponzi scheme that defrauded clients of his chiropractor business and other investors. Miland had previously been convicted of running a different Ponzi scheme in 1999 related to an alleged deal he had with Blockbuster, and he was ordered to pay $1.5 million in restitution, which he did not pay. Miland served a 55 month prison sentence for the 1999 conviction and in 2004 he pleaded guilty to wire fraud charges that got him a 41 month prison sentence.

    Ash Narayan, an investment advisor, was charged by the SEC with running a Ponzi-like scheme. He allegedly defrauded several athletes such as Jake Peavy of the Giants, Eagles quarterback Mark Sanchez, and retired Astors pitcher Roy Oswalt out of $30.4 million. The SEC also named The Ticket Reserve aka Forward Market Media, Inc., Richard M. Harmon and John A. Kaptrosky in its complaint, alleging that Narayan transferred more than $33 million to The Ticket Reserve without the investors’ knowledge.

    Haena Park, 40, was charged by the SEC with running an alleged Ponzi scheme using a futures and foreign currency trading strategy. Park was a Harvard graduate who solicited more than 30 friends, family and former Harvard classmates through her companies, Phaetra Capital GP and its predecessor, Argenta Capital. She raised at least $23 million from the investors. Criminal charges were also filed against Park this month.

    Scott Richard Rookus, 45, was charged with running a $1.5 million Ponzi scheme through his company, New Haven Holdings. The scheme allegedly defrauded at least 9 investors.

    Malcolm Segal, 70, was sentenced to more than 10 years in prison and ordered to pay more than $3.2 million in restitution in connection with a Ponzi scheme. Segal falsely promised his brokerage customers that the FDIC-insured CDs he was selling would generate higher interest than CDs available to the general public.

    John Sposato, 64, pleaded guilty to charges relating to an alleged Ponzi scheme that he ran through numerous companies, including Pegasus Investment & Development Corporation, LLC; Pegasus Investments; Oil Eaters, LLC; Organic Miracle Incorporation; S&J Corporate Properties, LLC; Pegasus Demolition & Debris Removal Service, LLC; and Pegasus Truck Lines, Inc. Nearly 50 people invested about $811,000 in the schemes that involved international bank instruments, cutting edge oil remediation and recovery products, and real estate transactions.

    Jerry Stauffer, 68, was sentenced to 10 years in prison for running a $1.8 million Ponzi scheme. The scheme defrauded about 15 people by promising them 5% returns. Stauffer was an expert in foreign currency who taught at a community college, but he did not actually invest the funds.

    Lawrence Paul “Larry” Stephens, 53, pleaded guilty to securities fraud in connection with a Ponzi scheme he ran while using somebody else’s certified public accountant license. Stephens solicited funds for the “Black Canyon Project” which was supposedly a toll road that was going to be built in Orange County, California. No toll road was ever actually planned.

    Jack Utsick, 73, an ex-concert promoter through his companies, Worldwide Entertainment Inc. and Entertainment Group Fund Inc. pleaded guilty to charges relating to an alleged $200 million Ponzi scheme. Utsick allegedly defrauded 3,300 investors in connection with his promotion of tours by artists such as The Rolling Stones, Fleetwood Mac, Elton John, The Pretenders and Aerosmith. In 2014, Utsick was extradited to the U.S. from Brazil where he had fled in 2007.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

    The trustee administering the bankruptcy case of Virginia Mary Tan, 64, and her husband Patrick Eng Tien Tan, 73, filed a first report showing that the Tans have liabilities of $46.54 million and assets of $2.55 million. The Tans have been accused of running a $40 million Ponzi scheme, which has not yet been established, and the trustee says the scheme involved 177 investors. Investors were promised 12% to 24% interest in connection with the payday loan business and other finance investments.

    The receiver for Banners Broker International reported that the scheme’s pitchman, Kuldip Josun, embezzled at least $3.6 million from an MLM program known as KulClub and used the funds for his own personal purposes.

India

    Police detained Rajib Behera, an agent of Flourish India Limited, on allegations that investor had been defrauded of over Rs 100 crore through its 132 branches over the last 8 years.

    Pravesh Chander Rout was arrested in connection with an alleged Ponzi scheme involving Rs 230 crore.

    Three directors of Oscar chit fund company, Tara Prasad Hota, Kirti Bstia and Abani Patnaik, were arrested.

    The government moved to confiscated properties from Vista Management Services Ltd. The managing director of the firm, Deb Kumar Panda, was arrested last year on larges that the company defrauded investors out of at least Rs 50 crore.

    Kamalsinh Parmar, 35, was arrested and the alleged Ponzi scheme run through Krishna Serva Vikas Trust was shut down. The scheme allegedly defrauded 6,000 investors out of Rs 75 crore. 

Philippines

    Terrence Kenji Ito, Theodore Yuji Ito, Aldus Renier Tubiera, Joanary Roxas, and Jake Ryu Oprecio were charged on allegations that they were running a second Ponzi scheme that defrauded investors out of P500 million. The defendants are executives of One Lightening Corp. and are already the subject of a cease and desist order, but they began offering and selling investment contracts through a new company, FDS Forward Direct Selling Corp.

South Africa

    Colin Davids, 48, was arrested on charges that he was running a Ponzi scheme through Platinum Forex Group. The assets of the company were frozen about a year ago but Davids denied any wrongdoing. The scheme promised returns of between 48% and 84%. Davids is a pastor at New Direction Grace Ministries in Cape Town.

Swaziland

    Big Buxx Swaziland and Empowerment Gener were revealed to be two new Ponzi schemes that appear to have taken the place of the failed MMM scheme from South Africa.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    Customers of the now defunct cryptocurrency mining company, GAW Minors, filed a lawsuit against the company as well as ZenMiner, Homero Joshua Garza, and Stuart Fraser. The lawsuit alleges fraud and Ponzi scheme in connection with the company’s mining services and its cryptocurrency, paycoin.

    The trustee of the Bernard Madoff Ponzi scheme reached a revised agreement with the owners of the New York Mets, including Fred Wilpon and Saul Katz, that gives them more time to pay the $61 million settlement. The original settlement amount of $162 million had been reduced to $61 million due to a formula tied to how much the trustee had paid to victims. The $61 million was to be paid in two installments, the first of which was due this month. Wilpon, Katz, and their partners at Sterling Equities now have to pay $16 million this month and the balance will be divided into four installments.

    The bankruptcy court presiding over the Bernard L. Madoff Investment Securities LLC case approved a seventh distribution to Madoff customers, bringing their total recovery to $9.45 billion.

    The receiver of Nationwide Automated Systems Inc. filed a lawsuit against City National Bank, Royal Bank of Canada and Patrick Fitzwilliam, a senior vice president and branch manager, alleging that they aided and abetted NASI’s Ponzi scheme. The complaint alleges that the bank failed to report suspicious activity which “screamed that fraud was afoot” and that Fitzwilliam soothed investors’ fears by making false representations to investors.

    Defendant Dwayne Jones, an alleged net winner in connection with the TelexFree Ponzi scheme, counterclaimed against the trustee who sued him, seeking damages for emotional distress and attorneys’ fees and costs. Jones had allegedly received $561,000 in profits and is one of about 100,000 defendants in a class action filed by the trustee against net winners.

    The TelexFree trustee sought a stay of his lawsuit against Gerald Nehra and the law firm of Nehra and Waak at the request of the United States. The Department of Justice requested the stay to that the lawsuit would not interfere with the government’s criminal case against James Merrill, one of the principals of TelexFree.

    The court presiding over the Thomas Petters bankruptcy case ruled that actual intent to hinder, delay and defraud creditors can be inferred if the transfers made were caught up “in the main churn of a Ponzi scheme,” despite a Minnesota Supreme Court ruling last year (Finn v. Alliance Bank, 860 N.W.2d 638 (Minn. 2015)) that declined to allow the use of the Ponzi scheme presumption. Kelley v. Opportunity Finance, LLC (In re Petters Company, Inc.), 2016 Bankr. LEXIS 2169 (Bankr. D. Minn. May 31, 2016).

Tuesday, May 31, 2016

May 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for May 2016. The reported stories reflect: 3 guilty pleas or convictions in pending cases; over 129 years of newly imposed sentences for people involved in Ponzi schemes; at least 8 new Ponzi schemes worldwide; 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.

    Lori Ann Anderson, 54, was sentenced to one to 15 years in prison for each of three felonies in connection with a $1.7 million Ponzi scheme that defrauded 46 investors. Anderson ran an investment business called SMTS, which she said stood for “Show Me the Savings” or “Stock Market Trading Services.” This was the second time that Anderson was sentenced. In 1992, she was sentenced in a similar case which caused her to lose her securities license for embezzling $140,000 from Farm Bureau Insurance policy holders.

    Charles Bennett, 57, a former corporate lawyer at Skadden, Arps, Slate, Meagher & Flom, was sentenced to 5 years in prison for running a $5 million Ponzi scheme. Bennett had left a suicide note before trying to kill himself which revealed the scheme that defrauded 30 friends and family members. Bennett survived the suicide attempt.

    Louis Martin “Marty” Blazer III was accused of running a Ponzi scheme involving $2.35 million of funds invested in his company, Blazer Capital Management. Blazer is alleged to have taken money from 5 clients, at least two of which were professional athletes, promising them returns from investments in two movie projects.

    Gerard Frank Cellette, 51, pleaded guilty to charges that he ran a Ponzi scheme through his printing business, Minnesota Print Services, and was sentenced to 35 years in prison. Cellette had claimed to have printing contracts with major corporations and promised investors 10% to 15% returns. The scheme took in $250 million. Co-defendant Adam Jay Boskovich pleaded guilty last year and was sentenced to one day in jail.

    Alcibiades Cifuente, 33, and Jennifer Wee Cifuentes, 35, were charged by prosecutors alleging that they ran a Ponzi scheme that defrauded approximately 25 victims out of about $600,000. The scheme involved foreign currency and commodity markets.

    Chad Roger Deucher, 43, was indicted on allegations that he defrauded investors in his real estate firm out of $16 million in a Ponzi scheme. Deucher allegedly ran the scheme through his property management company, Marquis Properties LLC, and promised returns as high as 22%. He had collected about $28 million from 250 investors and transferred millions of dollars into his business and personal interests that were unrelated to the acquisition or rehabilitation of property. Deucher and Richard Clatfelter, the Marquis executive vice president, had been sued by the SEC in January.

    Catherine Ann “Cathy” Finberg was the subject of an order freezing her investment accounts on allegations that she ran a $1.3 million Ponzi scheme.

    Kevin Carl Fortney, 55, was convicted of lying to a federal court about hiding assets for his brother-in-law, Roger Stanley Bliss, 57, who was involved in a Ponzi scheme. Bliss had violated an asset freeze order by giving his 17 foot catamaran to Fortney.

    Jaswant S. Gill aka Jason Gill, and Javier Rios, 33, were charged by the SEC with running a Ponzi scheme through their companies JSG Capital Investments LLC and JSG Capital LLC. The scheme allegedly defrauded about 200 investors out of $10 million by promising to buy pre-IPO shares in companies like Airbnb and Uber.

    Wenxing Huang aka “Di Peng” aka “Fatty,” 33, was charged with operating an alleged $6.9 million Ponzi scheme. Huang is the owner of Ju Ding, Inc., an investment company that brought in funds from about 400 investors who thought they were investing in technology based on graphene, a layer of pure carbon that is only one atom thick.

 David B. Kaplan and his three entities, Synchronized Organizational Solutions LLCSynchronized Organizational Solutions International Ltd.; Manna International Enterprises Inc., were the subject of charges by the SEC that they were allegedly running a Ponzi scheme. The scheme allegedly raised $15.8 million from at least 26 investors by promising investors an offshore investment opportunity. The Water-Walking Foundation Inc., Lisa M. KaplanThe Water Walking Foundation, and Manna Investments LLC were named as relief defendants.

    Amanda Knorr, 33, pleaded guilty to a $54 million Ponzi scheme run through Mantria Corp. Knorr ran the scheme with Troy Wragg. The scheme promised returns from green energy technology that was never developed. More than 300 investors were defrauded.

    Christopher Maguire, 33, pleaded guilty to charges that he ran a $13.4 million Ponzi scheme through his company, Vivid Funding. Maguire told investors that he had a “proof of funds” loan business and that he had a software company called M-Development. Maguire represented that he could make a 20% profit on funds.

    Frank Mazzola, 49, had his request to unfreeze his assets denied. Mazzola, his uncle John Bivona, 75, and the investment funds, Saddle River Advisors and SRA Management Associates, were the subjects of an asset freeze requested by the SEC in which the SEC alleged that they had raised more than $53 million from investors in pre-IPO tech companies. Mazzola asked the judge to unfreeze $13,280 per month to cover living expenses and $35,450 to pay off debt, but the Court denied the request since Mazzola had asserted the Fifth Amendment and refused to disclose assets or income.

    William Risinger, 44, was sentenced to 13 years and 4 months in prison and ordered to pay more than $3.7 million in restitution for his role in three oil, gas and mineral schemes. Risinger was the owner of RHM Exploration LLC and had lost an estimated $500,000 while gambling in late 2015 and early 2016.

    Keith Michael Rogers, 42, was sentenced to 10 years following his guilty plea in March to defrauding investors out of $2.5 million.

    Richard Shusterman, 53, was convicted by a jury on multiple counts relating to a Ponzi scheme that defrauded investors and lenders out of $278 million. Shusterman sold fraudulent investment portfolios of debts that were purportedly owed by hospital patents. Shusterman conspired with Robert Feldman and ran the scheme through the companies, International Portfolio, Inc. and United Consulting Inc. Two other individuals, Jonathan Rosenberg and Douglas Kuber, operated Account Receivable Services LLC and agreed to promote the sale of the debt portfolio.

    Lawrence Paul “Larry” Stephens, 52, was arrested on allegations that he ran a $4.5 million Ponzi scheme. The victims were 4 individuals and a couple. Stephens had been doing accounting and handling bookkeeping for clients through Brylaw Accounting Firm for years but did not have an accounting license. Brylaw is still open but was placed on probation in September.

    Donell Thomas lost his motion to vacate his 94 month prison sentence arising from a Ponzi scheme involving short terms real estate sales in the Chicago area. United States v. Thomas, 2016 U.S. Dist. LEXIS 63955 (May 16, 2016).

INTERNATIONAL PONZI SCHEME NEWS

Canada

    Virginia Mary Tan, 64, and her husband Patrick Eng Tien Tan, 73, are accused of running a $40 million Ponzi scheme that defrauded 50 investors. Their son, Marcus Soon-Keen Tan, has also been named in some of the civil claims pending against them. Investors were promised 12% to 24% interest in connection with the payday loan business and other finance investments.

    Rashida Samji, 63, already facing a $33 million fine, was found guilty on charges relating to a $110 million Ponzi scheme. The scheme defrauded more than 200 investors who believed they were purchasing an investment in a winery that did not exist.

China

    Xu Qin, 35, a top executive at Zhongjin Capital Management (Wealthroll Asset Management Co.), confessed on state television to operating “an extremely typical Ponzi scheme.” Qin had been arrested last month on his way to get married, along with at least 20 other executives, for defrauding more than 25,000 investors out of $6.1 billion. Some have said that public confessions in China are often forced and can violate due process rights.

England

    Spencer Steinberg, 46, Michael Strubel, 54, and Jolan Saunders, 40, were sentenced to 6 years nine months, 7 years, and 7 years, respectively, for their role in a £79.5 million Ponzi scheme run through Saunders Electrical Wholesalers Limited. The scheme defrauded about 91 victims, whose money was used to buy expensive yachts, property and cars for the three defendants. Investors were told that the company supplied electrical goods to major hotel chains such as Marriott and Hilton.


India

    Subash Srichandan, one of the directors of Ashirbad Multipurpose Cooperative Ltd., was arrested on charges that he defrauded investors out of about Rs 10 crore.

  The Ponzi scheme known as IAmAuctioningDirect, which was run by Ingula Investments, has collapsed. The scheme was operated by Norman Mhlongo and defrauded 36,000 people by promising them daily interest of 3%.


Thailand

    Immigration police took British man, Mark Hallett, 48, into custody for allegedly overstaying his visa. Hallet is wanted in the UK for his role in an alleged Ponzi scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    TD Ameritrade and Integrity Bank & Trust were added to a proposed class action filed by investors of Aequitas Management LLC, which already named Deloitte & Touche LLP and Sidley Austin. Investors allege that the firms should be held accountable for “$600 million in alleged losses suffered by more than 1,500 investors.”

    Amir Isaiah, the court-appointed receiver of Coravca Distributions LLC, filed a lawsuit against JPMorgan Chase Bank alleging that it aided an international Ponzi scheme that promised profits from Venezuelan and U.S. currency trading. The scheme’s operators, Rosa Aguirre and Diego Corado, allegedly raised money from about 2,000 investors.

    The Ninth Circuit affirmed the lower courts’ decisions denying a motion to compel arbitration in lawsuit filed by the bankruptcy trustee of EPD Investment Company LLC seeking to avoid fraudulent transfers. Kirkland v. Rund (In re EPD Investment Company, LLC), 2016 U.S. App. LEXIS 8519 (9th Cir. May 9, 2016). The court found that the trustee’s clams were core matters and that he was not bound by the arbitration agreements.

    Steven Hoffenberg, 76, previously sentenced in 1997 to 20 years in prison in connection with a Ponzi scheme, sued Jeffrey Epstein for $500 million, alleging that Epstein was a co-conspirator in the Ponzi scheme.

    The Second Circuit affirmed a decision that dismissed claims of Ritchie Capital Management LLC against General Electric Capital Corp. in connection with the Tom Petters Ponzi scheme. Ritchie Capital Management LLC v. General Electric Capital Corp., 2016 U.S. App. LEXIS 8628 (May 11, 2016). The court found that Ritchie Capital lacked standing to bring the claims for conspiracy and aiding and abetting.

    As Chadbourne & Parke agreed to pay $35 million to settle claims of investors of R. Allen Stanford’s scheme, a new class action was filed against Proskauer Rose claiming $5 billion in damages.

    The trustee of the TelexFree bankruptcy case filed a lawsuit against Gerald Nehra and the Nehra and Waak law firm, alleging that they were “actively involved” in promoting the Ponzi scheme.

    A claims bar date has been established in the TelexFree case for September 26, 2016. An electronic claims portal has been established at TelexFreeClaims.com. The notice of the claims bar date can be found at: http://www.kccllc.net/telexfree/document/1440987160531000000000001.

   The ZeekRewards receiver obtained permission from the court to pay certain foreign affiliates by wire since they were unable to cash checks from the U.S.-based receivership.