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 on 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

Tuesday, January 31, 2017

January 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2017. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 58 years of newly imposed sentences for people involved in Ponzi schemes; at least 4 new Ponzi schemes worldwide; 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. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Gino F. Accettola, 49, signed a consent agreement in a civil lawsuit and agreed to repay $12 million, which includes treble damages, although he appears to have no ability to do so. In an alleged Ponzi scheme, Accettola stole $3.8 million from 9 companies and 2 individuals after he induce them to invest in commercial construction jobs in Michigan. Accettola has not been criminally charged.

David Boden, 55, was disbarred by the Florida State Bar for his role in the Scott Rothstein Ponzi scheme. Boden was a non-equity shareholder in Rothstein’s law firm and had engaged in a conspiracy to broker the sale of purported settlement agreements to investors. Boden had pleaded guilty to wire fraud in connection with the scheme in 2014.

Christopher K. Brenner and Jay Mac Rust lost their attempt to dismiss the SEC lawsuit against them accusing them of running an investment scheme. The two lawyers acted as escrow agents and collected $13.8 million from clients. The SEC alleged that they collected funds from 29 small business owners representing that the funds would be used by a company they worked for, Atlantic Rim Funding, to purchase government-backed securities that would then be leveraged to obtain large loans.

Angel Brongsgeest, 55, pleaded guilty to her role in a $3.5 million Ponzi scheme run through her company, The Equity Growth Group aka TEGG. Brongsgeest made false promises in the scheme run with Shawn Patrick Watkins, 46, who solicited investors during seminars offered by Investororkshops, Inc. At least 50 investors were defrauded.

Donna S. Brown, 66, was sentenced to 10 years and one month in prison for a Ponzi scheme in which she defrauded 200 to 800 or more investors out of at least $31 million. Brown had pleaded guilty to running the scheme of Budget Finance Co., which was licensed as a consumer lender.

Clayton Cohn, 30, was sentenced to 4 years and 4 months in prison and ordered to pay more than $1.55 million in restitution in connection with his investment fraud scheme. Cohn ran the scheme through Marketaction, which promised returns “in a variety of financial instruments.” He promised returns of 180% and said he had “skin in the game” with $1.5 million of his own money invested. Instead, about $1.8 million of investor funds came in, and Cohn used much of the money on himself to pay credit cards, to purchase homes, and to spend at nightclubs and casinos.

David deBarardinis, 55, was named in a lawsuit accusing him of running a Ponzi scheme that may have involved $80 million. The lawsuit also names Todd Muslow, the chief financial officer of one of deBerardinis’ companies and his father, Richard Muslow. deBarardinis is also currently under criminal investigation.

Donald Dodge, 74, who was previously sentenced to 6 years for running a Ponzi scheme with Scott Farah, was released from prison. They ran the scheme through Financial Resources Mortgage, Inc. and CL&M, Inc., a private mortgage brokerage. FRM brought in the borrowers and investors, and CL&M served as the bank where the funds were deposited. The scheme brought in at least $82 million, and Farah withdrew more than $20 million from CL&M. Farah is still serving his 15 year sentence.

Catherine Ann Finberg pleading guilty to operating a Ponzi scheme that took more than $1.5 million from 28 investors. Finberg is the assistant coach of a high school’s girls’ basketball team, but defrauded mostly elderly people who expected Finberg to invest their funds on their behalf. 

Gregory Gray, 41, agreed to pay $8 million in disgorgement to the SEC in a settlement with the SEC over allegations that he operated a $5 million Ponzi scheme involving fake purchases of Twitter and Uber shares. Gray was sentenced to 2 years in prison last October but did not admit or deny the SEC’s allegations.

Francisco “Frank” Hobson, 40, was sentenced to 6½ years in prison and ordered to pay about $1.6 million in restitution in connection with a real estate Ponzi scheme that took in more than $2.3 million. Hobson used the funds for travel, cosmetic surgery and to make payment to investors. Hobson advertised that investor funds would be used to purchase properties, but the properties were not actually for sale or did not exist.

Rick Koerber was re-indicted on charges that he operated $100 million Ponzi scheme. Charges against Koerber had previously been dropped because of government misconduct found by a court, but new charges were filed against the real estate investment guru. Koerber ran the scheme through Franklin Squires Cos. and Founders Capital, promising 2% to 5% returns per month. 

Leone Alfano La Cava was arrested on charges that he was running a $4 million fraud, and his indictment was unsealed. La Cava allegedly created fake deeds that falsely stated that investors owned real estate and that they were receiving rent payments. Most of the victims appear to be Italian, although some may also be Venezuelan. Victims allege that the scheme involves at least 100 victims and $40 million. 

LegendBit launched and was immediately alleged to be a new Bitcoin Ponzi scheme. The company offers 15% returns every day for the life of the account. The website does not mention how the company will make money and makes reference to Bitcoin Rocket Limited, which has been alleged to be another cryptocurrency Ponzi scheme run by the same people. 

Joseph Meli, 42, and Steve Simmons, 48, the head of Sideris Capital Partners, were arrested on allegations of securities fraud.  Meli and Matthew Harriton, 52, were separately accused by the SEC of orchestrating an $81 million Ponzi scheme by using investor funds to buy and resell tickets for popular shows, including the Broadway musical “Hamilton.” The scheme was run through Advance Entertainment LLC and involved 125 investors.

Yasuna Murakami was accused of running three hedge funds that operated as a Ponzi scheme taking in $15.3 million from 47 investors. The funds were MC2 Capital Partners Fund, MC2 Capital Value Partners Fund, and MC2 Capital Canadian Opportunities Fund.

Bryan Oulton and Thomas “Sandy” Swartzbaugh were named in a civil lawsuit alleging that they were operating a Ponzi scheme through Players Poker Championship (PPC Poker Tour). They were named in a complaint accusing them of operating “a complex international Ponzi scheme involving poker tournaments at myriad casinos inside – and outside – the United States . . .”

Cleber Rene Rizerio Rocha, 28, was arrested in connection with the TelexFree Ponzi scheme. Rocha not only has ties to a nephew of TelexFree figure Carlos Wanzeler, but he was found with $20 million cash in a box spring in an apartment in Massachusetts. Acting as a courier of cash for Wanzeler’s nephew, Rocha flew from Brazil to New York City to allegedly assist in the laundering of TelexFree cash through Hong Kong to Brazilian accounts.

Scott Rookus, 45, was sentenced to 7 – 20 years in prison and ordered to pay $4.3 million in restitution in connection with a Ponzi scheme he ran through New Haven Holdings. Many of the victims were senior citizens, and Rookus used their money to pay for his children’s private school tuition and tax liens against him. He pleaded guilty in December.

Rick Siskey took his own life at the age of 58 a week after a court issued on order that his house may be subject to forfeiture by the government. Siskey allegedly ran a $31 million Ponzi scheme through his company, TSI Holdings, in which he defrauded over 100 investors. Many of the investors were elderly and unsophisticated and were told that they investments were “safe” in a “guaranteed fixed rate of return investment.” Investor funds were used to pay for his home, two Bentleys, a Ferrari, two Mercedes, a Corvette and a Harley Davidson.

Steven Scudder, 62, pleaded guilty to charges relating to the $70 million Ponzi scheme run by William and Connie Apostelos. Scudder had served as the trustee of the WMA Trust, a land trust that supposedly was to secure investments that investors had made with William Apostelos. Scudder had resigned from the Trust, but continued to tell people he was trustee, during which time about 10 people invested more than $1 million.

Germaine Theodore, 36, pleaded guilty to one of two charges relating to a Ponzi scheme in which he stole approximately $298,000 from over 200 customers of his two debt relief businesses – TGC Movement and Save My Future. Theodore claimed he could reduce customers’ monthly bills by 35%, they could submit their bills to his companies along with 65% of the amount due, and a government grant program or private investors would pay the remaining 35%.

Navin Shankar Subramaniam Xavier, 44, pleaded guilty to charges in connection with a $29 million Ponzi scheme relating to sugar transportation and iron ore mining in Chile and a second scheme to illegally obtain economic development funds from the State of South Carolina. Xavier operated Essex Holdings Inc. and raised more than $29 million from nearly 100 investors. Xavier used much of the money to support his lavish lifestyle, including expensive jewelry.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

It was disclosed that the federal government agency, Austrade, had recommended a Ponzi scheme to Australian businesses. Austrade had promoted the Pearls Group Ponzi scheme despite the fact that it was being investigated by Indian authorities.

Pastor Colin Davids of the New Direction Church, was charged with running a Ponzi scheme that involved R330 million.

Pastor David Cupido is being investigated for running a Ponzi scheme.

Belize

Two Italian foreign investors, Domenico Giannini and Fabio de La Rosa, who were supposedly developing an ultra-luxury, 8 star resort to be called Puerto Azul, were arrested on allegations that they were using the project as part of a Ponzi scheme that defrauded over 200 investors out of over 20 million euros. John Travolta and Andrea Bocelli have been photographed in connection with the launch of the project and are believed to be investors. The resort was to have been built between 2013 and 2017, but the environmental impact assessment needed to start the project was never submitted.

Canada
Quintin Earl Sponagle, 51, pleaded guilty to one charge relating to a Ponzi scheme that defrauded Nova Scotia churchgoers out of millions of dollars through his company Jabez Financial Services. A total of 189 investors were defrauded out of $4.1 million. Sponagle had fled to Panama but was arrested there in 2013 at the request of Canada in 2013. He spent a year in prison in Panama, pleaded not guilty when he returned, but recently changed his plea to guilty. His sentencing was delayed so that 200 victims can be contacted to see whether they want to make victim impact statements.

Dubai

Sydney Lemos, who was arrested in December on charges that his company, Exential Group, defrauded nearly 7,000 investors, has launched a new firm called Pinnacle Asset & Investment Management, which is trading under the Exential banner. Exential promised profits of 100 to 150%.

England

Stephen Greig, 73, was sentenced to 6 years in prison in connection with a £1.2m Ponzi scheme. Greig offered returns of 7.5% through fictional investments such as Charles Stanley Capital Bond.

India

Sudip Bandvopadhvav, a Trinamool Congress Parliamentary party leader, was arrested in connection with the Rose Valley fraud. Another Trinamool Congress MP, Tapas Paul, was also interrogated and arrested in connection with the scam.

Gainbitcoin, which is related to GBMiners through Amit Bhardwaj, is alleged to be a Ponzi scheme. Gainbitcoin guarantees a 10% return per month on investments. Indian bitcoin exchange Zebpay warned customers against the cloud mining schemes. Bhardwaj is also associated with bitcoin wallet, Coinbank, which is reported to soon offer a 1.5% monthly interest rate on fixed deposits.

New Zealand

Paul Clifford Hibbs and his company, Hansa, have been accused of running a Ponzi scheme in which investors say at least $20m is missing. Liquidators believe that related entities such as Cameron Gladstone Investments are also involved in the fraud. The assets of Hibbs have been frozen by the liquidators.

Nigeria

The MMM Nigeria scheme tweeted that investor funds would be unfrozen on January 14. The accounts were actually unfrozen a day early on January 13. MMM also announced that it would start accepting Bitcoin and that it will have “30% growth” through the Bitcoin system. A poll taken after MMM came back show that 40% of Nigerians polled say they will invest a lot of money in MMM Nigeria.

Chuddy Anayo Ugorji, who was alleged to be the brains behind the MMM Nigeria scheme, denied having anything to do with Naija Helps Givers. Ugorji denies bringing MMM to Nigeria, stating that he is one of the administrators of it, not the creator. Ugorji then allegedly fled the country with his wife and went to the Philippines.

Isima Odeh aka Tunde allegedly defrauded Nigerians out of N600,000 from a WhatsApp group he created called Togetherness.

A new scheme called Twinkas emerged, promising to pay 200% returns to investors. The website reflects that the scheme was supposedly created “to promote the greatest good, with a particular emphasis on helping man and the environment.” The scheme requires that investors “donate” a set sum and then Twinkas will assign referrals to pay the investor. The website promises that any amount invested in each of the categories will double after one month of maturity.

Singapore

Kalimahton Md Samuri, 55, was sentenced to 12 years in prison for defrauding 15 victims out of more than $3.85 million. Known as the “Pawnshop Princess,” she posed as a member of the Brunei family, calling herself Datin Sharinah, and defrauded a jeweler into giving her jewelry that she then sold at a pawn shop.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A court dismissed a lawsuit against PNC Bank that alleged the Bank aided the $70 million Ponzi scheme run by William and Connie Apostelos. Cruz v. PNC Bank, N.A., 2017 U.S. Dist. LEXIS 3531(S.D. Ohio Jan. 10, 2017).

The Sixth Circuit found that David Keith Freeman must still pay a $1.5 million settlement to the receiver of Cash Flow Financial LLC, a Ponzi scheme operated by Freeman and Dale W. Toler, even though Toler committed suicide. Stenger v. Freeman, 2017 U.S. App. LEXIS 105 (6th Cir. Jan 18, 2017). Toler, Freeman and Stenger had signed a settlement agreement that resolved the transfer of $1.5 million by Cash Flow Financial to C.I. Solar Solutions Inc., an entity controlled by Toler and Freeman. Freeman was the president of Jedburgh Group International Inc., which acted as the escrow agent for the Cash Flow Financial investments.

A bankruptcy court declined to apply the Ponzi scheme presumption in Perkins v. Lehman Brothers (In re International Management Associates, LLC), 2017 Bankr. LEXIS 59 (N.D. Ga. Jan 10, 2017). The trustee of International Management Associates, LLC sought recovery transfers of $6,640,000 made to a brokerage account as part of its alleged Ponzi scheme. The court granted summary judgment in favor of defendant Oppenheimer, additionally finding that the transfers did not diminish the IMA estate or otherwise harm IMA’s creditors, and also that section 548(c) of the Bankruptcy Code provided a complete defense to Oppenheimer & Co., who provide value in good faith.

A district court held that victims of the Bernard Madoff Ponzi scheme could not pursue litigation claims to try to recover $11 billion from the estate of Jeffry Picower because it would interfere with the Madoff’s administration of his case. The trustee had previously entered into a $7.2 billion settlement with the Picower estate. The trustee had one a permanent injunction in 2011 barring competing claims against the Picower estate, but the investors argued their claims were different from the trustee’s claims.

J. Ezra Merkin lost his attempt to prevail in the lawsuit filed by the trustee of the Bernard Madoff Ponzi scheme, who is seeking to recover hundreds of millions of dollars. The court found that Merkin was willfully blind to the Ponzi scheme and refused to grant summary judgment in his favor. Picard v Merkin (Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC), 2017 Bankr. LEXIS 245 (Bankr. S.D. Jan. 30, 2017).

The Eleventh Circuit upheld the dismissal of a lawsuit by the receiver of the Arthur Nadel $168 million Ponzi scheme against Wells Fargo Bank. Wiand v. Wells Fargo Bank, N.A., Inc., 2017 U.S. App. LEXIS 1397 (Jan. 26, 2017). The receiver had alleged that the bank was negligent in failing to stop the Ponzi scheme that Nadel ran through six hedge funds: Scoop Real Estate, L.P., Valhalla Investment Partners, L.P., Victory Fund, Ltd., Victory IRA Fund, Ltd., Viking Fund, LLC, and Viking IRA Fund, LLC.

The State of Indiana reached a settlement with NYLife Securities LLC over the activities of Richard Schwartz who operated RAS & Associates. Schwartz, who killed himself in 2013 while being investigated for operating a Ponzi scheme, had sold investments through RAS totaling $16.3 million to 53 Indiana investors. NYLife had conducted required audits of Schwartz but failed to look into what he was selling through RAS. NYLife agreed to pay $250,000 in penalties and costs and to pay $25,000 to the Investor Protection Trust on Indiana’s behalf.

A district court affirmed a bankruptcy’s court’s refusal to dismiss the Chapter 7 bankruptcy of Peter Romero sought by the receiver in the Stanford Financial Ponzi scheme case. Romero had been ordered to pay the receiver $1.2 million in a fraudulent transfer case, but Romero then filed bankruptcy and the receiver had sought to have the bankruptcy case dismissed. Janvey v. Romero, 2017 U.S. Dist. LEXIS 12068 (D. Md Jan. 30, 2017).

The ZeekRewards receiver announced that a third distribution to victims will be made, which will bring the distribution to about 75% of the losses.

Saturday, December 31, 2016

December 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for December 2016. The reported stories reflect: 2 guilty pleas or convictions in pending cases; over 59 years of newly imposed sentences for people involved in Ponzi schemes; at least 10 new Ponzi schemes worldwide; and an average age of approximately 51 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.

Brenda Ashcraft, 46, was sentenced to 8 years in prison for operating a Ponzi scheme that defrauded 34 people out of more than $4.2 million. Ashcraft had represented to investors that she had exclusive access to properties in foreclosure and could generate positive returns. She operated the scheme through her company, French Manor Properties, but did not use investment funds to buy any properties. Rather, she used the money for vacations to Cancun, spa treatments and Cincinnati Reds season tickets.

Joseph Francis Bartholomew, 77, pleaded guilty and was immediately sentenced to 10 years in prison for operating an $11.3 million Ponzi scheme through MBP Insurance Services Inc. The scheme targeted seniors and defrauded 27 victims. Co-defendant Wendy King-Jackson, 56, also pleaded guilty for her role in defrauding two victims in her capacity as Bartholomew’s office manager. The scheme involved selling life insurance policies on third parties, and it promised 15% to 24% annual returns.

Richard I. Booy, 48, was accused of running a $1 million Ponzi scheme that defrauded at least 15 clients. Booy ran the alleged scheme through Principal Financial Strategies LLC and the now defunct Safe Financial Strategies Inc. He claimed to be affiliated with Principal Financial Group, but had no actual relationship with that widely known investment firm. Instead of investing his clients’ funds, Booy spent the money on personal expenses, including credit card debt and purchases at Best Buy.

Richard Wyatt Davis, Jr., 40, was indicted on allegations that he defrauded more than 100 investors out of more than $19 million. Davis allegedly targeted clients who were “wary of the government and banking systems” and induced them to invest in his investment funds, DCG Commercial Fund I and DCG Real Assets. Davis falsely represented that his funds averaged a net rate of return of 32%.

Charles Caleb Fackrell, 37, was sentenced to 5 years and 3 months in prison for operating a Ponzi scheme that defrauded at least 20 investors out of about $1.4 million. Fackrell did business as Fackrell Trivette Wealth Management LLC and was a stockbroker who sold his clients into purported investors with Robin Hood, LLC, Robinhood LLC, Robin Hood Holdings, LLC, Robinhood Holdings, LLC, and related entities, all of which he owned. He guaranteed returns of 5% to 7% and represented that the investments were very safe. Fackrell spent most of the money on his personal expenses and used part of it to make Ponzi scheme payments to induce further investors.

Vincent P. Falci, 57, was charged on accusations that he was running a $5.3 million Ponzi scheme through Vicor Fund, which he controlled though his management entity, Vidon Capital Partners LLC. Most of the $5.3 million taken from investors was used to repay prior investors in The Saber Fund. Falci had previously been ordered to pay $6.7 million in restitution to 182 investors connection with that prior fraud. Falci lost investors’ money in risky ventures like day trading and real estate and promised investors 7% returns.

John Fox, 66, was sentenced to 6½ years in prison in connection with his wine Ponzi scheme that he ran through Premier Cru. Fox previously pleaded guilty to defrauding more than 4,500 customers out of between $20 million and $45 million. Fox falsified purchase orders for about $20 million worth of wine, and then sold that “phantom wine” to customers. He also used money from new customers to buy wine promised to earlier customers.

Bobby Eugene Guess was arrested on charges in connection with an alleged $6 million Ponzi scheme run through Texas First Financial LLC. Guess promoted himself through radio advertising and financial seminars and supposedly sold notes, stock certificates and investment contracts in internet company, StaMedia Inc. Funds raised from investors in StaMedia were used to repay investors in TenList, Inc., a company owned by two Guess associates, Timothy Booth and Shawn Sandifer. Guess is the author of “Robbed with a Pen Again: A Guide to Protecting Your Assets,” which is a book to supposedly help investors.

Pedro Jaramillo aka Enrique Jaramillo, 47, was arrested on charges that he defrauded more than 2 dozen investors from Peru and countries in Latin America, out of more than $1.2 million. Jaramillo represented that he was an accomplished commodities trader who partnered with well-known international investment bank, Global Investment Bank, to earn returns of 25% every 90 days. Jaramillo diverted more than $700,000 to his own use, including 3 vacations to Disney World for family and friends.

Andrew D. Kelley, 41, and Paul H. Shumway, 47, were the subject of a complaint filed by the SEC accusing them and their company, Blackbird Capital Partners, of running a $3.1 million investment scheme. Kelley was quoted as telling an investor, “I am delusional. I am a compulsive liar” and that he could “trade his way out of it” to repay the investor if the investor would not report him to authorities. Kelly represented that he had developed an algorithmic software program for Blackbird to invest its own funds to profit the company and investors and that the program made up to 300% returns.

George R. McKown, 65, and Richard E. Gearhart, 66, were charged in connection with an alleged Ponzi-like scheme that defrauded investors out of their retirement savings. The convinced investors to transfer their retirement accounts, pensions, annuities and 401(k)s to Asset Preservation Specialists Inc., a company owned by Gearhart.

Patricia Means, 70, was sentenced to 5 years in prison in connection with a Ponzi scheme she ran to purportedly develop a product called “Savvy Bag.” Means embezzled $1.1 million from more than a dozen investors and spent over $900,000 on housing, casino trips, vehicles and other personal items.

James A. Nickels was ordered to pay $3.6 million in restitution to investors for running a Ponzi scheme in which he sold promissory notes. Nickels ran the scheme through Fiscal Concierge LLC. At least 35 investors were defrauded out of the $4 million they spent to purchase promissory notes that were to pay 8% per year.

Mark Nordlicht, 48, David Levy, 31, and Uri Landesman, 55, were accused of running a Ponzi scheme through Platinum Partners. Landesman is the president of the $1.3 billion hedge fund. They are accused of falsely reporting the value of Platinum’s assets and using high-interest loans to move money between funds to pay some investors ahead of others. One example of misrepresentation relates to the value of Black Elk Energy, an oil and gas company controlled by Platinum, which was valued at $283 million after there had been an explosion on a Black Elk platform in the Gulf of Mexico that caused the death of 3 workers, other injuries and an oil spill. The alleged fraudulent activity also involves the funds dealings with Lafitte Energy Corp. and Golden Gate Oil LLC. Others charged in connection with the matter are Joseph Mann, 24, Daniel Small, 47, Jeffrey Schulse, 44, and Joseph Sanfilippo, 38. The Platinum Partners executives collected $100 million in fees as they offered investors annual returns of up to 17%.

Scott Richard Rookus, 45, pleaded no contest to charges that he was running a $1.5 million Ponzi scheme through his company, New Haven Holdings. He promised returns to investors from profits from his companies, but instead used their money to pay for his children’s private school and tax liens, and used some money to pay old investors. Many of Rookus’ victims were seniors on a fixed income.

Tobin Joseph Senefeld was banned by FINRA from the broker industry. This related to a 2015 civil suit filed by the SEC claiming that Senefeld, along with Matthew D. Haab and Jeffrey B. Risinger, had operated a Ponzi scheme through his company, Pin Financial LLC. The civil suit alleged that the trio had raised $15 million from 80 investors.

Richard Shusterman, 53, was sentenced to 18 years in prison and ordered to pay about $171 million in connection with a $242 million Ponzi scheme. Shusterman was the president and shareholder of International Portfolio, Inc., and co-conspirator Robert Feldman, 69, was a part owner of International Portfolio and also president of United Consulting, Inc. Together, they misrepresented that they were paying returns based on the purchase of medical accounts receivable. Jonathan Rosenberg, 48, and Douglas Kuber, 56, were also involved through their operations of Account Receivables LLC, through which they received in excess of $8 million in kickbacks. Feldman, Rosenberg, and Kuber each previously pleaded guilty and were sentenced to 46 months, 5 years, and 4 years in prison, respectively.

Michael Skupin, 54, was sentenced to one to four years in prison following his conviction in November for possessing child pornography. Skupin was also ordered to serve probation for financial crimes relating to a Ponzi scheme investigation, which is what led to the child pornography charges when investigators searched his laptop.

John Sposato, 64, was sentenced to 7 years in prison and ordered to pay nearly $2.6 million in restitution in connection with a Ponzi scheme that he ran through his companies, 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. He represented to potential investors that the companies were all investment entities that offered participants the chance to invest in various low-risk, high-reward investment vehicles, including international bank instruments, cutting edge oil remediation and recovery products, and real estate transactions. About 48 people invested about $800,000 with Sposato and his companies, but Sposato used the money to, among other things, buy his girlfriend a car and breast augmentation.

Derek Springfield, 53, was accused by the CFTC of running a Ponzi scheme through his company, Draven LLC. Springfield provided false account statement to commodity pool participants. The alleged scheme involved $1.46 million, and investors were told their funds were being invested in futures, foreign exchange and options markets. 

Alvin Guy Wilkinson and his entities, Chicago Index Partners and Wilkinson Financial Opportunity Fund, were hit with a $21.8 million default judgment in an action commenced by the CFTC. The commodity pool fraud defrauded 30 investors and involved over $11 million. Instead of trading financial instruments on their behalf as promised, he misused most if not all of the investor funds in a Ponzi scheme fashion. Wilkinson promised investors 10% to 30% returns.

INTERNATIONAL PONZI SCHEME NEWS

China

Wang Baoqiang, 32, has been linked to a peer-to-peer lending scheme run through Jingjinlian. Wang is a celebrity in China, and there was a tacit understanding that Wang was directing a film project that was part of Jingjinlian’s investment portfolio. The film’s official account denied any involvement, stating they never raised any funds from any financial platform.

India

Prakash Chandra Panda was sentenced to 5 years in prison in connection with a Ponzi scheme he ran through Shirdi Sai Estate Private Limited. The company had defrauded over 100 investors by promising them land plots at cheap prices.

Siba Narayan Das, Jugal Gupta and Tushar Jana, the three directors of Silicon Project, were charged with running a Ponzi scheme.

Dipankar Ghosh, Malay Halder, Prasenjit Sil, Tirtha Halder and Malay Kumar Guha, who are directors of Real Tulip India Limited, were arrested on allegations that they are running a Ponzi scheme. 

Nigeria

The MMM scheme that has been flourishing in Nigeria suspended business. The scheme in Nigeria is believed to be operated by Pastor Ernest Chigozie Mbanefo, who is based in South Africa. Mbanefo registered the website, and it is now believed that MMM Nigeria is not affiliated with MMM Global, a Russian company run by Sergei Mavrodi. Mbanefo denies owning the MMM franchise in Nigeria. The MMM Nigeria scheme offered 30% returns annually. Access Bank warned its customer not to invest in the MMM scheme. Following its suspension in Nigeria, the MMM scheme was launched in Kenya and Ghana.

A new doubling scheme called NNN Nigeria appeared a few days after MMM froze the accounts of over 3 million members. NNN appears to be a copycat of MMM in almost every way.

An alleged Ponzi scheme call Ultimate Cycler that was also gaining popularity shut down. The website stated earlier in the month that is was being “worked on.” The website was relaunched and Peter Wolfing, the CEO of the scheme, announced that 50,000 Nigerians registered within 24 hours of the relaunch. It is believed that there are about 2 million users. Wolfing also runs anther scheme called “Easy 1 up.”

Givers Forum is reported to be another Ponzi scheme gaining popularity in Nigeria.

Nigeria was also hit with another alleged Ponzi scheme called I-Charity whose website was registered in October. It is already the 47th most visited site in Nigeria. Another alleged scheme, Zar Fund, is the 57th most visited website in Nigeria.

It is reported that internet usage increased from 95.37 million in August 2016 to 97.21 million by September 2016 due to the flood of internet users investing in the MMM, Ultimate Cycler, Givers Forum, I-Charity, Get Worldwide Help, and Zar Fund schemes.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The receiver over Creative Capital Consortium that was run by George Theodule obtained approval of a distribution plan that will distribute more than $4.6 million to 1,474 defrauded investors and creditors. Theodule had collected more than $68 million from more than 100 investment clubs formed by relative and friends. Theodule pleaded guilty and was sentenced to 12½ years in 2014.

The Second Circuit declined to revive an ERISA lawsuit by the pension fund for a New York engineers’ union seeking to obtain damages from Ivy Investment Management and Bank of New York Mellon Corp. The lawsuit sought damages for the alleged breach of fiduciary duties in failing to advise the fund to fully withdraw from investments with Bernard Madoff. Trustees of Upstate New York Engineers Pension Fund v. Ivy Asset Management, 2016 U.S. App. LEXIS 21823 (2nd Cir. Dec. 8, 2016).

The TelexFree trustee has asked the court to extend the deadline for filing claims. The deadline is set for December 31, 2016, and about 121,000 claims have already been filed. The trustee believes that the sentencing of James Merrill scheduled for next March and Merrill’s agreement to forfeit tens of millions of dollars might spur additional claimants to file claims.

The ZeekRewards receiver obtained judgments against the largest net winner investors. He is also working on a procedure to fix the amount of money owed from the members of a defendant class of net winners