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

Sunday, June 30, 2019

June 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for June 2019. The reported stories reflect at least 7 new Ponzi schemes worldwide; at least 7 guilty pleas, over 43 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 45 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
 
Syed Arham Arbab, 22, was sued by the SEC, who alleged that Arbab was running a Ponzi scheme from his fraternity ho use at the University of Georgia. Arbab told investors that he had earned his undergraduate degree and was pursuing his master’s degree in business. He offered investors returns from two allegedly bogus hedge funds. Arbab started Artis Proficio Capital Investments when he was a junior in college and claimed that it had over 350 members. Arbab also ran Artis P. Capital Management. He claimed that he raised more than $700,000 from 42 individuals, but information sent to investors reflected more than 110 investor accounts and over $2 million raised. Arbab promised annual returns between 22% and 56%.

Yehuda Belsky  aka Jay Bell, 47, of New York, pleaded guilty to charges relating to a binary options and securities Ponzi scheme run through Y Trading, LLC. Belsky was permanently barred from trading in commodities futures transactions and options in 2008 by the CFTC. Belsky represented he was investing investor funds into securities and binary options but instead used the funds for personal expenses and to pay investors who demanded repayment.

Kevin Brody, 55, of Pennsylvania, pleaded guilty to charges relating to a $12 million Ponzi scheme that defrauded at least 50 people. The case against his co-defendant, Matthew Eckstein, is still pending. They ran the scheme through Conmac Funding Corp. and investors were promised that their investments were risk-free. Investors were given usernames and passwords to a website where they could see their account statements and the supposed accrual of interest. Brody and Eckstein used the funds for other businesses including a hamburger restaurant and other personal expenses.
 
Nickolas M. Godfrey, 41, was sentenced to 37 months in prison and ordered to pay more than $1.6 million in restitution for his involvement in a Ponzi scheme he ran in South Carolina. Godfrey owned the Blakeney Shopping Center and convinced investors to invest in small businesses, taking more than $1 million from more than 20 victims through his company, Coast to Coast Business Funding.
 
Hunter Hanson, 22, agreed to plead guilty to charges relating to his role in an $11 million Ponzi scheme that defrauded North Dakota and Canadian farmers. Hanson ran the scheme through Midwest Grain Trading, which would purchase grain from sellers in Canada and the U.S. and would take delivery of the grain without paying for it.

Todd Hitt, 54, of Virginia was sentenced to 6½ years in prison in connection with a $20 million Ponzi scheme. Hitt is a real estate developer and was the CEO of Kiddar Capital and a member of the real estate family behind Hitt Contracting. Kiddar Capital claimed to manage $1.4 billion in assets but the FBI has only been able to account for $27 million.

James E. Hocker, 49, was hit with a final judgment in favor of the SEC for his conduct in connection with a $1.5 million Ponzi scheme. The SEC had charged Hocker with running a $1.5 million Ponzi scheme. He was an insurance agent that promised investors returns between 10% and 30% from S&P 500 and other investment vehicles. Hocker was previously sentenced to 17 years in prison.

Konstantin Ignatov pleaded not guilty to charges that he ran a $3.8 billion cryptocurrency Ponzi scheme through OneCoin Ltd. Ignatov and his sister, Ruja Ignatov, were charged and arrested by the U.S. Department of Justice.

Olaf Janke, 48, pleaded guilty to charges relating to the scheme run through Aequitas Capital Management. Co-founder, Brian Oliver, previously pleaded guilty to the scheme. The scheme is estimated to have defrauded more than 1,400 victims out of between $300 million and $600 million.  CEO Robert Jesenik and chief operating officer, N. Scott Gillis, are also believed to be central to the scheme.
 
Jay B. Ledford, 55, and Kevin B. Merrill, 53, pleaded guilty to charges in connection with a $550 million scheme run with Cameron R. Jezierski, 28, who previously pleaded guilty. They solicited investors to purchase consumer debt portfolios.

Steven A. LeProhon, 30, was accused of running a Ponzi scheme. LeProhon is the owner of Steven LeProhon Marine and Motorsports and is accused of theft and failing to do work as part of a Ponzi-style scheme.

Paul Ricky Mata, of California, was indicted in connection with an alleged $14.5 million real estate scheme. Mata was an elder in the Water of Life Community Church and had allegedly been paid to teach members how to invest. In 2015, the SEC sued Mata and his entities, including Secured Capital Partners LLC, alleging that they had defrauded victims. Mata had formed the unregistered advisory firms Logos Wealth Advisors, Inc., Logos Lifetime University, and Lifetime Enterprises, Inc.

Patrick McDonnell aka Jason Flack, 46, pleaded guilty to running a fraudulent cryptocurrency investment scheme. McDonnell operated a bitcoin trading firm Coin Drop Markets. McDonnell claims that investors could make a 300% return on investments in less than a week and issued false balance statements to persuade investors.

James Moore, 58, co-conspirator of Renwick Haddow aka Jonathan Black, was convicted for operating a Ponzi scheme through Bar Works Inc. Moore and Haddow are British citizens, and Haddow had previously been disqualified as a director of any U.K. company for 8 years. To disguise his identity, Haddow went by his alias name, and the two solicited investments into workspace leases through Bar Works. Haddow also operated Bitcoin Store Inc. Haddow pleaded guilty last month. Moore is seeking a new trial.

Stephen Condon Peters, 46, was found guilty by a North Carolina jury for the $15 million Ponzi scheme he ran through VisonQuest Wealth Management. Peters promised investors returns of 8% to 9% on low-risk investments. Peters diverted $6 million for his own personal use.

Benjamin Reynolds and Control-Finance Ltd. were sued by the CFTC who alleged that they ran a $47 million Ponzi scheme. The CFTC alleged that Control-Finance promised returns of 45% a month. The complaint seeks the returns of about 23,000 bitcoin, valued at $47 million and to bar the principals of UK-based Control-Finance Ltd. from trading. The scheme allegedly defrauded more than 1,000 investors by representing that the company employed expert virtual currency traders who earned guaranteed daily trading profits on bitcoin deposits.

Paul A. Rinfret, 70, was accused of running a securities Ponzi scheme in which he purported to trade in futures contracts relating to the S&P 500 utilizing a bespoke algorithm he had developed. Rinfret obtained more than $19 million form about 6 victims.

Daniel B. Rudden, 72, of Colorado was sentenced to 10 years plus one month in prison for running a Ponzi scheme that defrauded 175 victims. Rudden ran the scheme through Financial Visions, which provided funeral funding services to nearly 600 funeral homes and cemeteries. Investors were promised 12% interest, and losses were estimated at $19 million.
 
John Gregory Schmidt, 68, was sentenced to 5 years in prison in connection with a scheme run through Schmidt Investment Strategies Group while he was employed by Wells Fargo Advisors. Schmidt stole money from investment accounts in order to cover other stolen money in investors’ accounts. He was accused of having misappropriated about $1.1 million.
 
Lo Van Tran, 42, of California is accused of running a $3 million Ponzi scheme that defrauded more than 10 investors. Investigators are searching for more victims, and most of the victims are believed to be Vietnamese. Tran ran the scheme through SmartBuy Outlet Inc., which had two storefronts and operated under the name SavMax Solutions Inc. Tran claimed to have a partnership with a third-party logistics company known as Zyp Corporation which would allegedly facilitate the buying and selling of large amounts of Apple products. However, Zyp Corp. did not actually exist.

Christopher B. Warren, 50, of Florida was sentenced to 9 years in prison and ordered to pay $15 million in restitution in connection with a $28 million Ponzi scheme that he ran through Clean Energy Advisors. Warren claimed the company owned multiple solar farms in North Carolina, and he created phony audited financial statements to defraud investors.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Douglas Gordon Johnston was sentenced to 6 years in jail for his role in a scheme that defrauded investors out of about $815,000. Johnston ran the scheme through Small Business Management Pty Ltd. and Investman Nominees (USA) Pty Ltd with his wife Maureen Johnston, who was sentenced to 5½ years in connection with the scheme. Their daughter, Fiona Johnston, also received a 6-month sentence in connection with the scheme.
  
England

Liam James Collins, 45, and David James Robert Bone, 37, were each sentenced to 21 months in connection with a scheme run through a number of companies known as the CBS Group. Investors were told that their funds would be used to purchase and renovate student housing. After CBS Group failed, Collins and Bone set up a new investment scheme called the Collins and Bone Partnership.

Hudspiths Fund has been accused of operating a Ponzi scheme. The foreign exchange firm is believed to owe more than £40m to creditors. Hudspith’s chief executive Karl Lubieniecki denies the allegations.
 
India

Seven directors of IMA Jewelers were arrested in connection with the Ponzi scheme. Mohammed Mansoor Khan, the owner of IMA (I Monetary Advisory) Group of Companies, is still at large. More than 26,000 investors have lodged complaints. IMA promised 10% returns and claimed to have a presence in bullion trading, retails sales of gold, silver, diamond and platinum jewelry, educational academies, healthcare service, supermarkets and real estate development, among other things. Authorities several branches of IMA Jewels and seized 41 kg worth of jewelry.

Misbahuddin S. Mukarram, the managing director of Injaz Builders and Developers, was arrested on allegations that he defrauded investors out of Rs 89 crore, promising 25% monthly returns.

Nigeria

Uno Michael Eke was arrested for his role in the alleged Ponzi scheme run through Micheno Multi-purpose Cooperative Society Ltd. The scheme promised 80% interest in 40 days if they invested in Swissgolden packages.

Philippines

Dexter Cuyos, 24, and Robert Padayogdog, 31, were arrested in connection with an alleged Ponzi scheme run through Kapa-Community Ministry International Inc., a religious organization that promised “too good to be true” investments. The assets of Kapa were frozen on allegations that it operated the largest investment scam in recent Philippine history. Kapa solicited investments in a minimum amount of P10,000 and promised investors a 30% monthly return for life. Kapa would need P15 billion per month to pay its alleged 5 million members. Pastor Joel Apolinario was accused of engineering the Ponzi scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A class action was certified against Stuart Fraser, GAW Miners LLC and ZENMiner LLC, accusing them of defrauding thousands of investors

Court approval of a $65 million settlement for victims of the Stanford Financial Ponzi scheme was reversed by the Fifth Circuit. The settlement required insurers to pay $65 million to the receiver of the companies run by Allen Stanford. The First Circuit, however, found that the lower court did not have authority to void or release some claims against the insurances and to bar further legal challenges over their policies and the Stanford companies.

Friday, May 31, 2019

May 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for May 2019. The reported stories reflect at least 5 new Ponzi schemes worldwide; at least 2 guilty pleas, over 99 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

INTERNATIONAL PONZI SCHEME NEWS 

Australia

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

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

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

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

England

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

India

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

Isle of Man

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

Nigeria

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

Russia

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

Singapore

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

South Africa

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

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

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

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

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

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