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

Thursday, August 31, 2017

August 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for August 2017.  The report stories reflect: 5 guilty pleas or convictions in pending cases; over 51 years of newly imposed sentences for people involved in Ponzi schemes; at least 14 new Ponzi schemes worldwide; and an average age of approximately 53 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.

Connie Apostelos aka Connie Coleman, 51, was sentenced to 2½ years in prison for her role in the $70 million Ponzi scheme run along with her husband, William Apostelos. The scheme defrauded about 480 victims who lost about $20 million in the scheme. Connie Apostelos operated and oversaw multiple companies, including Coleman Capital Inc. and Silver Bridle Racing LLC. The scheme promised investors returns from stock, real estate, gold and silver, and loans to businesses.  William Apostelos previously plead guilty and was sentenced to 180 months in prison. Steven Scudder, 62, previously plead guilty to using his position as an attorney to facilitate the scheme. Scudder was previously sentenced to 14 months in prison.

Dawn J. Bennett, 55, was charged by the SEC with running a $20 million Ponzi scheme through her companies, DJB Holdings and DJBennett Holding LLC. The scheme involved selling notes issued by a luxury sports apparel firm to elderly and unsophisticated investors. Bennett promoted her standing as Barron’s-ranked top woman advisor and had a self-financed weekly radio show called Financial Myth Busting with Dawn Bennett. She also ran Bennett Group Financial Services. Bennett spent the money to support an extravagant lifestyle including purchases of jewelry, clothing, payments on a penthouse condo and a $500,000 annual 20-year lease for a suite at the Dallas Cowboys stadium. Bennett tried to cast spells on SEC investigators, including a “Beef Tongue Shut Up Hoodoo Spell.”

Louis Martin Blazer III agreed to pay $2 million and to be barred from the financial advisory business in connection with his activities run through Blazer Investment Advisors and Blazer Capital Management. Blazer agreed to settle the SEC charges but without admitting to the alleged Ponzi-like scheme. Blazer took money from professional athletes to fund movie projects: one titled Mafia: The Movie and another called Sibling.

Christopher Bohnenkamp, 42, who pleaded guilty to charges relating to a Ponzi scheme in April, was sentenced to 5 years and 3 months for his operation of a Ponzi scheme run through his companies, Treasure Valley Marine and Bohnencamp’s Whitewater Customs. His companies built boats and trailers, but victims lost $3.2 million in the scheme.

Michael S. Burnos, 72, was charged with fraud in connection with the sale or purchase of securities. He promised investors 20% returns from the purchase and sale of collectibles. Burnos had previously been sentenced to more than 7 years in prison for defrauding over 1,300 victims out of more than $14 million, telling investors that he was buying and reselling musical instruments for a profit.

Cardis International, a credit card company, is under investigation for allegedly running a Ponzi scheme that may have involved over $70 million. The scheme involved at least 31 investors who were promised returns of 12 to 18%. Cardis allegedly faked ties to Jay-Z’s company Roc Nation to lure investors.

Darren Dash was accused of running a Ponzi scheme that allegedly defrauded about two dozen athletes. Dash once headed Pro Player Funding, which is a subsidiary of Platinum Partners, also accused of running a $1 billion Ponzi scheme.

Timothy Durham, 55, the former CEO of National Lampoon Inc. was ordered to pay a $1.3 million penalty in connection with the SEC’s action against him, but the SEC’s request for $230 million in disgorgement was denied. Durham ran a Ponzi scheme through Fair Finance, defrauding about 5,000 investors. Durham was previously sentenced to 50 years in prison in connection with the scheme.

Robert H. Edmunds III, 75, pleaded guilty to charges relating to his solicitation of at least $1 million to invest in various Ponzi schemes such as Web Booth Inc., Branson City Limits, Inc., Douglas Network Enterprises, and Sunshine Real Estate Development Inc. Edmunds was under investigation in 2004 but remained at large, living in Belize for almost 12 years.

Tzvi Erez, 49, was sentenced to 8 years in prison in connection with a Ponzi scheme that defrauded 12 investors out of 6.2 million. Erez offered investors 30% interest per year from printing contracts that actually never existed. He showed investors bogus printing contracts to lure them into the scheme.

Daniel J. Flynn III, 53, had his plea agreement approved, which provides for Flynn to pay back more than $20 million to the 73 victims of his scheme. Flynn pleaded guilty to certain counts relating to his real estate investment scheme that prosecutors called “similar to a Ponzi scheme.”

Brianne Ghallagher, 32, is wanted in connection with an alleged Ponzi scheme that she ran while employed with Bromm’ Sod Farm. Ghallager, who ran the sod division, collected cash payments from customers but never turned the money over to her employer. Instead, she unlawfully used customers’ credit cards to pay on accounts of customers who previously paid in cash.

Rick Koerber, 44, started his trial for allegedly running one of the largest Ponzi schemes in Utah. He allegedly took in $100 million in a real estate scheme run through Founder’s Capital and FranklinSquires Cos. Investments. The funds were to be used for “equity milling” in real estate transactions – buying homes and renting or reselling them. Koerber has pleaded not guilty and has accused regulators and prosecutors of misconduct.

Thomas Lanzana and his company Blackbox Pulse (Unique Forex), and Nikolay Masanko and his company White Cloud Mountain, LLC were sued by the CFTC on allegations that they were running a $700,000 Ponzi scheme. They solicited investors to participate in forex trading pools and other investments. The scheme defrauded at least 31 investors.

Wayde McKelvy, 54, sought to dismiss a 10 count indictment on charges relating to his role in the $54.5 million Ponzi scheme through green energy company, Mantria Inc. Mantria was run by Troy Wragg and Amanda Knorr and promised investors returns of up to 484%. McKelvy pitched the scheme through get-rich-quick seminars promising to make investors “filthy, stinking rich.”

Raymond K. Montoya, 69, was charged with running a Ponzi scheme through RMA Strategic Opportunity Fund LLC. Montoya promised investors returns from investments in stocks and bonds, but only a portion of the money was actually invested. The rest was diverted for his personal expenses such as luxury vehicles and the mortgage on his son’s residence. Montoya told investors he had $5 billion in assets in his fund when the highest amount he ever had was about $20 million.

Jason Nissen, 44, pleaded not guilty to charges that he ran a Ponzi scheme through National Event Co., although it is believed that he is trying to work out a plea deal. The scheme involved $70 million invested in connection with a buy and resell ticket business. Nissen was also denied leave to travel to Las Vegas in advance of the Mayweather-McGregor fight.

Ariel Quiros, 59, consented to a preliminary injunction sought by the SEC who alleged that Quiros ran a “Ponzi-like” scheme to supposedly fund upgrades at the Vermont Jay Peak ski resort. A separate investigation is pending against Quiros and his partner, Bill Stenger, by the U.S. Attorney’s office, but no criminal charges have yet been filed.

Benjamin Rose, 35, was arrested on charges that he ran a Ponzi scheme that allegedly defrauded victims out of over $450,000. The scheme involved returns supposedly generated from the remodel and resale of properties that he purchased using investor funds.

Randall Rye, 26, was sentenced to 5 years and 10 months in prison in connection with a $1.7 million Ponzi scheme run through Faster Than Light Trading. Rye claimed to have a “propriety algorithmic trading program” for options and futures trading.

Martin Shkreli, 34, was found guilty on two counts of securities fraud and acquitted on 5 other charges relating to what prosecutors called a Ponzi scheme. Shkreli used investor funds to form a new drug company, Retrophin. Shkreli called the case against him “a witch hunt” and stated in a streaming video after the conviction, “I don’t think I’m going to prison, by the way.”

Douglas Swenson, 69, and his sons, Jeremy Swenson, 44, and David Swenson, 40, and Mark Ellison, 69, saw their criminal convictions upheld on appeal. The three were convicted in connection with a Ponzi scheme run through Diversified Business Services and Investment. Douglas Swenson was sentenced to 20 years in prison. Ellison was sentenced to 5 years and the younger Swensons were sentenced to three years each.

Richard Paul Underwood, 65, and Colin P. Purcell, 56, were arrested in connection with their roles in an alleged $15 million oil Ponzi scheme. The arrests came after the indictment was unsealed, which followed guilty pleas from David R. Greenlee, 41, and David A. Stewart, 46, who admitted their involvement in the investment scheme. The scheme involved the companies, Southern Energy Group Inc., Black Gold Resources, and TennStar Energy Inc. At least 150 investors were promised returns of 15% to 50% per year from supposed drilling opportunities. Underwood was also charged with securities fraud for allegedly running a boiler room of telemarketers in Florida to sell the fake oil investments.

Kevin D. Wanner reached a settlement with the North Dakota Securities Department in connection with the Ponzi scheme run through Questar Capital Corporation. Wanner was a securities agent doing business through Precision Financial and allegedly sold fictitious certificates of deposit and unregistered interests in pooled investments to 66 victims.

Paul David Ward, 61, was charged with running a Ponzi-style” scheme that took in $700,000. Ward operated an aviation fuel supply business through Lebanon Aviation Service Inc. and wrote promissory notes and post-dated checks as part of the scheme.

Chris Young Yoo, 44, was sentenced to 9 years in prison and ordered to pay nearly $3.7 million in restitution in connection with a Ponzi scheme that he ran through Summit Asset Strategies. The scheme defrauded 17 investors.

Joseph Paul Zada, 59, lost his appear to the Eleventh Circuit seeking to overturn his conviction and 210 month prison sentence. Zada was convicted in connection with a scheme that defrauded more than 20 investors. He represented that he had connections to Saudi Arabian oil ventures but instead used the funds for his personal expenses. On appeal, Zada said that he borrowed money from people in good faith and anticipated paying them from an expected inheritance of $250 million.

INTERNATIONAL PONZI SCHEME NEWS 

Argentina

The Ponzi scheme, PayDiamond, is alleged to have claimed 30,000 victims and involve $60 million. The scheme, which started in Brazil, is targeting Bolivian immigrants in Argentina.

Australia

Michael Christopher Samra, 57, pleaded guilty to charges that he ran a $2 million Ponzi scheme. He was sentenced to 8 years and nine months in prison.

Cayman Islands

CWM FX is under investigation for running an alleged Ponzi scheme.

Finland

OncCoin is under investigation as part of a global crackdown against the scheme. The scheme is under investigation in India, Italy, and the United Kingdom.

India

Pradeep Sethy, the Group Chief of Artha Tatwa, along with directors Manoj Patnaik and Sri Krushna Padhi, were sentenced to 7 years in prison in connection with a Ponzi scheme run through the Artha Tatwa Group.

Devi Prasad Moharana, the head of Bandhan Financial Services, was arrested on charges that hundreds of investors were defrauded in a Ponzi scheme. Moharana has pleaded innocence.

Michael Ferreira, 77, had his bail plea rejected, along with Malcom Desai, in connection with an alleged Ponzi scheme run through Vihaan Direct Selling (India), a subsidiary of the Hong-Kong based direct selling company, ONet.

Sudhir Patil has been held in connection with an alleged Ponzi scheme run through Jeeo India. Seventeen people have been arrested in connection with the scheme that promised investors 1% profit per day. Customers were asked to become members and buy the company’s e-currency.

The government was authorized to sell at auction properties of Land India Real Estate Private Ltd. and Land India Assets Ltd. The proceeds are to be paid to investors defrauded in scheme run by the companies.

Malaysia

Arunmaguam has been accused of running a Ponzi scheme through Uni Pay Group.

Datuk Seri and Pahang and Kota Baru were arrested on charges that they ran a Ponzi scheme through MGCfx. The scheme promised investors returns of 10% per week through foreign exchange trading.

Philippines

Barbara May Garcia, Herley Jesuitas, Anthony Kierulf, Jose Tengco III, Oudine Santos, Nicoline Mendoza and Maria Pamela Morris were ordered to be put on trial in connection with their role as agents or brokers for Philippine International Planning Center Corp.

Monday, July 31, 2017

July 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for July 2017. The reported stories reflect at least 10 new Ponzi schemes worldwide: over 58 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. And please remember that I am just relaying what’s in the news, not writing or verifying it.

David Brian Binder, 61, was sentenced to 2 years and 6 months in prison for his role in helping Roberto Trinidad Del Carpio Frescas, 40, in running a $14 million Ponzi scheme. Del Carpio represented that he was a licensed investment broker and energy market expert. He ran the scheme through SMI International Institute LLC aka Stock Market Investment, Del Carpio Trading Institute LLC, and Del Carpio Holdings. Del Carpio was previously sentenced to more than 19 years in prison. Binder previously pleaded guilty to assisting Del Carpio in keeping proceeds away from creditors and lying to investors about protecting their investments.

Seth Adam Depiano, 36, was charged in connection with an alleged $20 million real estate Ponzi scheme that he ran through The Rental Group, U.S. Funding and Home Services LLC, and Draymond Homes. Depiano allegedly promised investors returns from investments generated from the renovation and resale of residential properties and rental income.

Joey Stanton Dodson, 52, was accused by the SEC of running an alleged $15.5 million Ponzi scheme through Citadel Energy Partners LLC. The scheme allegedly defrauded about 50 investors.

Mark Dulik, 31, was charged in connection with a $100,000 alleged scheme run through Rework, Inc. Rework claimed to provide cloud-based software services.

Stephen  S. Eubanks, 48, was sentenced to 2½ years in prison and was ordered to pay more than $437,000 in restitution in connection with a Ponzi scheme that he ran through Eubiquity Capital. He took in more than $700,000 from more than 20 investors, posing as a hedge fund manager.

Renwick Haddow aka Jonathan Black was charged in connection with an alleged fraud run through Bar Works and Bitcoin Store Inc. Haddow collected $37 million from over 200 Bar Work investors. Bar Works purportedly would rent or buy retail spaces, turn them into offices with a bar and sublet desks. The scheme solicited investments to fund expansion and promised guaranteed double digit returns. Haddow was also named in a lawsuit brought by 51 plaintiffs against Bar Works alleging $4.1 million in lost investments and $20 million in punitive damages. The investors allege that they were guaranteed annual return of 16% and a return of principal in 10 years. Another lawsuit filed by 71 investors against Haddow also names his wife, Zoya Kiselova aka Zoe Miller, alleging that she assisted Haddow in connection with the Bar Work entities. Haddow had been a fugitive since he was charged, but was apprehended in Morocco later in the month.

Michael S. Holcomb, 74, Gary L. Holcomb, 72, Jennifer L. Chalmers, 46, and Kristen S. Van Breemen, 44, had new charges issued against them in connection with an alleged $40 million Ponzi scheme they ran through Berjac of Oregon and Berjac of Portland. The scheme allegedly defrauded more than 400 investors through their insurance premium finance businesses. They were first indicted in 2015 but new charges of mail fraud were added. Michael Holcomb and Gary Holcomb, who are brothers, managed the entities, and Michael’s daughters, Chalmers and Van Breemen ultimately took over day to day operations at the businesses. In 1994, Peter R. Snook was convicted in connection with the operation of Berjac of Washington as a Ponzi scheme, and in 2013, Michael J. Turnock was convicted of operating Bridge Premium Financing, fka Berjac of Colorada, as a Ponzi scheme.

Cheryl L. Jones, 62, was sued by the SEC in connection with the Ponzi scheme run by her brother, Mark A. Jones. The scheme involved investments for a bridge loan program for Jamaican businesses. Jones was paid 10% commissions for soliciting investors into the Bridge Fund and was repaid her full investment, a higher rate of return than other investors and a monthly legal retainer. Other investors lost most of their money.  Mark Jones pleaded guilty earlier this year and is currently serving a 70 month prison sentence.

Shamika Luciano, 34, was sentenced to 5 years of probation for her role in the Ponzi scheme run by Nicholas Cosmo. Luciano was Cosmo’s executive assistance while Cosmo ran a $400,000 million Ponzi scheme that defrauded more than 5,000 investors.
  
Joseph Wayne McCool, 70, was indicted on charges that he defrauded investors out of $10 million. Two other individuals, Donald Manning, and Cameron Campbell, were indicted in 2006, but McCool has been missing since then. The three allegedly ran a scheme through Brixon Group Ltd. in which investors were promised 15% per month returns in connection with a high-yield insurance portfolio through a supposed European investment company. From their returns, 5% was to be put back into the scheme to buy insurance on the original investment.

Mark Moskowitz, 48, was sentenced to 33 months in prison in connection with a $675,000 Ponzi scheme that he ran through Edge Trading LLC and Edge Trading Partners L.P. Separately, Moskowitz had previously been ordered to pay a $1 million civil penalty for selling fraudulent securities and misusing investor funds. Moskowitz told investors that Edge Trading was invested in U.S. and foreign equities, futures contracts, and option contracts.

Jason Nissen and his brother, Robert Nissen, were enjoined from selling about 300 tickets for this year’s U.S. Open Tennis Championships. Their company, National Events Holdings LLC, got approval from the bankruptcy court to sell about 11,000 of remaining ticket stock, stating that the tickets would become worthless if not sold soon.

Carl Frederic Sealey, 42, and Eric Enge, 44, were indicted on charges that they were running a Ponzi scheme through Global Standard Industries and SEK Industries. They used their investment firms to allegedly defraud about 21 investors out of $1.6 million, promising 8.5% to 10% returns from investments in short-terms loans, operating expenses and real estate transactions.

Shirley Sooy, 66, began her 4 year, 2 month prison term for her $42 million Ponzi scheme. Sooy ran the scheme through a collection of companies known as TransVantage Group. The companies provided firms with audited freight bills generated by carriers and freight forwarders hired by those firms and was supposed to pay the carriers with funds provided by the firms.

Justin Troy Spearman, 29, was accused of selling royalty interests in oil and gas leases on land in Texas in what is alleged to be a Ponzi scheme. Spearman, who was recently released from prison after serving time on wire fraud charges, is being held in prison in lieu of bail.

Christopher Swartz, 46, was sentenced to 11½ years in prison in connection with a Ponzi scheme that defrauded investors out of more than $19 million. Swartz devised a promissory note scheme in which he defrauded investors through food and restaurant entities such as Jreck Subs, North Country Hospitality, Ultimate Franchise Systems, Caffino Live Roast, Madeline Ventures, Grace Ventures, and Obees.

Germaine Theodore, 37, was sentenced to 5 years in prison in connection with a Ponzi scheme that he ran through TGC Movement and Save My Future. The scheme promised customers “big reductions” in their monthly bills, up to 35%, and defrauded over 200 victims out of approximately $298,000. Theodore promised them the reductions if they paid 65% of the outstanding balance on those bills plus fees, and Theodore would supposedly pay the clients’ creditors.

Carol J. Wayland, 80, and her son John C. Mueller aka John Clark aka Bob Allison, 53, were sued by the SEC, along with their Wyoming entity, Kentucky-Tennessee 50 Wells/400 BBLPD Block LP, on allegations that they ran a $2.4 million Ponzi scheme that defrauded 41 investors. The complaint alleges that they raised the money by cold-calling investors from a California boiler room, using the fictitious name “Sahara Wealth Advisors.” Also named in the SEC complaint are defendants HP Operations LLC, C.A.R. Leasing LLC, Mitchell B. Dow aka Dave Baker, 54, Barry Liss, 59, and Steve G. Blasko aka Steve Gerald, 47.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Michael Christopher Samra was accused of running a $2 million Ponzi scheme that defrauded at least 6 victims through his failing business, ALC Group Pty Ltd.

Bradley Keith Silber was charged by authorities with fraud in connection with a property development scheme run through Capital Growth International Club and All About Property Development. The scheme promised mostly elderly victims returns of up to 20%.

China

Members of Shan Xin Hui (Kindness Exchange), an investment firm, protested in Beijing, seeking the release of founder Zhang Tianming. Authorities say the investment scheme is a fraud, but some protesters say that Shan Xin Hui has benefited a lot of people in need. The scheme has recruited more than 4 million members in the past 12 months, promising returns of 30% and bonuses for those who introduce new investors. 67 people were detained in connection with the protest.

Chu Hoi-yan, 36, and her husband, Kevin Au Yeung, 39, were accused of defrauding 14 people in Hong Kong in an alleged Ponzi scheme involving luxury bags and watches which were to be sold at a profit.

England

David Dixon had two years added to his sentence when he failed to pay $353,000 pursuant to a confiscation order. The two year default sentence was added on to the original 3 year, 10 month sentence he is serving after pleading guilty to running an alleged no-risk gambling syndicate through Arboretum Sports (U.K.) Limited.

India

Ashok Kumar Patnaik was sentenced to 3½ years in prison in connection with a Ponzi scheme that he ran through six companies including: Micro Leasing and Funding, Micro Hotels, Micro Constructions, Micro Hospitals and Micro Media.

A charge sheet against OneCoin in India, a purported digital currency scheme, includes Bulgarian national Rjua Ignatova, the founder and CEO of OneCoin.

Charges were filed against Basudeb Bagchi and Avik Bagchi in connection with their role in the operations of Prayag Infotech Hi-Rise Limited and Prayag Infotech Network Private Limited. The total amount collected from investors is believed to be Rs 2,862.

Authorities conducted searches of five locations relating to an alleged Ponzi scheme called Uni Pay Group run by Kamal K. Bakshi and A K Singh. Bakshi was taken into custody in connection with the alleged scheme.

Philippines

Veronica Macpherson, 37, and her company, Macro Realty Developments Pte Ltd. are under investigation by authorities for running a suspected Ponzi scheme. The scheme promised investors up to 18% returns from investment in property developments and took in over $110 million. The scheme is being investigated in Australia, Singapore, and Malaysia as well. 

South Africa

Graeme Minne, 54, and Carolina Frederika Minne, 52, were convicted on fraud charges relating to a multi-million rand Ponzi scheme that defrauded over 930 victims. The scheme took in R278,786,853 and promised victims returns on forex trading of up to 65%.

Thailand

Chatchayont Pornbaiyok and Patthachak Theppasorn were accused of running a Ponzi scheme that defrauded about 700 people out of at least 100 million baht.

Vietnam

Ly Senleap, 31, and So Sothearoth, 30, were arrested in connection with an alleged Ponzi scheme run through FUGI Investment Excellence. The scheme allegedly promised investors a 9.8% monthly return on investments and defrauded about 150 victims. 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Eleventh circuit ruled that a group of federal employees who lost funds in the Ponzi scheme run by Wayne McLeod could not sue the government for having hired McLeod to give them financial advice. The court found that sovereign immunity applies because the claims were based on misrepresentations.

The Eighth Circuit declines to rehear argument on whether Ponzi scheme losses were covered by insurance. The court previously ruled that 3M’s insurers did not have to cover losses in connection with the WG Trading Co. LP Ponzi scheme.

The  CFTC sought default judgments against Cory Williams and his investment company, Williams Advisory Group LLC, seeking a civil monetary penalty of more than $9.7 million along with restitution.