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 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

Saturday, June 30, 2018

June 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for June 2018. The reported stories reflect at least 9 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.

Matthew Eckstein, 48, was charged in connection with an alleged $5 million Ponzi scheme that defrauded 14 people. Eckstein ran the alleged scheme through Conmac Funding, promising a risk-free investment at 4% over 2 years. Eckstein is a financial advisor who started Sisk Investment Services Inc. in 2015, but used the money to fund other business enterprises or for his personal use, rather than investing into Conmac Funding. Eckstein pleaded not guilty.

Randall Finer, 54, pleaded guilty to charges relations to a Ponzi scheme run in Iowa. The scheme brought in more than $800,000, and he is accused of diverting 52% of the money into his own accounts for living expenses.

Jesse Harris and his company Harris Custom Projects were the subject of an asset freeze sought by the Kansas Securities Commissioner who alleged that Harris was running a $5.5 million Ponzi scheme. Harris used investor funds to purchase a house, car and furnishings for his home.

James E. Hocker, 48, was charged by the SEC in connection with an alleged Ponzi scheme that promised investors 10% to 30% returns from an insurance scheme. Hocker promised guaranteed returns from investments he would supposedly make on the investors’ behalf in the S&P 500 and other investment vehicles. Hocker was selling insurance products and annuities under the name James E. Hocker & Associates. The investors withdrew money from their life insurance policies or retirement accounts to invest with Hocker. Hocker raised approximately $1.27 million from about 25 investors.

Ralph T. Iannelli and his leasing company, Essex Capital Corp., were accused by the SEC of running an $80 million Ponzi scheme. The scheme involved 70 investors and promised them returns of 8.5% to 10%. Essex Capital was supposedly going to use 100% of investor funds to purchase equipment and investors would be paid back within 3 years. The SEC alleged that Essex only spent about 9% of the capital raised from investors and through bank loans.

Brian D. Jones, 38, pleaded guilty to charges that he ran a Ponzi scheme in connection with his cattle broker business in Indiana. Jones took $473,000 from his victims, promising them large returns from the buying and selling of bull calves from dairy farms in Wisconsin to cattle ranches in Texas and Missouri. Jones used investor funds from gambling and his personal benefit.

Mitchell Klein faced sentencing in connection with a Ponzi scheme that defrauded investors out of $60 million. Klein had pleaded guilty in February to running the scheme with John Magee and Burton Dorfman through FKF 3 LLC. Magee and Dorfman were not charged in the case.

Alex Reaves Lundin, 26, was sentenced to 2 years in prison in connection with her role in a Ponzi scheme run by her husband, Jeremy Lundin. Jeremy Lundin previously pleaded guilty to the scheme he ran through Big Island Capital in which he defrauded at least 51 people out of $1 million. Alex Lundin assisted her husband in soliciting new investors and assuring investors that their funds were safe.

Billy Wayne McClintock, 76, was sentenced to 10 years in prison for his role in a Ponzi scheme that brought in more than $20 million  from over 220 investors in Minnesota. McClintock ran the scheme with Diane Alexander, and they offered investors 38% annual returns from supposed investments in Europe.

Perry Santillo, 38, and Christopher Parris, 38 were charged along with Paul Anthony LaRocco, 55, John Piccarreto, 34, and Thomas Brenner, 55, in a civil lawsuit brought by the SEC with running a $102 million Ponzi scheme that defrauded 637 investors. Santillo and Parris would “buy or take over books of business of retiring investment professionals from around the country.” The other three defendants would then persuade clients to withdraw their money and invest in First Nationle Solution, Percipience Global Corp., and United RL Capital Services. Santillo used at least $13.4 million fund a lavish lifestyle. Investors have sued Bank of America along with the five individuals for allegedly aiding and abetting the $102 million scheme. 

Carl Frederic Sealey, 43, pleaded guilty to running a $1.6 million Ponzi scheme through Global Standard Industries Inc. and SEK Industries Inc. Sealey is a Philadelphia investment adviser who used investors funds to fund his own lavish lifestyle instead of using the money to finance real estate deals. Sealey claimed to have more than $15 billion in domestic assets and another $33 billion offshore. Investors were told their investment was risk-free and they would get their money back in 90 days. When there was a delay, they were told they could get their money back more quickly if they invested additional funds for other deals.

Carlos Uresti, 54, was sentenced to 12 years in prison and order to pay $6.3 million in restitution. Uresti, a Texas senator who was convicted on charges relating to a Ponzi scheme run with co-defendant Gary L. Cain, resigned from his senate seat in advance of his sentencing. Cain was sentenced to more than 5 years in prison. A jury found Uresti and Cain guilty in connection with the fracking enterprise run through FourWinds Logistics. FourWinds CEO Stanley P. Bates pleaded guilty earlier this year.

James VanBlaricum and six others were charged by the SEC in connection with an alleged oil and gas Ponzi scheme in Texas. The alleged scheme was run through Texas Energy Mutual LLC fka Texas Energy Management. Also included in the complaint were Rodney Pope, Chet Inglis, Robert  Gilliam, Matthew Leaverton, William Hill and Erik Rhodes. The complaint alleges that the defendants raised over $10 million by guaranteeing returns from the use of their funds to drill oil wells.

Thomas Michael White, 59, John Kevin Reech, 56, and Joseph Mario Genzone, 53, were indicted in Miami on charges relating to an alleged Ponzi scheme. The three defendants alleged solicited investors to buy shares of stock in First Call Ventures LLC and its subsidiaries, promising investors a 100% return and that their money was safe.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Poker professional William “Billy” Jordanou, 59, pleaded guilty to charges that he ran a $72 million Ponzi scheme, along with Robert Zaia, 54. Jordanou admitted to using forged documents to receive loans from clients to supposedly fund property development.

Canada

Rashida Samji was ordered to surrender herself following dismissal of her appeal on her conviction on charges that she defrauded nearly 284 investors in a $110 million Ponzi scheme. She was sentenced to serve 6 years in prison.

Cambodia

Authorities warned of risks of buying, selling or trading cryptocurrencies without getting a license. They warned investors of potential losses due to the volatile nature of cryptocurrency as well as the risk of hacking.

Cayman Islands

A Cayman Islands court dismissed rival claims made by a Saudi Arabian family and a Kuwaiti-born businessman, finding that both sides defrauded banks out of about $126 billion in a Ponzi scheme. The al-Gosabis and Maan al-Sanea blamed each other for their losses.  Ahmad Hamad al-Gosabi and Brothers (AHAB) and Saad Group are owned by al-Sanea, had sued each other for fraud relating to a Ponzi scheme run through a unit of AHAB known as the Money Exchange. Sanea had married into the al-Goasbi family and was managing director of Money Exchange. The al-Gosabis allowed al-Sanea to use the Money Exchange for “massive personal borrowing.” The Money Exchange had raised about $126 billion by fraudulently borrowing funds from at least 118 banks around the world.

India

Authorities detained Tah Kazi in connection with a cryptocurrency Ponzi scheme run through Finstone Group, called Money Trade Coin (MTC) estimated to have involved around Rs 300 crore to Rs 500 crore.  The director, Amit Lakhanpal, absconded along with four others. The scheme promised investors ten-fold returns in 5 to 6 months.

Authorities attached 47 properties of Royal Twinkle Star Club and Citrus Check Inns Ltd. The promoter of the scheme, Om Prakash Goenka, is currently in prison.

Authorities began searches of the offices of Atharva 4 U Infra and Agro Pvt Ltd. in connection with an alleged Ponzi scheme. The scheme promised investors that they could double their money from investments in construction, travel and tourism, educational institutions, hotels and resorts. Shivaji Niphade, Ganesh Hajare, Sachin Gosavi and Mukesh Sudesh are all named in the scheme.

Six people were charged in connection with an alleged crypto Ponzi scheme run through NCR Coin LLP. The director of the scheme, Rohit Kapopara, allegedly devised a fake kidnapping and said that all of the company’s digital holdings had been acquired by a kidnapper.

Turkey

Turcoin, an alternative digital currency, was revealed to be a Ponzi scheme. Turcoin was established by Hipper, which was founded by Muhammed Satiro─člu and Sadun Kaya. The scheme stopped paying returns in June and the Hipper executives left Turkey with 1 billion Turkish Lira ($211 million). Satiro─člu has joined investors in suing Kaya, alleging that his partners, and not he, stole the money. Kaya is also involved with Anafis, Inc., another company involved in the scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The trustee of the Bernard Madoff Ponzi scheme reached a settlement with J. Ezra Merkin and his two funds, Ascot Partners LP and Ascot Fund Ltd., along with Gabriel Capital Corp. Merkin and his companies, who lost money in the scheme, are to pay $280 million and will be allowed a $502 million claim in the case. The distribution, however, will be used to fund the settlement.

JPMorgan Chase agreed to pay $4.6 million to settle a proposed class action that accused the bank of aiding the Millennium Bank Ponzi scheme run by William Wise. Investors allege that JPMorgan allowed Wise to steal millions of dollars from accounts held at the bank despite numerous signs that he was running a fraud.                        

Thursday, May 31, 2018

May 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for May 2018. The reported stories reflect at least 15 new Ponzi schemes worldwide; 5 convictions and guilty pleas; over 26 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 55 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.

Arthur Lamar Adams, 58, was charged in connection with his role in a Ponzi scheme in Mississippi. Adams pleaded guilty and admitted his company was a Ponzi scheme. The scheme was run through Madison Timber Properties LLC, Madison Timber Fund LLC, and Madison Timber LLC. More than $100 million was invested by more than 250 investors from at least 14 states. The criminal charges were filed after the SEC filed its lawsuit. Adams allegedly falsely represented that Madison Timber Properties was in the business of buying timber rights from landowners and then selling those rights to lumber mills at a higher price. Only a few such timber rights or contracts existed. The investors were guaranteed returns of 12% to 13%. The SEC then filed an action to appoint a receiver over the assets of Adams.

Kenneth Brewington, 53, of California was convicted on charges relating to a $3 million Ponzi scheme run through Compass Financial Solutions. Brewington and his co-conspirators, William E. Dawn, 80, and Brian G. Elrod, 61, previously pleaded guilty to their roles in the scheme.
  
John (Jack) William Cranney, 76, was convicted in connection with a $6 million Ponzi scheme that defrauded 15 investors. Cranney defrauded his friends and business associates by representing that he was investing their money in a fund or retirement plan. Instead, he spent the money on personal bills and put money into his failing nutrition products distributorship.

Seth Adam Depiano, 37, was sentenced to 12 years and seven months in prison and ordered to pay more than $19.6 million in restitution following his guilty plea regarding a Ponzi scheme he ran through The Rental Group, US Funding and Home Services LLC, and Draymond Homes. Depiano had promised investors returns from the purchase and resale, or rental of real properties. He falsely represented high occupancy rates to lure in investors.

Jeffrey Lynn Gentry, 40, was sentenced to 3 years in prison in Tennessee and ordered to pay back more than $10.4 million in restitution in connection with a $43 million Ponzi scheme run through Gentry Brothers Tractor Supply that caused losses of more than $10 million. Gentry convinced investors to pull money from their retirement and savings accounts, promising them returns of 6% to 10% from investments in farming equipment that would supposedly be used to fulfill state government contracts. The scheme defrauded more than 50 people. Gentry previously pleaded guilty to the scheme.

Barry and Fern Kornfeld, and their company FEK Enterprises dba First Financial Tax Group, were the subject of an administrative complaint by Florida regulators, who accused them of selling unregistered securities to investors in the Woodbridge Group of Cos. Ponzi scheme. The Kornfelds are accused of selling at least 529 unregistered notes in 5 Woodbridge related funds for approximately $40 million. Other defendants named in the case are Andrew Grigsby Costa and Costa Financial Insurance, James Gilchrist, Albert Klager and Atlantic Insurance & Financial Services Inc., Lynette Robbins, and Knowles Systems.

Kevin Kyes, 69, was found guilty in connection with a Ponzi scheme that defrauded Japanese investors. Codefendant John Holdaway, 73, pleaded guilty last year. The investors were defrauded out of $6.8 million through a business called Money Management Strategies. Investors were told that the high-speed trading programs had historic returns of more than 100% annually.

Yasuna J. Murakami, 45, was sentenced to 6 years in prison and ordered to pay about $10.5 million in restitution in connection with a scheme he ran through MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Murakami established the investment advisory firms and managed three hedge funds: the MC2 Capital Partners Fund, MC2 Capital Value Fund, and MC2 Capital Canadian Opportunities Fund. The SEC had filed charges against Murakami and his former business partner, Avi Chiat, last year and the Massachusetts Securities Division also filed civil fraud charges.

James Nickels, 67, of Wisconsin, was charged in connection with a scheme he ran through a business called “Fiscal Concierge.” The scheme brought in over $5 million from investors and caused losses of over $3 million.

Steven Pagartanis, 58, pleaded not guilty to charges that he ran a $7.5 million Ponzi scheme. The SEC, which also filed a complaint against Pagartanis, has alleged that the losses were $8 million.  Pagartanis ran the scheme through Omega Planning Associates and defrauded elderly investors. The SEC alleged that Pagartanis defrauded at least nine retail investors that were his long-standing brokerage customers.

Paul W. Smith, 63, was sentenced to 5 years in prison in Pennsylvania in connection with a $2 million Ponzi scheme. Smith had been accused criminal and by the SEC in a civil suit for running a scheme for 25 years. The scheme defrauded about 30 investors in an investment advisory scheme Smith ran through The Haverford Group.

Shawn Patrick Watkins, 48, pleaded guilty in connection with a $3.4 million real estate investment scheme. The scheme defrauded about 50 investors through real estate investment seminars conducted in California under the name The Equity Growth Group Inc. Victims were told that their money would be used to acquire or repair properties or that their money would be used as “bridge loans” to allow the company to acquire properties when money from another investor had not been received. Investors were told that there were hundreds of properties generating rental income and that the company was acquiring new properties to continue its growth. In reality, the company was not acquiring new properties and investor funds were used to pay mortgages on three homes purchased and occupied by Watkins and his family. Co-conspirator Angel Bronsgeest, 55, had earlier pleaded guilty to one count of wire fraud in connection with the scheme.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Aimee Pitman, 26, and a 32-year old man were charged with running a Ponzi scheme that defrauded investors out of $800,000. The scheme persuaded investors to buy a share of an automatic teller machine, but the ATMs either didn’t exist or were owned by someone else.

Botswana

Authorities shut down foreign exchange trader Aquapanel Limited after concluding that it was running a Ponzi scheme. The company is owned by Motswana Shima Moeng Phorie, 28.

Canada

Joshua James Tenhove was charged with fraud relating to an alleged $10 million Ponzi scheme. The scheme was run through Silvertip Energy that sold or rented light towers with the same serial number to multiple investors and sold or rented units that were never manufactured.

Arnold Breitkreutz, 70, and Susan Way, 67, were charged in connection with an alleged Ponzi scheme that lured in more than $27 million from investors. The scheme was run through Base Finance and involved mortgage lending.

China

Two suspects were detained in connection with an alleged Ponzi scheme that took in over 300 million yuan (US$47 million) from over 8,000 people. The scheme was run through an investment management firm called Jielang and promised investors an 8% to 12% return on financial products. Around 80% to 90% of the victims were retirees.

Six people were arrested for allegedly defrauding 3,000 Chinese investors by selling a cryptocurrency they claim was backed by a kind of tea. They had formed a firm named PEB which issued a blockchain-powered token called Pu’er Coin. The scheme promised investors that with each token they held a portion of the Pu’er Tibetan tea supposedly owned by the firm, which was worth billions of dollars. However, there was only very limited tea in stock.

Authorities arrested four more suspects in connection with the OneCoin scheme. OneCoin, known as “Weika Coin” in China, was a billion-yuan Ponzi scheme, and 98 people have been prosecuted so far. Authorities report that $267.5 million has been recovered so far from the cryptocurrency scheme. Companies associated with OneCoin and its founder, Ruja Ignatova, are being investigated in other countries as well.

Germany

P&R Group, once one of the world’s largest container lessors, has been accused of operating a Ponzi scheme. P&R, no longer operating, sold new and used containers to investors, rented them back and offered to repurchase them after 5 years for 65% of the original value. P&R claimed it had sold around 1,600,000 containers to around 54,000 investors. The firm is now accused of selling nearly one million more shipping containers than it owned.

India

Kamal Singh and Vijay Kumar were charged in connection a scheme run through their bitcoin company, bits2btc, which allegedly defrauded over 2,500 people out of more than $14.9 million. They have ties to Amit Bhardwaj who has been charged with running a bitcoin Ponzi scheme.

Rahesh Jain and Sanchit, agents of Amit Bhardwaj, were arrested in connection with their efforts to solicit investors. They operated two Hong Kong-based companies to lure investors and promised returns of 10% each month.

Akash Goud and others were arrested in connection with a scheme that promised investors high end cars at a 30% discount. Goud used references from the few people to whom he delivered cars to lure in other customers. About 60 cars were delivered, but there were about 200 additional orders.

The properties of Oscar Group of companies were attached and bank accounts frozen in connection with an alleged Ponzi scheme run by Prabhas Chandra Rout. Rout was arrested in 2016.

Omprakash Bansantlal Goenka was arrested in connection with an alleged Ponzi scheme run through Citrus Check-Inns Ltd. and Royal Twinkle Star Club.

Sunita Samal, director of Inter Ocean Videsh Limited, was arrested on charges that he defrauded investors in various schemes.

Chhotrai Majhi, 40, was arrested on charges that he ran a Ponzi scheme through a money deposit collection company known as Shree Bhumi Construction Limited. The scheme was run under the guise of a construction company and then moved into real estate, mining and hotels. 

New Zealand

Jimmie Kevin McNicholl, 56, director of Arena Capital Limited, which traded as BlackfortFX, pleaded guilty to charges that he ran a fraudulent scheme as a foreign exchange brokerage. About 900 people invested about $8.3 million into the scheme. Lance Jack Ryan aka Lance Jared Thompson, 44, was also charged but has maintained a plea of not guilty.

Philippines

Margarita Huang aka Irma Pascual was arrested on charges that she ran a Ponzi scheme that defrauded between 29 and 46 victims. The victims were promised returns of 15% per month, but many of them received bounced checks issued by Huang and her husband, Gary Chen Huang. The Huangs claimed to be co-partners in the lending facility they supposedly operated with a large employee cooperative under Comfoods Inc.

South Africa

Derek Bredekamp, 52, has been arrested in connection with the alleged Ponzi scheme run through Platinum Forex Trading Group. It is alleged that Bredenkamp colluded with Colin Davids, the director of Platinum, to defraud investors. Approximately 2,000 investors were defrauded.

Authorities are investigating Bitcaw Trading Company aka BTC Global for alleged investment fraud. More than 28,000 investors are believed to have lost over R1-billion. Investors were promised 2% interest per day, 14% per week, and 50% per month. The founder of BTC Global, known as Steven Twain, has disappeared.

QSG Consult International is under investigation and accused of defrauding 800 people out of R380 million.

South Korea

Two South Korean individuals whose names remain anonymous were arrested for running a $30 million cryptocurrency Ponzi scheme through a company known as Upbit. The scheme brought in money from 3,787 investors who were promised a daily profit of $4,000 and were told they could double their profit if they recruited more investors. 

Turkey

Police detained 28 suspects in connection with an alleged Ponzi scheme run through Detay Maxinet, a company specializing in search engine optimization. More than $16.3 million was collected from more than 18,000 members.