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

Wednesday, December 31, 2014

December 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for December 2014. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 112 years of newly imposed sentences for people involved in Ponzi schemes; at least 9 new schemes involving more $200 million and over 32,000 victims in the aggregate; 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. And please remember that I am just relaying what’s in the news, not writing or verifying it.

    Bryan W. Anderson, 40, was charged with running an alleged $8.4 million Ponzi scheme in which about 12 investors lost more than $3 million. Anderson has agreed to plead guilty. He was a registered financial broker and solicited funds from his clients to invest in stock options. He also solicited them to invest in his company, 360 Properties.

    Robert Andres, 63, was sentenced to 4 years and 4 months in prison and ordered to pay more than $3.2 million in restitution following his guilty plea. Andres ran a Ponzi scheme through Winsome Investment Trust where Andres raised more than $39 million by using misleading information to promise returns from a trading program that was mostly automated.
 
    Joseph Francis Bartholomew, 75, was arraigned on charges that he ran an $11 million Ponzi scheme along with Wendy King-Jackson, 54, that defrauded 27 investors. The scheme was allegedly run through MBP Insurance Services, and investors were promises 15% to 40% returns.

    Charles A. Bennett, 56, a New York-based attorney, was accused of running a $5 million Ponzi scheme. The SEC filed a complaint against Bennett, alleging that he had defrauded at least 30 friends and family members. Bennett had tried to kill himself and left a 16-page suicide note outlining the fraud. Bennett told investors that their money would be used to fund investments in European real estate mortgage-backed securities and promised them returns of 6% to 25%. Bennett was also criminally charged in connection with the scheme.

    Annette Bongiorno, 66, was sentenced to 6 years in prison for her role in the Bernard Madoff Ponzi scheme. Bongiorno was Madoff’s former secretary, and the court found that she was not “fundamentally corrupt” but that she should have recognized the fraud.

    Daniel Bonventre, 67, was sentenced to 10 years in prison for assisting Bernard Madoff in his scheme.

    Bonnie Brito, 68, was released from prison after serving 70% of her 18 month sentence for running a $16 million Ponzi scheme that defrauded 250 investors. The scheme was called GetMoni.Com. Brito was released for “extraordinary and compelling reasons” that relate to her health. Brito’s husband, Ronald Lee Brito was sentenced to 12 years, 7 months for his role in the case, and John Missitti was sentenced to 6 years.

    Whileon Chay, 52, used some of the money stolen from 19 victims of an alleged Ponzi scheme he was running through 4X Solutions to cryogenically freeze his deceased spouse. Chay has been a fugitive since 2011 when he learned that his scheme was under investigation. His scheme defrauded 19 investors out of about $5 million by promising them 36% returns from investments in currencies, gold and other markets.

    Joann Crupi, 53, was sentenced to 6 years in prison for assisting in the Madoff fraud. Crupi said that she “really believed the lies that Frank DiPascali and Bernie Madoff told” her.

    Trente Francke, was sentenced to 7 years in connection with a $46.5 million Ponzi scheme. Francke testified against the schene’s mastermind, David McQueen, 44, who was convicted at trial. McQueen had set up the Ponzi scheme after an investment company he had set up fell victim to a Ponzi scheme. McQueen was also sentenced this month to 30 years.

    Joel Barry Gillis, 74, and Edward Wishner, 76, were criminally charged in connection with an alleged $100 million Ponzi scheme run through Nationwide Automated Systems, Inc. The scheme brought in money from about 2,000 investors and promised them 20% returns for purchasing an ATM machine. The scheme allegedly lured investors to pay about $12,000 for an ATM machine, which would be leased back to the company in return for payment of $.50 for each transaction that the unit processed.

    Kenneth A. Grant, 66, was charged with operating a $17 million Ponzi scheme that defrauded 70 investors. Grant allegedly ran the scheme through his company, KGTA Petroleum Ltd., in which investors could earn returns from buying and selling crude oil and refined fuel products. Grant promised returns of 5% per month.

    Carlos Hernandez, Hileah mayor, is facing possible ethics fines for making false statements on disclosure forms about his loans to Luis Felipe Perez in connection with the Perez Ponzi scheme. Hernandez had charged 35% interest and collected $100,000 interest on loans totaling $180,000. The possible ethics violations stem from prior statements made by Hernandez denouncing a news report that he was paid $100,000 in interest by Perez. Hernandez later testified that he had in fact received that money.

    Robert L. Holloway, 57, was sentenced to 18 years and 9 months in prison after being found guilty of running a $33 million Ponzi scheme resulting in $15.2 million in losses to investors. Holloway recruited investors to his company, US Ventures LC, and promised them returns of .8% per trading day based on supposed proprietary trading software that was consistently profitable.

    Claude Roderick Koerber aka Rick Koerber, 45, may still be subject to allegations that he ran a Ponzi scheme. The government filed an appeal to the Tenth Circuit asking the court to overturn the lower court’s dismissal with prejudice of the case against Koerber. The dismissal was based on violations of the Speedy Trial Act, but the government blames most of the delays on Koerber and his attorney.

    Michael Kratville, 53, who was initially turned away by the court when he unsuccessfully tried to plead guilty, finally pleaded guilty to charges in connection with a Ponzi scheme. Kratville is one of 3 men indicted in connection with a $4 million alleged Ponzi scheme run through Elite Management Holdings Corp. and MJM Enterprises. Jon Arrington and Michael Welke have also been indicted. The scheme supposedly defrauded 100 people by promising returns from investments in commodities, metals and foreign currency.

    Levi Lindemann, 38, was charged by the SEC with running a $1 million Ponzi-like scheme. Lindemann allegedly defrauded 6 elderly investors by promising them returns from investments a real estate investment company, HomePath Financial. He also promised returns from life insurance policy-backed notes from GWG Life. He ran his schemes through his companies, Gershwin Financial Inc. and Alternative Wealth Solutions. Both HomePath and GWG Life deny any involvement with Lindemann. Instead, he actually used their money to fund his own lavish lifestyle.

    John K. Marcum, 50, was charged in connection with a $6 million Ponzi scheme that defrauded about 30 investors. Marcum ran his scheme through his companies, Guaranty Reserves Trust, LLC and  Marcum Companies LLC. He promised investors returns of more than 20% in day trading. Marcum managed the career of race car driver Arie Lyuendyk.

    Al Moriarty, 81, was ordered to pay investors $10.2 million in restitution in connection with his Ponzi scheme. Moriarty was previously sentenced to 5 years in prison.

    Jimmy Morrisett, 55, is back in custody after escaping from a low security prison where he was serving a 9 year prison sentence following a guilty plea relating to a $7 million Ponzi scheme that defrauded more than 200 investors. Morrisett was found hiding in the attic of an abandoned home and was returned to prison.

    Jerome O’Hara, 51, was sentenced to 2½ years in prison for his role in the Bernard Madoff Ponzi scheme. O’Hara was given a shorter sentence given his limited involvement and the shorter of time he knew about the fraud. O’Hara was a computer programmer who confronted Madoff in 2006 about the fraudulent computer programs.

    George Perez, 49, received a 2½ year sentence for his role in the Madoff scheme. Perez was found to have assisted in fabricating and backdating financial records and fooled customers, but the court found that his role in the fraud “was far more limited that most” of the other co-defendants.

    Robert Rocco, 49, pleaded guilty to running a $5 million Ponzi scheme in which he promised investors 18% returns. Rocco ran his scheme through Limestone Capital Services, Advent Merchant Services and Advent Equity Partners.

    Brian C. Rose aka John Hankins, 35, entered into an agreement to plead guilty to charges associated with a Ponzi scheme that allegedly defrauded more than 160 coal mine investors out of $15 million. Rose promised quarterly payments of 6%, 100% returns in the first year plus royalties of $4 per ton of coal produced. Rose is a former NASCAR driver who competed primarily in 2001 – 02.

    Jerry A. Smith was sentenced to 20 years in prison and 20 years on probation in connection with charges for the sale of unregistered securities. Smith is already serving a 5 year sentence for running a Ponzi scheme along with Jasen Snelling through City Fund Advisory and Dunhill Investment Advisories Ltd. The two had run a scheme promising investors between 10% and 30%. Smith had previously pleaded guilty.

    Sachin Uppal, 37, was sentenced to over 5 years for running a $3.8 million Ponzi scheme through his company, Jefferson Smith Trading Company LLC. Uppal represented that he was a day trader, promising returns of 18% to 20%. The scheme was an affinity scheme, targeting his friends and family.

    Jack Utsick, 72, was extradited back to Florida from Brazil to face charges that he ran a $300 million Ponzi scheme. The scheme allegedly defrauded 3,300 investors, promising returns between 15% and 25% through his businesses, Worldwide Entertainment Inc. and The Entertainment Group Fund Inc.

    Robert Waldman, 54, pleaded guilty to a $52 million Ponzi scheme that defrauded more than 1,000 people. Co-defendants Jonathan Carman, 51, and Scott Yard, 53, also pleaded guilty this month.

    Lambert Vandertuig, 56, and Mark Sostak pleaded guilty last month. The remaining defendant, Soren Svendsen, 49, is scheduled to be tried next month. The defendants sold $52 million innstock they said would be used to buy land develop luxury resorts. Some land was acquired, nothing was developed, and they spent about $24 million on themselves.

    Eilyahu Weinstein, 39, was charged and received 2 additional years in prison for a new scam, which were added to his 22 year prison sentence previously received for running a Ponzi scheme. Weinstein previously pleaded guilty to running a $200 million real estate Ponzi scheme. He filed a motion to dismiss the new charges relating to an alleged Facebook Inc. initial public offering scam on the grounds that the new charges violated the terms of his plea agreement. The court denied to the motion to dismiss, finding no violation because the charges were related to a separate alleged scheme.

    Cassandra K. Wilson, 66, and Timothy L. Wilson, 60, were sentenced to 9 months of house arrest following their guilty pleas of obstructing justice by hiding assets of convicted Ponzi schemer Ronnie Wilson, 67, who is serving more than 20 years in prison for his scheme. Ronnie Wilson’s scheme defrauded 798 investors out of $57.4 million.
 
INTERNATIONAL PONZI SCHEME NEWS

Australia

    Philip David Linacre, 62, was sentenced to 12 years in prison in connection with his $12 million Ponzi scheme that defrauded 17 victims.

Canada

    Quintin Earl Sponagle, 50, who was charged with running a $4 million Ponzi scheme that defrauded 179 investors, was first ordered to stay in jail but then later released following his bail hearing. He had been extradited from Panama last month. Sponagle was the general manager of Jabez Financial Services Inc., and investors were promised returns of up to 214%.

    The Nova Scotia Securities Commission has set a  hearing on an alleged $1.3 million Ponzi-like scheme to consider sanctions against Douglas G. Rudolph, Peter A.D. Mill, CFG*CN Ltd. aka CanGlobe Financial Group, and CanGlobe International Capital Inc.

    Nicholas Smirnow, 56, and Dianna Smirnow, 44, were arrested in Toronto in connection with an alleged $70 million Ponzi scheme that was run in Canada and the Philippines using a website called “Pathway to Prosperity.” Investors were offered returns of up to 17,000% in at least one instance.

Wade Robert Closson was accused of running a Ponzi scheme through his companies, Optam Holdings Inc. and Infinivest Mortgage Investment Corporation. The alleged scheme involved between $11 million and $24 million and between 75 to 125 investors.

England

    Alex Hope, 25, is in the midst of his trial for allegedly running a Ponzi scheme with Raj Von Badlo, 56. The scheme involved £5.5 million and supposedly involved foreign exchange and currency trading.

    Alok Dhanda faces a prison sentence in connection with a £2.6m Ponzi scheme. Dhanda told investors that he was investment in property in India but he actually used much of the money to pay off his gambling debts.

New Zealand


    A New Zealand woman, Denise Driver, 52, was arrested along with three local men, Mohammed Kurram Iqbal, 44, Kiran Jitendra Modi, 39, and Hithesh Modi, 42, in connection with a scheme that allegedly defrauded at least 32,000 investors. The scheme, YOBSN Social Media Network, promised high returns in U.S. dollars to the investors

South Africa


    Jasmine Ebrahim, 53, and Maksuud Ebrahim were arrested and charged with an alleged Ponzi scheme involving more than R7 million. The couple ran World Focus 899 CC, which was liquidated a few years ago. About 400 people invested in the scheme that promised returns of between 100% and 200%. The Ebrahims maintain their innocence.

    Yunus Moolla, the owner of Carmol Distributors (Pty) Ltd., is believed to have fled to Dubai in the midst of an investigation of what is believed may be one of South Africa’s largest alleged Ponzi schemes. Carmol was offering returns of up to 8% per month through “profit-share” agreements to supposedly fund the purchase of fuel. Carmol attracted more than R450 million, and possibly as much as R 1 billion, from about 2,500 investors.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    A FINRA arbitration was commenced against Wells Fargo Advisors LLC by a group of 16 clients relating to an alleged Ponzi scheme run by Michael J. Frew, who was a Wells Fargo Advisors broker.

    Fidelity and Deposit Co. of Maryland lost its summary judgment motion against Integra Bank NA in a lawsuit in which Integra Bank was seeking coverage for losses for $29 million in loans made to Ponzi schemer Lou Pearlman.

    The trustee in the Bernard Madoff Ponzi scheme case lost his appeal to the Second Circuit seeking to overturn a ruling that prevents him from recovery payments from customers under section 546(e) of the bankruptcy code. See In re Bernard L. Madoff Investment Securities LLC, 2014 U.S. App. LEXIS 23032 (2d Cir. Dec. 8, 2014).

    The Madoff trustee sought permission to make a fifth distribution in the amount of $322 million to Madoff’s customers. There is about $3.5 billion remaining in a reserve account pending decisions in some cases. This latest payout will push the distribution percent to 50%, and claims of under $963,500 have already been paid in full.

    An investor has asked the Supreme Court to reverse a Second Circuit ruling that held that the Securities Litigation Uniform Standards Act (SLUSA) bars state-law claims accusing JP Morgan Chase & Co. and other banks for aiding the Madoff Ponzi scheme. The basis of the appeal is that the Second Circuit ruling conflicts with the Supreme Court’s ruling in Chadbourne & Park v. Troice.

    Bank of New York Mellon Corp. subsidiary Pershing LLC lost its motion to dismiss a lawsuit against it filed by victims of the Stanford Financial Ponzi scheme. The court found, “"An interest in the receipt of ordinary legal fees, while no doubt a pecuniary interest, is not an improper interest, and thus can not ordinarily support a claim for breach of fiduciary duty.”

    A class action brought by investors against Greenberg Traurig LLP and Hunton & Williams LLP for breach of fiduciary duty in connection with the Stanford Financial scheme was dismissed.

    The assets of Xiaomei Deng, the mother of WCM777 Ponzi schemer Ming Xu, were frozen at the request of the receiver of WCM777. Money of WCM777 was wired to Deng, who used the money to purchase real property.

    The receiver of ZeekRewards decided not to withhold taxes from the initial distributions being made to 58,000 former affiliates of ZeekRewards.
 
    The net winner defendants in ZeekRewards lost their motion to dismiss the receiver’s fraudulent transfer claims against them. The defendants sought to have the cases dismissed on jurisdictional grounds and that a constructive trust should not be imposed against them. The court disagreed finding among other things, that Defendants have received property which they “ought not, in equity and good conscience, hold and enjoy.” Bell v. Disner, 2014 U.S. Dist. LEXIS 170081 (W.D.N.C. Dec. 9, 2014).

Sunday, November 30, 2014

November 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for November 2014. The reported stories reflect: 9 guilty pleas or convictions in pending cases; over 80 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 newly discovered schemes involving more $100 million in the aggregate; and an average age of approximately 56 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.

    William M. Apostelos and his wife, Connie M. Apostelos aka Connie Coleman, along with Scott Doak and Rebekah Fairchild, are under investigation for an alleged Ponzi scheme that may have defrauded about 213 victims out of $50 million. The scheme involved the purchase of racehorses. No one has yet been charged in connection with the alleged scheme.

    Donald Ray Babb, 58, and Ralph Ruth, 61, pleaded guilty to running a Ponzi scheme. It is believed that at least 181 victims, mostly elderly, were defrauded and that the scheme raised nearly $19 million. They ran the scheme through several businesses, including Southeast Mutual Insurance and Investment LLC, Capstar Industries LLC, and First Merchant Capital LLC, and offered supposed risk-free certificates of deposit with high rates of return.

    James Berghuis, 42, was sentenced to 14 years in prison in connection with a Ponzi scheme that defrauded victims out of more than $2.7 million. Last year, a jury found Berghuis guilty on four counts in connection with the scheme run through his company, Berghius National Lending Inc., that persuaded investors to take out home-equity loans to make their investments.

    Angela Dawn Campbell, 42, was sentenced to 10 years in prison in connection with a $1.6 million Ponzi scheme. Campbell defrauded fellow churchgoers and members of art classes that she attended, promising them they could double or triple their investments from an online brokerage and investment business.

    Robert Cephas Brown Jr. and Duane Allen Eddings had their cases remanded by the Ninth Circuit for resentencing. The Ninth Circuit found that the district court had overreached in the use of sentencing enhancements. It states that the district court "erroneously imposed on both defendants an enhancement ... for endangering the solvency or financial security of 100 or more victims, where the government did not provide evidence of the impact of the crime on the requisite number of victims."

    Paul Burks, 67, pleaded not guilty in connection with the $850 million Ponzi scheme run through ZeekRewards. The scheme is believed to have brought in more than 1 million investors. Burks is alleged to have diverted $10 million to himself.

    Mark Feathers, 51, was charged with securities and mail fraud in connection with an alleged $50 million scheme that defrauded over 250 investors. Authorities allege that Feathers, through his business Small Business Capital Corp., promised investors returns of 7.5% in connection with their membership interest in investment funds. 

    C. Tate George, 44, was denied a new trial on his conviction relating to a $2 million Ponzi involving real estate investments. George sought a new trial based on his contention that he had ineffective counsel and there was prosecutorial misconduct that led to his convictions.

    Loren Holzhueter, 69, is being investigated by the IRS relating to a possible $7.5 million scheme. Holzhueter allegedly took investors money to invest in “legitimate investment accounts,” but used his business, Insurance Service Center, to divert payments to his business or in Ponzi scheme payments. Holzhueter denies any wrongdoing and has not been charged.

    Shervin Neman aka Shervin Davatgarzadeh, 33, had his sentencing hearing delayed. Neman was convicted in connection with a $3 million Ponzi scheme that defrauded Iranian Jews living in Southern California. Neman had represented that investor funds would be used to purchase foreclosed real estate and stocks, but instead use the money to repay other victims and on personal expenses. Neman ran the scheme through his company, Neman Financial Inc. A month after the SEC had sued Neman, he solicited $2 million from another victim falsely representing that he could obtain pre-IPO shares in Facebook. He used the new funds to repay victims and that had the victims send in letters that they had been repaid.

    John Packard, 64, pleaded guilty to a charge relating to a $110 million real estate Ponzi scheme. Packard, along with Michael J. Stewart, 67, ran the scheme through Pacific Property Assets. They purchased, refurbished and resold apartment complexes using investor funds but continued to raise money from investors when the real estate market crashed. Pacific Property had declared bankruptcy, listing $90 million owed to 647 investors and $100 million owed to banks. Stewart has pleaded not guilty and is scheduled to go to trial in April 2015.

    James M. Peister, 62, pleaded guilty to running a 10-year, $17.9 million Ponzi scheme. Peister defrauded at least 74 investors through his funds, Northstar International Group Inc., North America Globex Group, and North American Globex Fund LP. Victims believed that their money was invested in stocks, futures and fixed income instruments, but instead Peister used the money to pay existing investors, finance his business and pay for his home and a Hummer.

    Bruce Prevost had his 90 month sentence affirmed by the Eight Circuit. Prevost participated in the Thomas Petters Ponzi scheme and pleaded guilty to charges of aiding and abetting securities fraud in connection with his fundraising activities. Prevost had argued that the court had erroneously varied his sentence from another co-conspirator, David Harrold.

    Laurie Schneider, 39, was sentenced to 3 years in prison for running a $7 million Ponzi scheme. Schneider used two shell corporations to run the scheme – Janitorial Close-Out City Corporation and Eager Beaver Realty LLC. Janitorial Close-Out supposedly purchased and resold janitorial equipment and machinery at a profit margin of 15% to 60% in a short term so that she could promise investors up to 60% returns annually. Eager Beaver supposedly bought and sold real estate,  and investors were promised returns of up to 20%.

    Meir Marian Segal was sued by an investor and accused of running a Ponzi scheme through his company Las Vegas Perfect Stay LLC. Segal, a former professional soccer player, organizes soccer tournaments and buys blocks of rooms at Las Vegas hotel and casinos and selling them for soccer events. Segal allegedly took money from investors as loans to buy the hotel rooms. The lawsuit also names Perfect Stay officer Peter Michael.

    Luis Serna, 61, was sentenced to more than 10 years in prison and ordered to pay $4.6 million in restitution in connection with his $7 million Ponzi scheme that defrauded 82 people. Serna was a pastor at Zion Living Word Christian Center in California who used his position to defraud victims, mostly Spanish-speaking victims, out of $4.6 million. Serna promised investors returns of between 4% and 20% and used his company, Architects of the Future Investments, to convince investors that he was a successful investor in foreign currency.

    Trendon Shavers, 32, was arrested on allegations that he ran a Bitcoin-related Ponzi scheme through Bitcoin Savings and Trust. Shavers promised weekly returns of up to 7%, telling investors that he was involved in Bitcoin arbitrate activity. Shavers had taken in about 764,000 BTC and had returned about 500,000 BTC to investors. About 146,000 BTC, then worth $1 million, were transferred to his personal account. At least 48 of the 100 investors lost all or part of their investment with Shavers.

    Lynn Alan Simon, 64, was sentenced to 2 years in prison and ordered to pay $1.4 million in restitution in connection in connection with a Ponzi scheme that he ran through Financial Security Planning, Inc. Simon lured in his clients who he served by acting as their insurance agent and investment advisor. He promised a high rate of return

    Louis Spina, 57, pleaded guilty to charges in connection with a $20 million Ponzi scheme. Spina ran his scheme through LJS Trading LLC and promised dozens of investors returns ranging from 9% to 14% from trading stocks and equities. Instead of investing, however, Spina lost all of the $9.5 million that he invested and spent the rest to purchase expensive cars, real estate and to make a $400,000 donation.

    William P. Sullivan II, 68, was found to have engaged in “inherently deceptive acts in furtherance of a Ponzi scheme.” Sullivan assisted the scheme through Bridge Premium Finance, supposedly making short term loans to businesses so they could pay their annual commercial insurance premiums. The company was owned by Michael Turnock.

    Douglas L. Swenson, 66, was the subject of an administrative complaint filed by the SEC in connection with his conduct in the $100 million Ponzi-like scheme run through DBSI Inc. that defrauded 250 victims. Swenson was sentenced to 20 years and was barred from appearing or practicing before the commission. Swenson’s general counsel, Mark Ellison, had previously been sentenced to 5 years for his role in the scheme.

    Jeffrey M. Toft, 51, was sentenced to 66 month, Chad A. Sloat, 33, was sentenced to 70 months, and Michael J. Murphy, 51, was sentenced to 4 years in prison in connection with a $40 million Ponzi scheme run through Black Diamond Capital Solutions.

    Lambert Vandertuig, 56, pleaded guilty to running a $52 million Ponzi scheme that defrauded more than 1,000 investors. Vandertuig was immediately sentenced to 20 years in prison. His co-defendants, Scott Yard, Jonathan Carman, Soren Svendsen and Robert Waldmand are scheduled to go to trial in December. They ran the scheme through Carolina Development which was to acquire and develop luxury resorts. Some land was acquired but was not developed. Instead the defendants spent about $24 million on their own expenses.

    Robert Van Zandt, 70, pleaded guilty to running Ponzi scheme. It is believed that the scheme involved over 250 investors and $35 million. Van Zandt promised investors returns from investments in real estate, U.S. government backed securities and other investments, but instead he used the money for personal and business expenses.

    Deepal Wannakuwatte, 63, was sentenced to 20 years in prison after pleading guilty to running a $150 million Ponzi scheme. Wannakuwatte had misrepresented that he had $100 million in annual contracts with governmental agencies to provide latex gloves. He ran his business through International Manufacturing Group and RelyAid Global Healthcare Inc.

    Cassandra K. Wilson, 66, and Timothy L. Wilson, 60, pleaded guilty to hiding money from authorities investigating the Ronnie Gene Wilson’s Atlantic Bullion & Coin Ponzi scheme. Cassandra is Ronnie’s wife, and Timothy is Ronnie’s brother, and both were accused of hiding in an ammunition canister that had been received from Ronnie. Ronnie Wilson is serving a 19 year prison sentence for the scheme that defrauded 798 victims out of $57.4 million.

INTERNATIONAL PONZI SCHEME NEWS

Australia

    Maureen Gael Johnston, 58, and Douglas Gordon Johnston, 71, were charged with running a $1.5 million Ponzi scheme. They allegedly misled investors to invest into property developments in the United States and Australia through two companies, Investman Nominees (USA) and Small Business Management.

    Peter Foster, 52, was accused of running a Ponzi scheme through Sports Trading Club in which hundreds of investors deposited up to $10 million. The scheme was based on the supposed ability to predict sporting winners to make enormous profits. Foster’s niece, Arabella Foster, 28, is believed to be connected with a related company, Sports Trading Club Limited.

Canada

    Reginald Roskaft, 58, was arrested on allegations that he was running a half a million dollar Ponzi scheme through Trekant Group. Roskaft ran a tax preparation business called Corporate Receivables Agency.

    Quintin Earl Sponagle, 50, was extradited from Panama to be tried on charges relating to an alleged $4 million Ponzi scheme that defrauded 179 investors. Sponagle fled to Panama 8 years ago when he and his company, Jabez Financial Services Inc., were being investigated for fraud.

France

    Authorities raided Aristophil offices and museum founded by Gérard Lhétitier. Aristophil is suspected of running a Ponzi-like scheme in which investor dollars were brought in to acquire shares in lots of rare manuscripts and were promised returns of between 6% and 8%. Lhétitier has supposedly acquired a collection worth between €400 million and €500 million.

India

    Real property belonging to four companies allegedly running Ponzi schemes was seized by the government. The properties belong to Sai Pragati Group, Artha Tatwa Group, Shastra Group and Seashore Group.

    Carmol Distributors has been accused of running a Ponzi scheme. The firm allegedly took in about R450 million from more than 2,500 investors. Carmol has been offering returns of up to 8% per month, or 96% per year.

    Sukhdev Singh aka Sukha, 41, was arrested on charges that he allegedly ran a Ponzi scheme through the company he managed, Almandine Marketing Pvt. Ltd. The scheme had allegedly defrauded more than 300 investors and had raised Rs 6 crore.

    Shrawan Kumar Khetawat, and his son Deepak, have been held for allegedly running a Ponzi scheme through Progress Cultivation Ltd. Others named in the complaint are Souvik Mistry, Bikash Howalder, Ajoy Das and Gabbar Chowdhury.

    Sujata Das and her husband, Bharat Chandra Das, were arrested for allegedly running a Ponzi scheme though their agency, Sunray Advertisement. The couple promised investors that they could double their money in two years.

    Over 2,500 bank accounts containing Rs. 295 crore were attached in connection with the Rose Valley Ponzi scheme case.

New Zealand

    John David Milne, 79, was sentenced to more than 8 years in connection with a Ponzi scheme that defrauded 32 victims out of about $2 million.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    A group of investors sued an attorney, Gregory G. Jones, for advising them to invest in Edwards Exploration LLC and Edwards Operating Co. LLC run by Spencer Edwards, which turned out to be a Ponzi scheme. The investors are seeking damages in the amount of $6.7 million which they say they would not have lost but for following his advice. The lawsuit also alleges that Jones was paid a finder’s fee in connection with their investments, which he did not disclose to them beforehand.

    A settlement was reached in a class action against Michael Willner in connection with the Glen Galemmo Ponzi scheme. Willner was a net winner in the scheme ad agreed to pay back some of the gains. The sum of $1.4 million will go to the 141 victims in the Galemmo scheme who lost at least $34.6 million.

    The recoveries for victims in the Bernard Madoff Ponzi scheme case topped $10.3 billion following two large settlements. Two hedge funds, Herald Fund SPC and Primeo Fund, agreed to return $497 million to the estate. In another settlement, Senator Fund SPC agreed to give up $95 million. The latest recoveries bring the distribution amount to about 60 cents on the dollar for the victims. The fees to administer the estate are approaching $1 billion.

    The trustee in the corporate case relating to the Ponzi scheme of Thomas Petters filed more than 60 summary judgment motions on his fraudulent transfer claims seeking the return of “false profits” totaling more than $85 million. The lawsuits seeking the return of false profits, i.e., did the recipients get more money out than they put in.

    Lawsuits filed by hedge funds Ritchie Capitals against JPMorgan Chase and other banks for $3.7 billion in connection with the Thomas Petters Ponzi scheme were kept in federal court after a federal judgment refused to move the cases to state court.

    OneAmerica Securities Inc. agreed to pay $805,000 to settle claims that it had failed to properly supervise Jerry Smith while he worked there as a registered representative. Smith, along with Jasen Snelling, ran a Ponzi scheme through CityFund Advisory and Dunhill Investments. The scheme had defrauded 72 victims out of more than $8.9 million.

    An arbitration panel held that Pershing LLC is not liable for $80 million in investor losses in connection with the Allen Stanford Ponzi scheme.

    A court issued a temporary restraining order and ordered Preferred Merchants Solutions LLC and its manager, Jaymes Meyer, to turnover over more than $4.85 million to the ZeekRewards receiver. The order was entered without notice out of concerns that the money would go missing. The receiver contends that Preferred transferred Zeek’s cash to itself when it learned about the imminent receivership in 2012, and Preferred contends that it is owed the $4.85 million at issue.

    The ZeekRewards receiver filed fraudulent transfer lawsuits seeking the return of “false profits” from Canadian investors who profited from the scheme. The receiver is seeking judgment in the amount of the net winnings.

    The court in the ZeekRewards case issued an order not permitting a charging lien by the lawyers for victims on hundreds of thousands of dollars of interim distributions to be made to them. The lawyers represented about 400 claimants in assisting them with the filing of claims and demanded that the receiver make the interim distributions payable to the firm so that it could be paid its fee. The receiver requested that the distributions be made directly to the victims. The court has now ordered the firm to “immediately and without further delay” provide the contact information for the claimants so that the receiver can make the distribution directly to them.

Friday, October 31, 2014

October 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for October 2014. The reported stories reflect: 8 guilty pleas or convictions in pending cases; over 158 years of newly imposed sentences for people involved in Ponzi schemes; at least 10 newly discovered schemes involving more $500 million in the aggregate; 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.

    Ron Battistella was sentenced to 5 years in prison in connection with a Ponzi scheme that he ran through a car dealership known as Steven’s Creek Auto Mall. Funds from investors were solicited to supposedly purchase vehicles for the showroom, and investors received pink slips for the vehicles as collateral for their investments. The scheme involved more than $1.3 million.

    David Boden, 53, an attorney who worked at Scott Rothstein’s law firm, Rothstein, Rosenfeldt Adler, pleaded guilty to charges in connection with that scheme. Boden admitted that he worked with a broker, Richard L. Pearson, on some of the fictitious settlements that Rothstein was selling to investors and that the broker made false statements to one group of investors that lost about $2.4 million. Both Boden and Pearson received commissions on these sales. Pearson has also pleaded guilty to charges relating to his role as a broker in connection with the Scott Rothstein Ponzi scheme. Boden was named in a $37.8 million lawsuit filed by Rothstein investors and filed a personal Chapter 7 bankruptcy petition in 2012.

    Marie Maksche Bontiago, 43, was accused of running a $2 million Ponzi scheme through her franchise of EXIT Realty, Tri-State Group, and Tri-State Investment Holdings, Inc. Bontiago solicited funds for investments in real estate but instead used the money for business expenses. Bontiago promised investors interest of 10% to 40%.

    John C. Boschert, 43, pleaded guilty to charges that he ran a Ponzi scheme under the name Assured Capital Consultants. Boschert, along with Jennifer E. Hoffman and Bryan Zuzga, were accused of running the scheme that defrauded about 100 victims.

    John Bravata, 46, has asked to appeal the $8.2 million judgment obtained against him by the SEC. Bravata had been accused of collecting $53 million from more than 500 investors in a real estate investment scheme. Bravata is serving 20 years in prison and was ordered to pay $44.5 million in criminal restitution. His son, Antonio Bravata, was sentenced to 5 years in prison, and the company’s CEO, Richard Trabulsy, was sentenced to 45 months in prison in connection with the scheme.

    Paul Burks, 67, was indicted in connection with charges that he masterminded the $850 million ZeekRewards Ponzi scheme. The indictment alleges that Burks diverted more than $10 million to himself. Burks is the third person charged in connection with the scheme. Dawn Wright Olivares and Daniel Olivares pleaded guilty and are awaiting sentencing.

    Brian Caisse, 54, was sentenced to 1½ to 4½ years in prison in connection with a $1 million Ponzi scheme run through Huxley Capital Management. Caisse, who had fled to Colombia after police searched his apartment in 2013, pleaded guilty in August. Caisse had graduated from the U.S. Naval Academy in 1985 and the academy's Nuclear Power School in 1986. He later served as weapons officer on the nuclear submarine, USS John Marshall.

    Angela Dawn Campbell, 42, pleaded guilty to operating a Ponzi scheme in which she took $1.6 million from 27 people. Campbell guaranteed investors that they could double or triple their savings in the stock market through her day-trading business.

    Francis Cinelli Sr., 88, was charged with helping his son, Francis Cinelli Jr., file a false federal tax return. The father and son have also been sued in connection with an alleged Ponzi scheme run through Blue Mountain Consumer Discount. Victims allege in the suit that Walter “Buddy” Lambert, the company’s former CEO, defrauded them out of about $5 million and that the Cinellis either knew or should have known. Lambert pleaded guilty last month and Nicholas Sabatine pleaded guilty to related charges as well.

    James Ronald Donahoo II, 36, was sentenced to 4 years in prison and ordered to pay $2.7 million in restitution following his guilty plea in his Ponzi scheme case. Donahoo was known as “The Bamboo Cyclist” and sought funds to supposedly benefit storm-ravaged communities. Donahoo ran his scheme through Paradigm Investing, Inc. and promised monthly returns of 1% to 3%.

    EmGoldex MLM program was charged by the Massachusetts Securities Division with securities fraud in connection with a scheme that promised guaranteed returns of up to 1,105% for recruiting more individuals. Others named in the action are EmGoldEx Team USA Inc., Matthew Michael D’Agati, Joseph Zingales, James Vincent Piemonte, and Jonathan Herman Seigler. The Massachusetts entity was a recruiting arm for EMGX FS Ltd. EmGoldex raised about $500,000 from hundreds of investors.

    Armand Franquelin, 57, was sentenced to 57 months in prison and ordered to pay $5,560,000 in restitution in connection with a Ponzi scheme in which investors were promised 8% to 20% returns for investments in a real estate project called Haven Estates. Franquelin worked with Martin Pool who was previously sentenced to 78 months in prison.

    Edwin Fujinaga and MRI International Inc. were found liable for operating an $800 million Ponzi scheme. Fujinaga had operated a fraudulent investment scheme, promising mostly Japanese investors that their investment was guaranteed. The scheme defrauded more than 8,000 people.

    Ian Campbell Gent had his 8 year prison sentence vacated. Gent had been sentenced in connection with a $6 million Ponzi scheme run through Watermark Financial Services Group Inc. and M-One Financial Services LLC. The Second Circuit rejected James Lagona’s appeal that the sentence was procedurally and substantively unreasonable and upheld his 11 year sentence.

    Barry J. Graham, 59, was charged in connection with the Cay Clubs Resort and Marinas $300 million scheme. Graham is the third officer to be charged in connection with the program that stated that investors could “Retire Rich and Young in Paradise.” Cay Clubs founder Fred Davis Clark, 56, and his wife, Cristal Coleman Clark, 41, were previously charged in connection with the scheme that is believed to have defrauded 1,400 investors.


    Susanne Helbig, 50, pleaded guilty to charges relating to a Ponzi scheme that she ran through her construction company, Genesis Mansions. Helbig borrowed more than $17 million from financial institutions based on falsified loan applications.

    Charles Huggins, 68, was convicted on charges relating to a Ponzi scheme in which he solicited millions of dollars from investors and promised high returns from mining in Sierra Leone and Liberia. Huggins ran his scheme through his companies JYork Industries Inc. and Urogo Inc. The scheme raised more than $4 million from investors, but the funds were not used for mining in Africa. Instead, Huggins spent the money on personal expenditures including $7,200 monthly rent for an apartment and Mercedes car payments. Christopher Butchko and Ann Thomas were named as co-conspirators.

    IFreeX is the subject of an announcement in Massachusetts that the company is a fraudulent scheme like TelexFree but for mobile phones. The scheme is being promoted by Sanderley de Vasconcelos aka Sann Rodrigues, who was formerly a TelexFree promoter. The scheme targeted investors in Brazilian and other minority communities.

    Kevin James, 57, was sentenced to 10 years in prison and ordered to pay $1.3 million in restitution in connection with a $1.4 million Ponzi scheme. James defrauded victims into investment annuities into a fictitious fund called the Financial Security Program.

    Thomas Kimmel, 68, was sentenced to 22 years in prison and ordered to pay $16.5 million in restitution in connection with his Ponzi scheme that defrauded more than 300 investors out of at about $16 million. Kimmel held himself out as a financial adviser in the name of Jesus Christ and built a reputation on kindness and by hosting conferences such as “God’s Plan for His Money” conferences. He used his companies Sure Line Acceptance Corp. and Faithful Stewards to lure in investors, promising some of them returns of 1% per month. Three other officers of the company, James Willis Kirk Jr., Glen E. Smith Jr., and Carol April Graff, pleaded guilty earlier in the year and each received up to 5 years in prison.

    Robert E. Lee Jr., 50, was indicted for allegedly operating a Ponzi scheme. Lee was employed as a broker and financial advisor for various financial investment firms and defrauded clients by claiming that he was investing their funds when he was instead holding their funds in his personal bank account.

    Kevin Loux, 63, pleaded guilty to charges that he ran a Ponzi scheme that netted more than $450,000. Loux was a licensed life insurance and annuity broker in Hawaii and California and failed to invest money that he took from his clients.

    Bernard Madoff offered to put in a good word for five of his former employees who have been convicted and are awaiting sentencing on charges relating to the Madoff Ponzi scheme. The employees are Joann Crupi, George Perez, Jerome O’Hara, Annette Bongiorno, and Daniel Bonventre. Madoff sent a series of emails to the lawyers for the ex-Madoff employees offering to discredit the testimony of Frank DiPascali, the government’s star witness, who was also convicted in connection with the scheme.


    Sean F. Mescall, 35, was sentenced to 16 years in prison in connection with a Ponzi scheme that he ran through Capitalstreet Financial. The scheme defrauded 119 victims and promised them 60% to 80% returns on their investments.

    Frank Mete, 57, was sentenced to 41 months in prison for running a $1.2 million Ponzi scheme, and has also previously been charged with robbing and raping a prostitute while impersonating an officer.

    Roger Miller, 62, was sentenced to 20 years in prison in connection with a Ponzi scheme that defrauded more than 40 victims. Miller sought investments for a pre-construction condo project in Thailand.

    Nationwide Automated Systems, Inc. had its assets frozen after the SEC filed civil charges against the company and its principals, Joel Barry Gillis and Edward Wishner. The court also approved the appointment of a temporary receiver. The alleged Ponzi scheme involved phantom ATM machines and it is believed that the scheme involved $123 million and a few thousand investors. The SEC complaint states that the company records show that it was leasing back more than 31,000 ATMs, but the ATM servicers show that only 253 ATMS were being serviced. A website has been established at
http://www.nasi-nationwideatm.com/. An involuntary bankruptcy petition was also filed against the company but was then dismissed by stipulation between the receiver and the debtor.

    James Nicholson, 48, had his request to shorten his 40 year prison sentence turned down. Nicholson is serving time for running a $140 million Ponzi scheme.

    Luis Felipe Perez, 42, had his 10 year sentence cut in half for assisting in the prosecution of former Hialeah Mayor Julio Robaina. Perez had been convicted in connection with a $40 million jewelry investment scheme. Robaina and his wife were acquitted on tax evasion charges.

    David Prenatt rejected a plea deal to which he had previously agreed, admitting that he had engaged in a fraudulent securities scheme that involved about $13 million. Prenatt now states that he received “ineffective assistance of counsel.” Prenatt was then sentenced to 10 years in prison.

    Aubrey Lee Price, 48, was sentenced to 30 years in prison and ordered to forfeit $51 million in connection with a $46 million Ponzi scheme. Price ran his scheme through PFG, LLC and Montgomery Asset Management LLC fka PFG Asset Management LLC. Price used investor funds to acquire Montgomery Bank & Trust and transferred at least $10 million from the bank.

    Stuart Rosenfeldt, 59, was sentenced to nearly 3 years in prison after pleading guilty to charges for conspiracy that included campaign finance violations. Rosenfeldt had previously pleaded guilty in connection with charges stemming from conduct relating to the Scott Rothstein Ponzi scheme, although it was never alleged that Rosenfeldt was aware of or involved in the Ponzi scheme itself.

    Vincent Singh 
was sentenced to 15 years and 8 months in prison following a guilty plea in connection with a scheme that defrauded hundreds of victims. In sentencing Singh, the court said that Singh’s crimes were “the worst of their kind that I’ve seen in 12 years as a federal judge.”

    Frank Spinosa, 53, was charged with criminal conduct in his role as a former TD Bank officer in the Scott Rothstein Ponzi scheme case. Spinosa is accused of preparing false “lock letters” to give to investors to show that their investments were safe, among other things. The SEC also filed civil charges against Spinosa last year alleging that Spinosa made oral assurances to at least two investors that their money was held in trust accounts holding hundreds of millions of dollars when in reality those accounts held less than $100.

    R. Allen Stanford filed a 299-page appeal to try to reduce or reverse his 110 year sentence.  Stanford argues, among other things, that the U.S. lacked jurisdiction to bring charges against him because his bank, Stanford International Bank, was located in Antigua.

    James Staz and William Staz were charged on allegations that they stole $11 million from clients in a scheme run through Employee-Services.Net, Inc. The company supposedly processed payroll for companies, but the father and son kept the money for themselves.

    Joel Wilson, 32, will stand trial for charges arising from an alleged Ponzi scheme run in Michigan through the company, Diversified Group Advisory Fund LLC. Wilson was extradited from Germany after he was in Europe for over a year. It is alleged that he kept about $600,000 of investors funds after promising them returns supposedly generated from refurbishing and flipping distressed homes for a profit.

    Ron Wilson, 67, pleaded guilty to another charge relating to his $57 million Ponzi scheme run through Atlantic Bullion and Coin that defrauded about 800 victims. Wilson is currently serving a 19 year prison term after pleading guilty to other charges relating to the scheme. Wilson has not, however, pleaded guilty to conspiring to hide money from the federal government when it was alleged that he gave his wife and brother money after his initial arrest; they have been indicted for conspiring to obstruct justice.

    Carl David Wright, 54, was sentenced to 4 years in prison and ordered to pay $817,975 in restitution in connection with a scheme that defrauded victims out of more than $1 million. Wright promised investors returns of 20% to 30%, telling investors that he was putting the money into hedge funds, commodities, and Quick Trip service stores.

    Dennis Wright, 68, was accused by the SEC of running a $1.5 million Ponzi scheme through his company, Axa Advisors. Wright allegedly defrauded 28 customers by persuading them to withdraw funds from Axa variable annuity accounts to transfer to mutual funds with higher interest rates. Instead, Wright deposited the funds into his personal account to pay his expenses.

    Bryan Zuzga was arrested in connection with an alleged $25 million Ponzi scheme that defrauded 100 victims. The scheme was run through Assured Capital Consultants along with Jennifer E. Hoffman and John C. Boschert.

INTERNATIONAL PONZI SCHEME NEWS

Brazil

    Additional raids took place in Brazil to seize assets related to the TelexFree Ponzi scheme. Telexfree is known as Ympactus in Brazil

Canada

    Garth Bailey, 61, was sentenced to 9 years in prison for his role in assisting two others to run a Ponzi scheme by acting as their lawyer. Bailey participated in the scheme run by Robert Fyn and Harold Murray Stark through HMS Financial, which promised investors that their money was safe because it was backed by up to $40 million in bonds. Fyn and Stark had pleaded guilty and were sentenced to 8 and 6 year terms, respectively.

     Banners Broker and its masterminds, Christopher George Smith and Rajiv Dixit, were the subject of accusations that Banners Broker is a Ponzi scheme and an asset freeze. It was alleged that they were operating a pyramid scheme with 12,000 investors that evolved into a Ponzi scheme.


England

    Patrick Coppeard, 49, was sentenced to 6 years in connection with a £5.3 million Ponzi scheme that defrauded 61 victims.


Finland

    Finland’s Supreme Court ruled that 5 investors in the WinCapital Investment scheme must forfeit the proceeds that they earned from the scheme. The court ruled that financial gain from criminal activity must be forfeited not only by the criminals, but also by those who benefited from the criminal activity. The WinCapital scheme had raised more than 100 million euros from over 10,000 investors.

India

    The director of Green Ray International, Avub Shah, was arrested in connection with a scheme that is believed to have defrauded over Rs crore from about 1.5 lakh investors. Other insiders, Mir Sairuddin aka Gora and Abdul Khaliq have also been ordered to appear before the Security Exchange Board of India in connection with the matter.

Ireland

    Breifne O’Brien, 53, was sentenced to 7 years in jail in connection with a $10.8 million Ponzi scheme that involved fake shipping and insurance businesses.

Malaysia

    Manuel Amalilio aka Mohammad Kamal Said, the mastermind of a P12 billion Ponzi scheme run through Aman Futures Group Philippines Inc. in the Philippines, was freed after a Malaysian court declined to extradite Amalilio to the Philippines.

New Zealand

    John David Milne, 79, admitted to running a $2.8 million Ponzi scheme in which he defrauded 29 clients. Milne was a lawyer who had promised to invest his clients’ funds and pay them a return.

South Africa

    Prinasen Dhaver, 29, was accused of running a Ponzi scheme through his profit sharing company, Innovatech International Solutions.

South Korea

    Two men with surnames Kwon, 39, and Lee, 38, were arrested on charges that they defrauded 614 people of $6.4 million in connection with a scheme relating to the 2018 Winter Olympics. They promised investors high returns for investing in a land lot near the skating and hockey venue for the Olympics.

Thailand

    Song Migui aka Zhang Jiam, 37, a Chinese man, was arrested in Bangkok on charges that he engaged in a $277 million scheme. Geng Lian Bao and Wang Wen Fang were also arrested in connection with the scheme.

    Chong Mee Chew aka Supachai Rujathorn, Keng Lean Pao aka Surin Sophonsukson, and Wang Wen Fan were arrested in connection with a scheme run through Yun Shu Mao Co. Before the group arrived in Thailand, they allegedly defrauded Chinese people of 1.3 billion Yuan, and thereafter persuaded another 80,000 in Malaysia to invest.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    Skye Bonow filed lawsuits against Bitcoin Savings & Trust and Project Investors Inc. dba Cryptsy for the handing of his Bitcoin accounts at those companies. Cryptsy is the subject of allegations that it violated Florida’s Deceptive and Unfair Trade Practices Act by failing to provide critical information regarding security risks and customer fund management protocols and that the plaintiff was deceived into transferring Bitcoin to the defendants.

    A settlement was reached in the Dreier LLP bankruptcy case for Westford Asset Management LLC to pay $32.2 million to settle claims that it received $137 million of Ponzi scheme proceeds. Marc Dreier is currently serving his prison sentence and will now not need to be called to court testify in connection with the matter. Dreier had been ordered to testify in person in connection with the proceeding, and Dreier had asked to appear by telephone or video, but the court had denied his request.

    The Madoff Victim Fund being run by Richard Breeden as special master reported that 63,553 claims have been asserted against the Fund in connection with the Bernard Madoff Ponzi scheme. The Fund further reported that the losses reported in those claims total $76.654 billion. However, those numbers have not yet been fully reviewed for duplicative, ineligible or overstated claims.

    Edward Blumenfeld, a real estate developer who invested with Madoff, settled with the Trustee and agreed to pay back $32.75 million and to surrender $29.35 million in claims.

    The Eleventh Circuit found that former officers of Quest Energy Management Group Inc. did not have standing to appeal a decision that gave the receiver of Arthur Nadel authority over the company. Nadel, now deceased, was sentenced to 14 years in prison in 2010 in connection with his Ponzi scheme. Nadel invested $5.1 million of his victim’s money in Quest Energy.

    The Backstreet Boys settled their claims against their creator, Lou Pearlman. The trustee in Pearlman’s bankruptcy case settled the Backstreet Boys’ claims for $3.5 million by agreeing to pay them $99,000 and giving them possession of recordings of their music.

    Two hedge funds that invested in the Thomas Petters scheme – the Westford and Epsilon funds - have agreed to a settlement that finds them liable for $322 million received as false profits. The settlement is subject to court approval, and the trustee is permitted to withdraw from the settlement if there are material changes in the financial condition of the defendants. The trustee had sought recovery of as much as $3.2 billion, which was the total amount of funds transferred between the funds and Petters.

    George Levin, an investment manager in the Banyon 1030-32 LLC, a feeder fund in the Scott Rothstein Ponzi scheme, agreed to settle claims against it on the eve of trial. Levin has entered into a tentative settlement with the SEC in connection with charges that Levin, along with investment manager Frank Preve, raised $157 million from 173 investors by selling the fictitious Rothstein settlements.

    Chadbourne & Park LLP filed a motion to dismiss a lawsuit brought by Stanford Financial’s receiver in which the receiver alleged that the firm aided and abetted the Ponzi scheme through its representation of Stanford.

    The Allen Stanford receiver was permitted to proceed with his fraudulent transfer lawsuit seeking to recover $500,000 from the Tiger Woods Foundation. The court denied the charity’s motion seeking to dismiss the complaint on statute of limitations grounds. The court found that the receiver should be afforded more time under the discovery rule, which gives the receiver an extra year to sue after he discovers or could have discovered the transfer. The court stated that it was “perfectly reasonable to surmise that the generally complex and obfuscated nature of the Stanford financial records made these particular transfers difficult to discover.”

    Mary Margaret Butler, wife of accused Ponzi schemer Steven Wessel, 56, filed a lawsuit against Wessel alleging that he defrauded her out of her money and property she had acquired before marriage. Wessel’s criminal indictment states that Wessel used his company, Steeplechase USA, LLC, to defraud victims.

    The Zeek Rewards receiver mailed checks to more than 90,000 claimants that equal about 40% of the allowed claims. The first interim distribution totals about $134.2 million. A law firm representing victims who filed claims, Patrick Miller LLC, filed a Notice of Attorney’s Charging Liens asserting a lien in the amount of about $134,000 for fees it says is owed to the firm as a contingency fee for assisting the claimants in filing their claims. The receiver is also hearing complaints that he should not have withheld taxes from the payments. The receiver’s website states that “For those claimants to whom checks were mailed that did not provide an IRS Form W-9 (for US residents) as requested on the claims portal, we withheld a certain percentage for tax purposes. For non-US claimants, a percentage was withheld whether or not an IRS Form W-9 was provided." The receiver could not get a definitive opinion from the IRS about whether withholdings were required so he aired on the side of caution and made the withholding.

Tuesday, September 30, 2014

September 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for September 2014. The reported stories reflect: 4 guilty pleas or convictions in pending cases; over 239 years of newly imposed sentences for people involved in Ponzi schemes; at least 11 newly discovered schemes involving over 135,000 victims and more than $328 million; and an average age of approximately 51 for the alleged Ponzi schemers in the stories reported. 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.

    Eric Aronson, 46, pleaded guilty to defrauding investors of $30 million in a Ponzi scheme that he ran through Permapave Industries and Permapave USA Corp. The scheme defrauded more than 200 investors by promising returns as high as 400% for financing the importation of ecologically friendly paving stones from Australia.

    David Boden, 52, and Richard L. Pearson, 57, were both charged in connection with the Scott Rothstein Ponzi scheme. Boden was the general counsel for the Rothstein Rosenfeldt Adler law firm and was charged relating to his failure to disclose a second sales commission in several transactions. Pearson was a broker who worked in the same building and who sold legal settlements to investors. It is believed that both Boden and Pearson intend to plead guilty.

    John R. Bullar, 52, pleaded guilty to running an $8.7 million foreign exchange Ponzi scheme that defrauded 46 investors. The CFTC also charged Bullar with violations of commodities laws. Bullar ran his scheme through Executive Management Advisors and convinced investors that he had a computerized algorithm system that monitored the market for patterns and alerted him to potential losses. Bullar created an investment log for his clients to follow and put several computer monitors in his home office to give his business the appearance of legitimacy. He misappropriated approximately $6 million for his own use.

    Robin Kyo Cho, 50, was sentenced to 105 years in prison without the possibility of parole in connection with a triple homicide that was discovered because of his prior conviction in connection with a $2 million Ponzi scheme. Cho had pleaded guilty to a Ponzi scheme in 2008 and was required to submit a DNA sample as part of his sentence. His DNA was linked to the murder of a Korean woman, her 2 year old son, and a live-in nanny in 2003. Cho had admitted to defrauding at least 11 investors by promising them returns of 4% to 6% per year and that their principal was guaranteed. Cho had faced 60 years in prison in connection with the scheme but had negotiated just 5 years of probation as part of his plea agreement.

    Fred Davis Clark Jr., 56, and Cristal R. Clark aka Cristal R Coleman, 41, were the subject of a new indictment in connection with the investment scheme run through Cay Club Resorts and Marinas. It is alleged that they used Cay Club to sell vacation rentals with the promise of an upfront “leaseback” payment of 15% to 29% of the purchase price. Cay Club had raised more than $300 million from about 1,400 investors. An earlier civil enforcement action by the SEC was dismissed on statute of limitations grounds.

    John Williams Cranney, 73, was indicted on charges related to an alleged Ponzi scheme that defrauded at least 15 investors out of more than $6 million. Cranney solicited money from investors through his companies Cranney Capital I and Cranney Capital II.

    Tim Durham, 52, Jim Cochran, 58, and Rick Snow, 50, had all almost all of their 25 felony convictions upheld on appeal in connection with their $200 million Ponzi scheme run through Fair Finance Co. that defrauded 5,000 victims. U.S. v. Durham, 2014 U.S. App. LEXIS 17267 (7th Cir. Sept. 4, 2014). The three defendants are serving sentences of 50 years, 25 years, and 10 years, respectively, and will now be resentenced. All of the challenges to the conviction but one were rejected by the appellate court. As for the one, the court stated, “The government failed to enter into the trial record key documentary evidence supporting two counts of wire fraud against Durham. It was clearly an oversight, but the mistake leaves a crucial gap in the evidence on those counts.”

    eAdGear was the subject of an SEC action in which the SEC alleged that the eAdGear program is a $129 million Ponzi and pyramid scheme. The SEC identified the operators of the scheme as Charles S. Wang, 52, and Qian Cathy Zhang, 52, and Francis Y. Yuen, 53. eAdGear held itself out as a profitable Internet marketing company and targeted investors in Chinese communities. The program involved 66,000 accounts held by tens of thousands of investors. The company supposedly used search engine optimization to help clients increase their website rankings on search engines and then claimed to share 70% of the revenue generated with investors. Investors were also promised 5% to 15% commissions for the recruitment of new investors.

    Derek Elliot, 43, pleaded guilty to charges that he had masterminded a $91.3 million Ponzi scheme along with James Catledge. The two defrauded hundreds of investors in connection with a scheme to renovate a luxury hotel in the Dominican Republic. Catledge has denied wrongdoing and a trial is pending.

    Glen Galemmo, 48, is the subject of a new complaint brought by the CFTC alleging that Galemmo’s Ponzi scheme involved about $116 million. Galemmo previously pleaded guilty and was sentenced to 15 years and 8 months in prison. The complaint alleges that Galemmo falsely promised investors returns ranging from 17% to 40% and that his firm, QFC LLC, suffered trading losses of $1.2 million.

    Jennifer E. Hoffman, 37, John C. Boschert, 43, and Brian Zuzga, 37, were charged with running a $25 million Ponzi scheme. The scheme allegedly defrauded 100 investors by promising them returns of up to 50% per week through their company, Assured Capital Consultants. Zuzga was charged with impersonating a lawyer and assuring investors that their money was safe in an escrow account.

    Christopher Jackson, 46, Michael Bolden, 60, and Victor Alvarado, 53, were sentenced to 30 years, 20 years, and 10 years, respectively, in prison in connection with a Ponzi scheme involving more than $20 million and as many as 250 investors. The scheme was run through Diversified Management Consultants, which ran investment clubs in which people purportedly invested in the purchase and development of land. Bolden and Alvardo pleaded guilty, and Jackson went to trial and was found guilty.

    James Jackson Jr., 48, was sentenced to 90 years in prison in connection with a $2.7 million Ponzi scheme in which Jackson held investment seminars to lure investors into his company, AFG. Jackson was sentenced to three consecutive 30 year terms, which is believed to be the third longest prison sentence in a Ponzi scheme case, coming after only Bernard Madoff and Allen Stanford. Jackson used his companies, American Senior Advisory Group and Covenant Planning Group, to solicit elderly investors to invest in AFG. About 33 victims were defrauded.

    Walter P. Lambert, 73, pleaded guilty to charges that he ran a $10 million Ponzi scheme through Blue Mountain Consumer Discount Company. Lambert promised returns around 9% or 10% and he told investors that he would use their funds to issue high-interest loans to consumers at rates of 23% to 26%.

    Joseph Laurer aka Dr. Josef V. Laurer, now deceased, is the subject of a civil complaint in which his widow, Brenda M. Davis, is named as a relief defendant. The complaint alleges that Laurer ran a $4.6 million Ponzi scheme that defrauded 50 investors through his company, Abatement Corp. Holding Co. Laurer told investors he would put their money into AAA-rated corporate and government bonds with guaranteed returns and no risk to the principal balance.

    Andrew Madoff, the son of Bernard Madoff, died after a battle with cancer. Andrew Madoff’s brother, Mark Madoff, had committed suicide in 2008. The two brothers had turned their father in to criminal authorities in 2008. Both have been sued by the trustee of the Madoff scheme who is seeking the return of tens of millions of dollars that was transferred to them. Neither was charged with any criminal wrongdoing.

    Bernie Madoff’s penthouse sold for $14.5 million to Lawrence Benenson who runs a real estate investment and development firm.

    Erik Laszlo Mathe and Ashif Jiwa were indicted in connection with alleged securities fraud relating to their start up television company, Vision Broadcast Network. The SEC also filed a civil lawsuit alleging that they raised $5.7 million from approximately 100 investors but spent most of the money themselves. The SEC complaint alleges that Mathe and Jiwa misled investors into believes that Vision Broadcast owned TV stations and 70 broadcast licenses. The SEC complaint also names a company affiliated with Jiwa, Bluemark Asset Management LLC, as a relief defendant.

    William Charlton Mays IV was sentenced to 30 years in prison in connection with a $225,000 Ponzi scheme. Mays promised investors 6% to 18% per year from gold, silver and commodities investments.

    Sean Michael Meadows, 41, was charged with a new count for scheming a landlord and a renter. Meanwhile, charges remaining pending against Meadows for running a $10 million Ponzi scheme through Meadows Financial Group that defrauded 50 investors. In the latest charges, Meadows sought to have a renter circumvent the owner of a property and pay rents directly to Meadows even after Meadows had failed to fulfill a contract to purchase the property.

    James Ashby Moncure, 41, was charged with an alleged Ponzi scheme in which he promised investors returns of 10% to 25% in a program to acquire and develop the Quantico Corporate Center in Virginia. The scheme allegedly involved at least $35 million in investor deposits.

    James Nicholson, 48, was unsuccessful in his attempt to shorten his 40 year prison sentence for running a $140 million Ponzi scheme through his hedge fund firm, Westgate Capital Management LLC. The court rejected Nicholson’s claims of ineffective counsel. Nicholson v. U.S., 2014 U.S. Dist. LEXIS 132695 (S.D.N.Y. Sept. 22, 2014).

    Gina Palasini, 52, was charged with running a massive Ponzi scheme that defrauded seniors by promising them assistance in obtaining Medicaid or veterans benefits.

    Lananh Thi Phan, 54, and Diane H. Do Bui, 49, were charged with running an $8 million Ponzi scheme that targeted the Vietnamese-American community. At least 18 victims were involved, but there may be more. Phan, a licensed realtor, worked with Bui, who was a notary public, to persuade investors to invest in different investments, including a “secret” venture. The scheme effectively promised investors returns of 70% per year and that their money was safe.

    Marlon M. Quan and his companies, Acorn Capital Group LLC, Stewardship Investment Advisors LLC and ACG II LLC, were the subject of an $80 million sanction award and permanent injunctions for their role in the Tom Petters Ponzi scheme. SEC v. Quan, 2014 U.S. Dist. LEXIS 131618 (D. Minn. Sept. 19, 2014). The SEC had alleged that Quan helped facilitate the Petters fraud by funneling several hundred million dollars of investor money into the scheme and assuring investors that their money was protected by various safeguards.

    Stuart Rosenfeldt, 59, pleaded for mercy in connection with his sentencing on charges relating to the Scott Rothstein, 52, Ponzi scheme. Rosenfeldt, one of Rothstein’s former law partners in their firm Rothstein Rosenfeldt Adler, had pleaded guilty to charges in connection with the Ponzi scheme. Rosenfeldt contends that his drug-addicted son would suffer “irreparable damage” if his father is sent to prison. Rothstein is serving a 50 year sentence, and Russell Adler, 52, surrendered this month to serve his 2½ year sentence for illegally funneling campaign donations on Rothstein’s behalf.

    Trenton T. Shavers, 31, the founder of Bitcoin Savings and Trust, was found liable for securities violations and ordered to pay a $40.7 million fine in an action commenced by the SEC. Bitcoin Savings and Trust was accused of running a Ponzi scheme that promised investors returns of 7% interest weekly based on the purported Bitcoin market arbitrage activity.

    T. LeMont Silver, one of the promoters of the ZeekRewards scheme, is now promoting a new program called “BitClub Network.” Silver has also been linked to a program called Gold Crowdfunding. Silver has been sued by the receiver of ZeekRewards for gains received in the scheme. BitClub Network purportedly pays out a daily dividend for 1,000 days and has three “mining pools” with tiered buy-in rates: $500, $1,000 and $2,000. Early birds — described as “Leaders” — are being encouraged to send in $3,599 to qualify for a “Founder’s” position.

    Jason Snelling, 50, had his 11 year prison sentence vacated when the court found that the loss amount used in calculating sentence guidelines had not accounted for money returned to victims in the form of fictitious interest payments. See U.S. v. Snelling, 2014 U.S. App. LEXIS 19857 (6th Cir. Sept. 22, 2014 ). Snelling still must deal with two other prison sentences however, including a 40 year prison sentence, relating to his Ponzi scheme run through Dunhill Investment Advisers and CityFund Advisory. Snelling operated out of Cincinnati and promised rates of return of 10% to 15%.

    Joel Steinger, 64, was sentenced to 20 years in prison for masterminding an $800 million Ponzi scheme through Mutual Benefits Corp. that defrauded more than 30,000 investors. The company bought life insurance policies from people with AIDS, cancer and other chronic illnesses and sold them to investors. Safe and high returns were promised to investors. The company was shut down by the SEC in 2004.

    Jeffrey M. Toft, 51, Chad A. Sloat, 36, and Michael J. Murphy, 54, were sentenced to 66 months, 70 months, and 48 months in prison, respectively, in North Carolina in connection with the Black Diamond Capital Solutions Ponzi scheme. The three defendants had operated a $40 million hedge fund Ponzi scheme that defrauded hundreds of elderly victims by promising returns of up to 137% from a foreign currency trading program. The mastermind of the scheme, Keith Simmons, was sentenced in 2012 to 50 years in prison and ordered to pay $35 million in restitution. Simmons promised investors that no more than 20% of their funds would be at risk at any time, and he quoted Bible verses to convince about 240 investors to invest. Another defendant, Jonathan Davey, 50, is awaiting sentencing.

    Gary Richard Vibbard, 59, was sentenced to 63 months in prison in connection with a $3 million Ponzi-like scheme that defrauded dozens of investors. Vibbard had told investors that he was a proven financial manager, but he had actually filed bankruptcy in 2000, owed more than $1.5 million in back taxes, and had lost more than $1 million in investor funds in a prior failed company. Vibbard used investor funds to pay personal expenses such as his gym membership and an internet dating service, and he had instructed his bookkeeper to purchase cashier’s checks with the funds in the corporate bank accounts so as to prevent creditors from seizing his accounts.

    Oscar Villarreal, 27, was indicted in connection with a $9.6 million Ponzi-like scheme that is believed to have defrauded about 46 investors. Villareal was selling limited partnership interests and promising returns of as much as 45%.

    Eliyahu Weinstein, 39, pleaded guilty to charges that he defrauded investors out of $8 million by promising them high returns because he supposedly had the inside track on Facebook shares in advance of the company’s public offering. Weinstein is already serving 22 years in prison for masterminding a $200 million Ponzi scheme in New Jersey.

    Zhunrize was the subject of an SEC action filed to shut down a fraudulent program that was allegedly operating across state and national borders. It is alleged that the Zhunrize program, run by Jeff Pan, 52, involved $105 million and defrauded 77,000 investors.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    The trial of Gary Sorenson and Milowe Brost began in Calgary. The two defendants face charges in what is being called the largest Ponzi-type scheme in Canadian history. At least 2,000 investors around the world allegedly lost about $400 million. The scheme involved the companies Syndicated Gold Depository SA, Base Metals Corporation LLC, Bahama Resource Alliance Ltd., Merendon Mining Corporation Ltd., and Strategic Metals Corp

    Garth Bailey, 61, sat through his sentencing hearing where prosecutors argued that Bailey’s role in a multi-million Ponzi scheme warranted between 8 and 9 years. Bailey was convicted in May on charges for his role in the HMS Financial Ponzi scheme that collected about $37 million from investors. Bailey was the lawyer for HMS Financial, which was established by Harold Murray Stark and Robert (Colonel) Fyn. The scheme offered investors 8% to 12% returns per month and claimed that their money was protected by a $30 million bond that could cover any losses. Stark was previously sentenced to 6 years and Fyn was sentenced to 8 years after they had pleaded guilty. Bailey’s services added a “veneer” of credibility to the company as its lawyer.

England

    Eleven women were convicted for their roles in a cash-gifting pyramid scheme known as “Give and Take” and “Key to a Fortune.” The scheme targeted brides and young couples, encouraging them to get a great start to wedded life by putting their cash in a gifting scheme that would supposedly turn £3,000 into more than £20,000. The scheme involved £21 million.

    Geoffrey Langdale, 63, was sentenced to 6 years in prison for running a £2.3 million Ponzi scheme that defrauded 28 victims. Langdale ran his scheme through Langdale Accountants.

    David Gerald Dixon, 49, was arraigned on charges that he ran a multi-million Ponzi scheme through Arboretum Sports (U.K.) Ltd., which was a sports betting company.

Hungary

    A fine of Ft 1.25 billion was levied against Zsolt Szabo-Forrai and his companies, Fortress Holding, Flow Money and Flow Money Int. The companies promised 9% returns to investors.

India

    Bikash Swain, the proprietor of Suryaprava, and Ranjan Das, former chief of Swastik India Multi-Purpose Credit Cooperative Society, were arrested.

    Debasis Mohanta, the director of Happy Life Realty India, was sentenced to 5 years in jail. Two other agents, Pranab Behera and Jiban Das, were sentenced to 4 years each.

    Sadananda Gogoi was arrested in connection with the Saradha Ponzi scheme.

    Half-burnt documents were recovered from the riverbank in connection with the Ponzi scheme of SLB Invest India Ltd. Local fisherman observed two people setting papers on fire near the riverbank. The men fled after they were spotted, and the documents reflect records of SLB’s business and the names and addresses of investors.

    The Calcutta high court admitted a petition seeking investigations into the activities of Progress Cultivation Ltd. It is alleged that Progress Cultivation was a Ponzi scheme in which funds from investors were used to purchase property.

    Cases were filed against MPS Greenery Developers Ltd. and Akash Deep Projects LtdPramatha Nth Manna, the founder and managing director of MPS Greenery, and another director, PK Chanda, were also arrested.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The liquidator of Fairfield Sentry Ltd., an offshore Bernard L. Madoff feeder fund, was permitted by the Second Circuit to try to undo an imprudent sale of its $230 million claim against Madoff’s firm. Krys v. Farnum Place LLC (In re Fairfield Sentry Ltd.), 2014 U.S. App. LEXIS 18427 (2d Cir. Sept. 26, 2014).

    Investor Brad Markowitz filed an appeal asking to revive his lawsuit against LPL Financial LLC relating to an $8 million Ponzi scheme run by Michael E. McCready, 46. McCready had worked at LPL while running his scheme that targeted entertainment industry professionals. Markowitz alleges that LPL should have detected suspicious activity.

    Cal Poly San Luis Obispo filed a motion in the bankruptcy case of Al Moriarty, 81, seeking to cover up Moriarty’s name from its stadium scoreboard. Moriarty was convicted last month in connection with a $22 million Ponzi scheme. Moriarty had paid $625,000 in 2009 for naming rights to the video scoreboard.

    Some claims in the class action lawsuit relating to the $800 million Ponzi scheme of MRI International were dismissed and some were allowed to proceed. The complaint alleged that MRI misrepresented that its business was legitimate and that the company purchased and collected medical accounts receivable. The lawsuit named MRI, along with Edwin J. Fujinaga, 67, Junzo Suzuki and Paul Musashi Suzuki as defendants. Fujinaga owned and operated the company in Las Vegas, and Junzo Suzuki handled the marketing and investment solicitations in Japan. The lawsuit also named LVT aka Sterling Escrow, which handled MRI’s bookkeeping.

    Palm Beach Finance Partners and Palm Beach Finance II sued BMO Harris Bank for $23.6 billion for the alleged actions of M&I Marshall & Ilsley Bank which BMO acquired. The lawsuit alleges that M&I was complicit in the Thomas Petters scheme, that they knew no retailers were making payments into the Petters’ accounts, and that they knew Petters’ accounts only had a few million dollars at a time, rather than the billions of dollars in collateral that lenders granted him. M&I never filed a suspicious activity report with regulators.

    The court in the Scott Rothstein Ponzi scheme case approved a settlement between the victims of the Ponzi scheme and the creditors of Rothstein’s law firm, Rothstein Rosenfeldt Adler. The settlement resolves competing claims to about $50 million of assets that will be divided between the government seeking forfeiture of those assets and the trustee of the law firm.

    Investors in the Martin Sigillito Ponzi scheme have filed a new lawsuit against the former chief executive of Enterprise Trust Co., Paul Vogel, and Argos Partners LLC. The plaintiffs allege that they lost more than $4.8 million in the scheme in which investments were sought for loans to Distinctive Properties of London, England, known as The British Loan Program. The lawsuit accuses Vogel of participating in the scheme and referring investors to it in exchange for a $150,000 finder’s fee. A previous lawsuit against Vogel was settled for a confidential sum. The lawsuit alleges that Vogel created two companies, Brad-Green Development LLC and Cranmer Associates LLC, to divert investor money to himself.

    The SEC decided not to appeal the recent decision by the appeals court in Washington that held that the Stanford Financial victims are not “customers” under the terms of SIPA. The appellate court agreed with the lower court that an estimated 7,800 former customers of Stanford Group Co. did not qualify for reimbursement from SIPC because they did not fit the statutory definition of a “customer.”

    The Fifth Circuit affirmed the lower court’s ruling in favor of the Stanford Financial receiver against net winners in the Ponzi scheme. The court agreed with the lower court that investors had provided reasonably equivalent value to the extent they received back their principal investments, but that the receiver could recover amounts paid back in excess of their principal investment. See Janvey v. Brown, 2014 U.S. App. LEXIS 17580 (5th Cir. Sept. 11, 2014).

    The Department of Justice sought a stay of civil discovery in the SEC’s action against Telexfree. The government argued that the administration of its parallel criminal case might be impaired by the defendants’ use of the civil discovery process in the SEC case.

    The lawyers and turnaround advisors for TelexFree who were involved in TelexFree’s bankruptcy case before the trustee was appointed have agreed to cut their fee requests significantly. The company’s lawyers, Greenberg Traurig, agreed to cut its fee request from $969,999 to $320,000. The turnaround advisers, Alvarez & Marsal, agreed to reduce their fees from $876,000 to $435,000.

    The Massachusetts Securities Division has reached a settlement with Fidelity Co-operative Bank for $3.5 million to resolve claims in the TelexFree Ponzi scheme. The president of Fidelity is John Merrill, the brother of alleged Ponzi schemer James Merrill. The bank will establish a $35 million relief fund for individuals defrauded in the $1.1 billion TelexFree Ponzi scheme. TelexFree made three deposits into the bank totaling $10.1 million. James Merrill and Carlos Wanzeler each also had personal accounts at the bank, and Wanzeler moved $3.5 million from his personal account to an overseas bank account in Singapore.

    Morgan Stanley was fined $280,000 for ignoring “numerous red flags” in connection with the $35 million Ponzi scheme run by Benjamin Wilson through his company, SureInvestment. Morgan Stanley ignored warning signs such as documents that showed that SureInvestment had returns of 2,850% and 45 consecutive profitable months. The CFTC had alleged that the firm failed to supervise its officers and employees in the handling of the company’s accounts.

    The ZeekRewards receiver requested authority to sue at least 23 Canadian residents to recover a total of about $2.91 million.