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

Monday, November 30, 2015

November 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for November 2015. The reported stories reflect: 3 guilty pleas or convictions in pending cases; over 77 years of newly imposed sentences for people involved in Ponzi schemes; at least 9 new Ponzi schemes worldwide; 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.

    Troy Barnes, 53, was indicted in connection with an alleged Ponzi scheme operated through Work with Troy Barnes Inc., which later changed its name to The Achieve CommunityKristine Louis Johnson, 60, pleaded guilty to charges in June 2015. The scheme defrauded over 10,000 investors who lost at least $7 million, having been promised returns of up to 700%. At the time the scheme shut down for the self-stated reason that it could not handle “the volume of money we’re paying our members,” the company owed promised returns of about $51 million.

    John Paul Baron, 55, was sentenced to 6 years in prison in connection with a $3 million Ponzi scheme. Baron had promised annual tax free returns of 15% to 28%. Terrence McGill, 57, was previously sentenced to 23 months of house arrest in connection with the scheme.

    Ian Parker Bick, 20, was convicted on charges that he ran a Ponzi scheme defrauding over 15 investors out of nearly $500,000. Bick is the owner of Tuxedo Junction, an all-ages night club/juice bar. Bick used his other entities such as This is Where It’s At Entertainment, Planet Youth Entertainment, W&B Wholesale and W&B Investments, to solicit investments. Bick represented that he was buying electronics and reselling them for a profit and that he was organizing and promoting concerts.

    Scott A. Doak was barred by the SEC from the financial services industry in connection with his involvement in a Ponzi scheme through his company, OVO Wealth Management LLC. Doak founded OVO with William Apostelos. Apostelos’ other companies involved in the scheme were WMA Enterprises and Midwest Green Resources LLC. They raised more than $66 million from about 350 investors. Doak wound down OVO and directed clients to Apostelos’ companies, failing to tell them that he and others were unsuccessful in withdrawing their money, among other things.

    Joel Barry Gillis, 75, and Edward Wishner, 77, were sentenced to 10 years and 9 years, respectively, in connection with a 13 year long Ponzi scheme run though Nationwide Automated System Inc. (NASI). The scheme defrauded more than 1,300 investors out of at least $123 million, promising the investors returns of at least 20% from the sale and operation of ATMs. Investors could purchase ATMs that were then leased back to NASI in exchange for rent based upon a set price for each ATM transaction. Corporate records reflected more than 31,000 leaseback arrangements, but in fact only 253 ATMs were being serviced.

    Jon Michael Harder, 50, the former Sunwest Management CEO, was sentenced to 15 years in prison. Sunwest operated assisted living homes and defrauded more than 1,000 investors out of at least $120 million.

    Michael Holcomb, 72, Gary Holcomb¸ 70, Kristin Van Breeman, 42, and Jennifer Chalmers, 44, were indicted on charges that their family-owned insurance financing businesses, Berjac of Oregon and Berjac of Portland, were a Ponzi scheme. The scheme is believed to involve $40 million and more than 400 investors.

    James A. MacCallum, 44, was charged in connection with running an alleged Ponzi scheme that targeted more than 6 investors out of about $3.4 million. MacCallum, now a disbarred lawyer, had solicited investors while he was a practicing attorney to invest in real estate and life insurance policies through his company, Andrew Mitchell Holdings LLC. Investors were issued promissory notes bearing annual interest rates of at least 15%.

    Bernard M. Parker, 54, was charged by the SEC with stealing $1.2 million in an alleged Ponzi-like scheme that he ran through his company, Parker Financial Services. Parker represented to investors that he was using their money to purchase tax lien certificates and promised them high rates of return. Parker was a broker at Edward D. Jones & Co. at the time, and was terminated following a customer complaint.

    Richard Roop was jailed following contempt proceedings for his violation of orders to stop selling securities. Roop and his company, Bottom Line Results, had been permanently barred from the securities industry, but Roop continued to sell promissory notes to investors as an unlicensed broker. The funds from these sales were used to purchase distressed real estate without proper disclosure of risk and to pay off earlier investors.

    Matthew John Ryan saw his 10 year prison sentence affirmed by the Second Circuit. Ryan had pleaded guilty to running a real estate Ponzi scheme through his firm Prime Rate and Return LLC aka American Integrity.

    Anthony Saumell, 45, was sentenced to 3 years and two months in prison in connection with a Ponzi scheme run through his company, Gear Management Corp. Saumell guaranteed returns of 10% within 30 days from the supposed resale of aircraft parts.

    David Miguel Nanes Schnitzer aka David Banes, 47, was arrested in Belize in connection with the Stanford Financial Ponzi scheme. Nanes Schnitzer headed the Mexican arm of Stanford's Ponzi scheme, which allegedly defrauded investors in Mexico of $42 million. Although there are no criminal charges pending against Nanes Schnitzer in the U.S., the Stanford receiver has filed a civil lawsuit against him for breach of fiduciary.

    Jerry Stauffer, 66, has been soliciting victims of his alleged $1.5 million Ponzi scheme to help pay for private counsel in lieu of his public defender. Stauffer has been accused of running a Ponzi scheme in foreign exchange trading to generate returns of up to 10% monthly.

    James A. Torchia, 56, and his companies, Credit Nation Capital and Credit National Acceptance, were the subject of an SEC complaint accusing them of running a Ponzi scheme involving the sale of bogus promissory notes and selling interests in life settlements. The SEC complaint alleges that Torchia promised 9% returns and approximately $30 million was owed to note holders. The complaint also alleges that two companies he controls, Spaghetti Junction LLC and Willie’s West LLC, transferred hundreds of thousands of dollars to Torchia and his wife.

    Scott Valente, 58, was sentenced to 20 years in prison and ordered to pay $8.3 million in restitution for operating a Ponzi scheme that defrauded more than 100 investors out of more than $10 million. Valente ran his scheme through his investment company, the ELIV Group LLC, claiming that he had annual investment returns of 36% to more than 48% when in fact he was losing money each year.

    Hector Vega, 40, pleaded guilty to charges accusing him of running a Ponzi scheme in which he promoted music concerts.

    Sydney “Jack” Williams, 66, pleaded guilty to charges that he made a series of bank withdrawals. His wife, Lori Ann Williams, pleaded guilty a few weeks earlier.

    Tropikgadget FZE, Tropikgadget Unipessoal LDA, Compasswinner LDA, and Happy SGPS SA, operating under the $23.5 million Wings Network Ponzi scheme, were ordered to pay $36 million as fines and restitution to thousands of mostly Latino investors.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    Rashida Samji, 61, sought a stay of charges relating to an alleged $110 million Ponzi scheme, claiming that the charges would violate her constitutional right not to be tried twice for the same offense. Samji was previously fined $33 million by the BC Securities Commission for defrauding more than 200 investors, and she was banned from the B.C.’s capital markets. Samji’s investors were advised that they were investing in a winery that was expanding into South America and South Africa. About 90 of the investors came to her through Arvindbhai Bakaorbhai Patel, a financial planner at Coast Capital Savings. Patel was previously charged in connection with the scheme.

England

    Phillip Harold Boakes, 56, was sentenced to 10 years in prison following his conviction in March for defrauding investors of at least £3.5m ($5.3m, €5m). Boakes promised investors returns of 20% or more through a foreign exchange spread betting program in his company, CurrencyTrader.

    Richard Rufus, 40, was found to have operated a Ponzi scheme that defrauded almost 100 victims out of almost £9 million. Rufus had collected more than £16 million, but lost more than £5 million through currency exchange trading and used more than £3 for himself. Restrictions were imposed on Rufus’s ability to borrow money and work in business for the next 15 years. It is unclear whether he will face criminal charges.

Germany

    The trial got underway of Jorg Biehl and five other executives of Infinus, which is believed to have run a Ponzi scheme defrauding 22,000 investors out of €312 million, or $336 million.

India

    Four directors of ASSDA - Nabarun Dutta, Jasim Hossain, Jamir Hossain and Asgar Ali – were arrested for allegedly raising money from the public illegally and misappropriating funds.

    The Supreme Court dismissed the bail plea of Matang Sing, who had previously been arrested in connection with the Saradha Ponzi scheme.

    Omkar Singh was arrested in connection with an alleged Ponzi scheme involving more than 15 crore, through the companies, Ambitious Diversified Projects Management Ltd. and OAK India Multi-State Credit Cooperative Society.

    Davanidhi Mohapatra, the managing director of Tresty Securities Limited, was arrested for allegedly defrauding investors out of Rs 10 crore.

    Two directors of Akashdeep Projects, Pinak Ranjan Choudhary and Tapas Pramanik, were arrested and were alleged to be “involved in criminal conspiracy with other directors.”

    Nirmal Infra Home Corporations Limited was raided in connection with charges that it defrauded investors of about Rs 50 crore. Nirmal claimed to have operations in real estate and hospitality businesses and promised high returns.

Philippines

    The SEC alleged that EmGoldEx, which was renamed at Global Intergold, was a Ponzi scheme, and that Prosperous Infinite Philippines Holdings, Corp., was later incorporated. The SEC issued a warning in advanced of a promotional event at which 2,000 people were expected to attend. Individuals alleged to be associated with the scheme are Kevin Miranda, Ryan Manuit, Charles Juiz Padilla, Rabel Ymas, John Rafael Calicdan, and Paul Alviar. Weng Faye Cabreros Cabusas aka Rowena Faye Cabusas, Gavino Mariano Tan, and Romell Enriquez Tan of Goldxtream Trading Co. were charged in connection with an alleged Ponzi scheme that promised returns of P25,000 for an investment of P5,000 after 11 days.

Thailand

    Over 20 million baht worth of assets were seized from Wannachai Boonchu, who alleged defrauded victims into investing in gold futures through a China-based company. The scheme defrauded over 1,000 people.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The trustee of Tim Durham’s Fair Finance Co. $208 million Ponzi scheme sought approval to distribute $18 million to investors. The distribution represents less than 9 cents on the dollar for the 5,000 investors. Fair Finance, founded in 1934 but acquired by Durham in 2002, bought finance contracts from fitness clubs, timeshare condominium developers and other firms that offered customers extended payment plans. Durham, who pulled out tens of millions of dollars for himself, is serving a 50 year prison sentence.

    Ernst & Young was found liable by a jury in a lawsuit filed by investment firm FutureSelect Portfolio Management Inc. for negligent audit reports of a Bernard Madoff feeder fund prepared by Ernst & Young. Ernst & Young had audited Rye Funds, which were managed by Tremont Group Holdings Inc., and contends that it followed generally accepted accounting principles in auditing the fund. The jury rendered a verdict of $20.3 million, with Ernst & Young liable for half of that amount, but the liability could reach nearly $25 million when prejudgment interest is added.

    A court declined to dismiss claims brought by investors in the Stanford Financial Ponzi scheme against Toronto-Dominion Bank, alleging that TD failed to conduct proper due diligence and was negligent in providing services to Stanford International Bank.

    A bankruptcy court has ruled that TelexFree LLC, TelexFree Inc. and TelexFree Financial Inc. were engaged in a Ponzi and pyramid scheme. The trustee had sought such a ruling as part of the proposed claims procedure process, but he will likely also use the ruling in connection with lawsuits to recover voidable transactions.

    The lawyer appointed by the court to defend thousands of net winners in the ZeekRewards case has established a website to communicate with the Net Winner Class in the case. The website can be found at http://www.zeeknetwinnerclass.com/index.

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