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, May 31, 2017

May 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for May 2017. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 141 years of newly imposed sentences for people involved in Ponzi schemes; at least 8 new Ponzi schemes worldwide; and an average age of approximately 45 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Golan Barak, 49, pleaded guilty to one charge relating to a Ponzi-like scheme that he ran through Ergo Management. The real estate scheme involved mostly Israeli investors who were persuaded to invest funds to supposedly enter into a 50-50 partnership with Barak to buy real estate. Instead, Barak used the money to buy other properties or pay his expenses.

Larry Bates, and his sons, Chuck Bates and Robert Bates, and Kinsey Bates, were found guilty of running a Ponzi scheme through First American Monetary Consultants. More than 360 people lost more than $21 million in the scheme, which took in a total of $87 million for the purpose of buying precious metals. Larry Bates, a former Tennessee state representative, promoted the program through Christian television and radio programs and diverted more than $4 million to the creation of International Radio Network, a Christian radio system.

Richard Brandt, 62, was sentenced to 60 years in prison, with 20 years suspended, following his conviction for running a Ponzi scheme that took $1.9 million from 18 people. The scheme involved “house flipping,” and Brandt spent about $1.7 million on vacations and other expenses.

Thomas Bryant III (Trey) and his company, Bryant United Capital Funding, were accused by the SEC of running a Ponzi scheme. The SEC alleges that Bryant raised approximately $22.7 million from approximately 100 investors by promising risk-free, guaranteed returns of at least 30%. The complaint alleges that Bryant misappropriated $4.8 million for his expenses, he transferred $16.1 million to Wammel Group for securities trading, and he sent $1.37 million to concert promoter Carlos Goodspeed dba Top Agent Entertainment.

Alcibiades Cifuentes, 34, and his wife, Jennifer Wee Cifuentes, 36, were charged with running an alleged Ponzi scheme that defrauded about 20 people out of $500,000. The alleged scheme was run through the Cifuentes Fund Management hedge fund, and prosecutors say they used the money to buy themselves luxury items.

James Cochran, 61, appealed his 25 year prison sentence in connection with the Fair Finance Co. Ponzi scheme, blaming his sentence on ineffective lawyer. Cochran ran the scheme along with his partners, Timothy Durham and Rick Snow.

Daniel J. Flynn III, 54, was sentenced to 4 years in prison in connection with a $21 million Ponzi scheme that defrauded 90 victims. Flynn is an auctioneer who pleaded guilty to running a scheme that promised investors returns of 12% to 15%.
  
Paul Garceau Jr., 51, was charged on allegations that he was running a Ponzi scheme that defrauded elderly investors out of more than $800,000. Garceau ran the alleged scheme through Apex Wealth Management.

Franciso Illarramendi, 47, was ordered to pay about $26 million to the investors that he defrauded. Illarramendi is currently serving a 13 year sentence for the $700 million Ponzi scheme that he ran.

Mark Anderson Jones, 64, was sentenced to 70 months in prison for running a Ponzi scheme that defrauded 20 investors out of $10 million by promising them he was investing in Jamaican businesses.

Winstorn Ed Hoong Liang was sued by a group of foreign investors accusing him of playing a crucial role in the alleged $62 million Ponzi scheme run by North Dakota Developments LLC that sold interests in “man camps.” Liang allegedly tricked people into investing in four man camp projects that had serious flaws. The man camps were advertised as providing short-term housing for workers in Bakken oil fields of North Dakota and Montana.

Tamer Moumen, 39, pleaded guilty to running a $9 million Ponzi scheme. Moumen is a former hedge fund manager who mislead investors by misrepresenting that he consistently beat the S&P 500.

Yasuna J. Murakami, 44, was arrested on accusations that he was running a Ponzi-like scheme through investment advisory firms, MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Murakami was the managing member of those entities that managed three hedge funds: MC2 Capital Partner Fund, MC2 Capital Value Fund, and MC2 Capital Canadian Opportunities Fund.

Hamlet Peralta, 37, pleaded guilty to charges in connection with an alleged $12 million Ponzi scheme that solicited funds for a supposed liquor wholesale business.

Antonio Reyes and Craig Kahler face civil charges in Colorado in connection with their role as sales people in the Ponzi scheme run by Kelly Schnorenberg. The scheme allegedly defrauded 225 investors out of $15.25 million.
  
Eminiano Reodica, 72, was sentenced to 10 years in prison and ordered to pay $29.7 million to his victims after pleading guilty, but then filed an appeal against his conviction and sentence. Reodica has run a $90 million fraud in the U.S. in 1988 but fled to Australia where he went by the name Roberto Coscolluela. He defrauded 27 victims in Australia and then attempted to fly to Canada when he was scheduled to appear in court. He California court proceedings dragged on for 5 years before he plead guilty.

William Schantz III, 63, and Verto Capital Management agreed to pay more than $4 million to settle charges brought by the SEC that they were running a Ponzi scheme. Schantz raised approximately $12.5 million from about 80 investors by selling promissory notes to supposedly fund Verto’s purchase and sale of life settlements.

David W. Schwarz, 60, the former chief financial officer of Cay Clubs Resorts and Marinas, was sentenced to 40 years in prison. The court found that Schwarz’s conduct resulted in $303 million in fraudulent proceeds and about $170 million in victim losses. The scheme promised returns of up to 20% based on promises to rent out condo units. About 1,400 people were victimized. Schwartz was also hit with a $303 million forfeiture order and money judgment.

Pradeep Singh, 60, was arrested on charges that he was running a Ponzi scheme. Singh is a former licensed insurance agent who promised 10% to 12% returns through his company, Pradeepsingh Corp. dba Secure Vision Associates Insurance Services.

Shirley Sooy, 66, was sentenced to 50 months in prison and ordered to pay $1.1 million in restitution in connection with a scheme she ran through a collection of companies known as TransVantage Group. The companies provided firms with audited freight bills generated by carriers and freight forwarders hired by those firms and was supposed to pay the carriers with funds provided by the firms. Instead Sooy used the funds to make mortgage payments for properties she owned in New Jersey and Florida, for a 48-foot yacht, a Maserati, credit card bills and to remodel her home.

Richard L. Thompson, 62, was sentenced to 4 years in prison in connection with a Ponzi scheme that he ran through Latten Management LLC. Investors bought shares in his real estate development company and would loan money to Thompson personally, believing that he owned more than 200 acres of land called Catawba Peak in Tennessee.

Carlos Uresti, 53, a Texas State Senator, was indicted in connection with an alleged Ponzi scheme run through a company called Four Winds Company. Gary Cain, 60, and Stanley Bates, 45, are also accused of running the Ponzi scheme with Uresti. Uresti claims that he is not guilty of any wrongdoing. The alleged scheme involved the sale of fracking sand for oil production. Four senior managers of Four Winds were also indicted and 3 have already pleaded guilty.

Sanderley Rodrigues de Vasconcelos agreed to pay more than $1.8 million to settle claims brought against him by the SEC in connection with the TelexFree Ponzi scheme.

Navin Shankar Subramaniam Xavier, aka Navin Xavier, aka “Dr. Navin Xavier,” 44, was sentenced to 15 years in prison in connection with a $33 million Ponzi scheme. Xavier solicited funds from about 100 investors who received promissory notes purportedly secured by an iron ore mine in Chile. The scheme was run through Essex Holdings, Inc. and involved supposed investments in sugar transportation and shipping, and iron mining.

Robert F. Wallace Jr. and Charles Cangelosi were charged in connection with an alleged Ponzi scheme run through Poker Entertainment Network LLC.

Cory D. Williams was accused by the CFTC of defrauding Mormon Church members out of $13 million in a trading scheme. Williams is the founder of Williams Advisory Group LLC and told at least 40 investors that he was trading futures contracts. Instead, Williams spent $1.3 million on himself, for meals, jewelry, vacations and charitable donations in his name.

Micah Christopher Wilson, 61, pleaded guilty to charges that he defrauded investors out of hundreds of thousands of dollars. Wilson worked in the insurance and securities industries but lost his licenses for both. He set up a real estate investment company, D&M Associates, LLC, with his brother, David Wilson.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

Quintin Sponagle, 52, was ordered to pay victims $1.1 million. Sponagle pleaded guilty in December to charges that he defrauded 201 investors out of $1.1 million. The investors invested more than $4 million through Jabez Financial Services Inc., a company registered in Panama. He was sentenced to the 19 months prison that he already served.

Kenneth Charles Fowler, 67, was sentenced to 3 years for defrauding dozens of investors through The Investment Exchange. He raised $27 million to supposedly provide short-term loans but used the funds to support his personal lifestyle and pay dividends to some investors.

China

Authorities arrested 369 people believed to be involved in the Ponzi-like Nanning Investment Scheme. The scheme is code-named “Shen Jian” (god’s sword).

England

Peter Plimely, 68, was sentenced to 27 months in connection with a “Ponzi-style” scheme that defrauded victims out of almost £230,000.

Ghana

The Bank of Ghana issued a statement warning the public that a company called MMM Ghana is operating a Ponzi scheme through a virtual office.

India

Anjan Kumar Baliarsingh pleaded guilty to charges relating to a Ponzi scheme run through Capital Financial Services. He was sentenced to 3 years in prison. The scheme took Rs 15 crore from investors and promised them large returns. Others arrested in connection with the scheme are Ramachandra Hansda, Biju Janata Dal, Subarna Nayak, and Hitesh Bagarti,. 

Dipankar Ghosh, Malay Halder, Prasenjit Sil, and Malay Kumar Guha, officials of Real Tulip India Ltd., were sentenced to 3 years in prison. The Managing Director of Real Tulip, Tirtha Halder, was sentenced to 4 years.

Authorities filed charges against the Equinox Group and its four directors. Prasanta Chakraborty, purchased land, vehicles and valuable assets with the funds taken from over 100,000 people.

Police arrested Mansoor Siddiqui, who has been wanted for running a Ponzi scheme run through Admatrix Private Limited. The scheme allegedly defrauded more than one thousand people who lost up to Rs 20 crore in the scheme. The police had already arrested Ramniwas Pal, Ram Sumiran Pal and a few others in connection with the scheme.

Two directors of the Rightmax Technotrade International Ltd. Ponzi scheme were convicted and sentenced to 3 years in prison. Gunasekaran Murugan and Murugavel Nachimuthu were found guilty of misappropriating about Rs 17.6 crore from investors.

Two people were arrested in connection with an alleged Ponzi scheme run through Ablaze Info Solutions Limited. Pramod Kumar Solanki, 41, had set up a company called Solanki Enterprises, and Pramod Kumar Vimal, 45, had set up a company called Prizes Enterprises to solicit investors to invest in Ablaze.

Malaysia

A complaint was filed against Sean Tan, the chief operation officer of Empire Big Capital Limited, along with Huot Sovann, director of Asean Instrument Foundation, and Chi Gosaly, director of Investment Consultant Association. The lawsuit alleges that a Ponzi scheme stole about $46 million of their funds when they were promised 10% monthly profits and a return of their capital after 18 months.

Three people were arrested in connection with the JJ Poor to Rich (JJPTR) scheme.

New Zealand

The Supreme Court ruled that Investor Hamish McIntosh can keep the $500,000 he invested with Ross Asset Management, but must return the fictitious profits.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A group of investors filed a lawsuit for $100 million against Fyre Media and its organizers, Jeffrey “Ja Rule” Atkins and Billy McFarland, alleging that Fyre Festival was a Ponzi scheme.

Investors in Thomas Kimmel’s investment scheme filed a lawsuit against First Baptist Church of Hammond Inc., alleging that the church facilitated a $5 million Ponzi scheme by hiring Kimmel to provide church members financial advice. The investors say they would not have invested with Kimmel without the church’s endorsement of him. Kimmel encouraged members to invest in Sure Line Acceptance Corp., which operated a car lot and financed car loans. The church’s former pastor, Jack Schaap, who is now serving a 12 year prison sentence for having sex with an underage church member, received a 1% kickback for each investment. Kimmel was sentenced to 22 years in prison in 2014.

The Second Circuit affirmed a bankruptcy court opinion agreeing to undo the sale of a $230 million claim by the liquidator of the Fairfield Sentry Ltd. feeder fund in the Bernard L. Madoff scheme. The liquidator sold the claim to a hedge fund, Baupost Group LLC, just days before the value of the claim skyrocketed due to a settlement that brought in billions of dollars for the Madoff estate.

The Justice Department disclosed the amount that it has paid to the Madoff Victim Fund administrator who has been engaged to distribute $4 billion to victims of the Bernard Madoff scheme. The administrator has been paid $38.8 million, although no distribution has yet been made. This distribution scheme is distinct from the SIPA proceeding in which the trustee has paid out more than $9 billion to date to “customers” as defined by the SIPA statute.

LTV Inc., doing business as Sterling Escrow, reached a settlement and agreed to pay $800,000 to a class of Japanese investors who accused the firm of participating in the Ponzi scheme run through MRI International Inc. and its principal, Edwin Y. Fujinaga. The scheme involved more than 8,700 investors, who argued that the escrow agent should have known about the alleged scheme because of the bookkeeping and account services it provided to MRI.

A class action was filed against PayPal on behalf of about 162,000 investors in a $207 million Ponzi scheme known as Traffic Monsoon. The scheme was founded by Charles David Scoville. The complaint, seeking at least $5 million in damages, alleges that “PayPal was aware that Traffic Monsoon was making Ponzi/pyramid scheme payments to investors and that Traffic Monsoon’s Ponzi/pyramid scheme was growing exponentially in classic Ponzi/pyramid scheme fashion.” Additionally, the complaint states, “PayPal provided substantial assistance to the Traffic Monsoon scheme by allowing Traffic Monsoon to use its services in an extraordinary and atypical manner.”

The Fifth Circuit upheld the dismissal of the receiver’s fraudulent transfer lawsuit against Dillon Gage Inc. in the R. Allen Stanford Ponzi scheme case. The receiver said to recover $5 million paid by Stanford Coin & Bullion to Dillon Gage

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