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, January 31, 2018

January 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2018. The reported stories reflect 9 guilty pleas and convictions; at least 7 new Ponzi schemes worldwide: over 26 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 49 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

Rodney Allen, 65, was indicted on charges that he ran a Ponzi scheme through KA Investments LLC in Idaho. Allen had disappeared after an involuntary bankruptcy was filed against him last April and 77 creditors were listed in the bankruptcy. Allen had provided monthly statements to investors stating they were earning 1.6% to 1.9% returns when they were actually losing money. Allen also paid himself 14% to 18% commissions on their supposed profits. Allen is still missing.

Stanley Bates, 45, pleaded guilty to running a Ponzi scheme through FourWinds Logistics, a fracking company that accepted millions of dollars in investor funds in connection with the scheme. Bates, who also ran Bates Oil Energy & Gas, had been indicted along with Gary L. Cain and Senator Carlos Uresti, 54. Cain allegedly took investor funds for himself, and Uresti allegedly advised investors to invest in Four Winds without disclosing he would obtain a commission for their investments.

BitConnect was shut down as an alleged Ponzi scheme. The company represented that investors could earn up to 40% per month, or 400% per year was promised to others. BitConnect solicited Bitcoin in exchange for BitConnect Coin (BCC) and claimed that BCC would be lent to others and accrue daily interest. A class action lawsuit was also filed in light of the 90% loss in value of Bitconnect tokens. In a second class action lawsuit, BitConnect International, BitConnect Ltd., BitConnect Trading Ltd. and Ryan Maasen were all named as defendants.

Randall Crater, Mark Gillispie and My Big Coin Pay, Inc. were sued by the CFTC who alleged that My Big Coin ran a cryptocurrency scheme that defrauded investors out of $6 million. Investor funds were transferred into personal bank accounts and used for personal expenses and the purchase of luxury goods. The cryptocurrency, identified as MBC, was nonexistent and was not traded on any of the multiple it exchanges it claimed to be, but instead the company misrepresented that it was actively trading at fictitious trading prices. The company also falsely claimed that the coin was backed by gold and was partnering with MasterCard.

Dillon Michael Dean of Colorado and his UK-registered company The Entrepreneurs Headquarters Ltd. were sued by the CFTC accusing them of operating a Ponzi scheme involving bitcoin. The scheme allegedly solicited $1.1 million in Bitcoin from more than 600 investors. Dean allegedly misrepresented that investors would be pooled and invested in products including binary options. After the one million-dollar mark in Bitcoin was reached, Dean stopped paying investors and closed down the company’s social media. Dean then allegedly launched a similar Ponzi scheme under the new name, Real Trade Profits. 

Justin Tyler Greer, 36, was arrested on allegations that he was running a $1.5 million cattle scheme. Greer managed cattle owned by ranchers in California, Wyoming and Colorado. The ranchers were missing hundreds of cattle, and it is believed that cattle owned by investors were illegally sold and moved to other states.

Dermis Hernandez, 41, was arrested and charged with running a Ponzi scheme  while he was working as a cop. Hernandez defrauded investors in a Costa Rican investment scheme, claiming he was making loans to property owners in Costa Rica. Hernandez targeted active and retired cops and promised 24% returns.

Jack Hogan, 78, was sentenced to 12 years in prison for a Ponzi scheme that defrauded about 80 investors out of $8.2 million. Hogan held himself out to be a financial planner and sold whole life insurance policies at exorbitant prices. He then encouraged his clients to borrow against the accrued value of their policies and invest in a promissory note program that would give them a 10% return or higher.

Patrick K. McDonnell and his company Cabbage Tech Corp. were sued by the CFTC who alleged that the company was running a digital currency trading scheme.  Cabbage Tech operated under the name “Coin Drop Markets” and promised investors returns of up to 300% return on investment in less than a week.

Joseph Meli, 43, had his sentencing delayed to give him time to prepare. Meli had pleaded guilty to one count of securities fraud in connection with the ticket-selling scheme involving shows like Hamilton and Adele. Meli had been accused of defrauding about 130 investors out of $95 million.

Yasuna Murakami, 44, pleaded guilty to charges that he ran a Ponzi-like scheme through Massachusetts-based MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Murakami defrauded investors through his hedge funds, MC2 Capital Canadian Opportunities Fund, MC2 Capital Partners Fund, and MC2 Capital Value Fund.  In a related lawsuit, the SEC has said that Murakami and his partner, Avi Chiat, defrauded more than 50 investors out of $15 million.

David Perez Jr. and Bebe Ann Ramirez, 43, pleaded to guilty to a Ponzi scheme they ran through USA Now.  A third defendant, Marco Antonio Ramirez, 47, remains in custody in Nigeria where he was arrested in connection with the scheme. The scheme was run through the EB-5 visa program offered by the U.S. Citizenship and Immigration Services, which was terminated for USA Now in 2014. At least $5 million was taken from foreign investors seeking to secure resident status in the U.S.

Steven Condon Peters, 44, who was arrested and indicted in December on charges that he was running a Ponzi scheme through VisionQuest Capital LLC, has denied the charges. The SEC has also filed an action, alleging that Peters fraudulently obtained $15 million through his investment firm.

Bart Sidney Posey Sr., 50, pleaded guilty to charges that he ran a health insurance Ponzi scheme through his companies, American Trade Association and Smart Data Solutions. Posey admitted that he defrauded consumers by denying legitimate health insurance claims, selling an insurance product that was not backed by a legitimate underwriter, and embezzling millions of dollars of insurance premiums paid to his company by victims.

Benjamin Myung Sik Rose, 32, was sentenced to 4 years in prison in connection with a house-flipping Ponzi scheme. Rose had previously admitted that he was not a licensed contractor and had falsified bank statements to make it appear that he was selling houses and making profits. The scheme involved more than $450,000.

Nancy Spinks, 46, was sentenced to 10 years in prison and ordered to pay $8.6 million in restitution in connection with a Ponzi scheme that she ran through Millennium Title in Texas. Spinks referred to herself as the “Millennium Mobster” and skimmed money from the business to fund an elaborate lifestyle.

USI-Tech, a Dubai-registered company that claims to sell Bitcoin packages, has been placed on fraud alert by authorities in the U.S. and Canada. USI-Tech was the subject of an emergency cease and desist order from the Texas State Securities Board last month for “engaging in fraud.” Affiliates of the company are speaking out in support of the company in Guam.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Toni Iervasi, 53, is alleged to have defrauded investors out of $209 million in a Ponzi scheme. The scheme allegedly defrauded 780 creditors through his businesses, Courtenay House and Courtenay House Capital Trading Group. He promised investors 25% returns.

Louise Dalli and Claire Gauci Borda, the daughters of John Dalli, appeared in court along with Charles Ray Jackson and Robert Mitchell McIvor, to face charges that they ran an alleged Ponzi scheme. Two others accused in connection with the scheme, Eloise Marie Corbin Klein and Elizabeth Jackson, did not appear for the hearing. The scheme was allegedly run by Klein who solicited funds from elderly Christians posing as a missionary and convincing them to invest in a supposed African mining project. The funds instead were funneled into Tyre Ltd. and Corporate  Group, two Maltese companies owned by Louise Dali and Borda.

Bulgaria

OneCoin offices were raided and documents and servers were seized from “One Network Services,” a Bulgarian company serving as a representative and distributor of OneCoin. The company is registered officially in the United Arab Emirates as “OneCoin Ltd.,” but also allegedly operates in England, Ireland, Italy, the United States, Canada, Ukraine, Lithuania, Latvia, Estonia and other countries.

Canada

Wade Robert Closson, 47, has pleaded guilty to 17 of 83 charges that he ran a Ponzi scheme through Optam Holdings Inc. and Infinivest Mortgage Investment Company. The scheme offered second mortgages to investors and allegedly defrauded about 125 victims out of $10.8 million. Closson used about $5.6 million of the funds to pay returns to investors, $3.9 million for other projects, and about $800,000 for his personal use.

China

Huang Dingfang and Cai Keyi were convicted of running a Ponzi scheme through Longyan E-commerce Co. Ltd. Investors were promised annual returns of more than 250% if they invested 4,000 yuan. Investors were defrauded out of 15.6 billion yuan ($2.4 million). About 200,000 investors were defrauded. Ding Wenping, chief financial officer, and Sun Shijia, its president, were sentenced to 12 and 10 years, respectively.

A group of investors were arrested for organizing illegal gatherings and disturbing public order regarding the Ponzi scheme run through Qbao.com. Zhang Xiaolei, 49, who controlled Qbao.com, turned himself in to authorities in December. The website had about 1 million active users daily and unpaid principal of about $4.7 billion. The scheme had raised about $7.8 billion from 900,000 investors.

India

India’s Finance Ministry cautioned investors they are “entirely at their risk and should best avoid participating” in digital currency investments, likening them to “Ponzi schemes.”

Abhay Gandhi was convicted of running a scheme through Abhay Intraday Strategy Expert and was sentenced to 18 months in prison. Gandhi used 100 agents to attract small investors into the scheme.

Prashant Dash, the head of Seashore Group was arrested one day after his release. Dash was out on bail for just that one day before he was arrested in connection with another scheme.

An individual known under the aliases Wajid SK, Abdul Wajid and Javid Patel is accused of defrauding 200 investors out of over Rs 300 crore. He promised them 10% to 20% returns from his supposed investment firms, Capital Plus and Capital Infrastructure. The investors were told that those firms invested in share market, forex and cryptocurrency.

India has sent tax notices to tens of thousands of people who have dealt in cryptocurrency after a survey showed that more than $3.5 billion worth of transactions have been conducted over a 17- month period.

Japan

Coincheck suffered a hacking attack and lost $534,000,000 of virtual assets. Coincheck froze deposits and withdrawals for all cryptocurrencies except Bitcoin.

Thailand

The assets of Qingduan Zhang, 38, were seized as Zhang is a suspect in a major Ponzi scheme case in China. The scheme involved investing in a telecommunications business in which very high returns were promised. Four other suspects were also detained: Huang Jinke, Zewn Pu, Aim-on Chitchak, and a man identified only as Chi Tong or Atong

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A new study of cryptocurrency scams found that between June 2011 and November 2016 there was a new scam nearly once a day. A total of 1780 scam have been reported on cryptocurrency message boards.

A group of investors filed a lawsuit against Comerica Bank in connection with the alleged $1.2 billion Ponzi scheme run by Woodbridge Group of Companies LLC. The investors have alleged that the bank ignored glaring red flags in Woodbridge’s bank accounts. In the bankruptcy case of Woodbridge, the motions of the SEC and the Creditors Committee seeking the appointment of a Chapter 11 trustee were withdrawn in light of the appointment of a new board of directors for the company. The interim Chief Restructuring Officer and management company resigned, and the new board reached a compromise with the creditors and SEC.

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