Kathy Bazoian Phelps
Senior Counsel in Ponzi Scheme Litigation
and Bankruptcy Matters

Kathy is a senior business trial attorney with more than 25 years experience prosecuting and defending claims for clients involved in Ponzi scheme matters and in bankruptcy proceedings. Kathy’s practice includes recovering assets for clients in complex fraud cases under standard fee and alternative fee arrangements. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring an expert on fraud or Ponzi schemes.

Kathy’s Clients in Ponzi Scheme Cases and Bankruptcy Matters
Equity Receivers
Bankruptcy Trustees
High Net Worth Investors
Debtors in Bankruptcy
Secured and Unsecured Creditors

Saturday, June 30, 2018

June 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for June 2018. The reported stories reflect at least 9 new Ponzi schemes worldwide and an average age of approximately 51 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

INTERNATIONAL PONZI SCHEME NEWS 

Australia

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

Canada

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

Cambodia

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

Cayman Islands

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

India

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

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

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

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

Turkey

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

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

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

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

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