January 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2019. The reported stories reflect at least 5 new Ponzi schemes worldwide; about 40 years of newly imposed sentences for people involved in Ponzi schemes; 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.

Phillip Michael Carter, 44, of Texas was accused by the SEC of running a Ponzi scheme that raised $45 million from investors. The alleged scheme was run with Bobby Eugene Guess and Richard Tilford and defrauded 270 investors. Investors were sold short-term, high-yield promissory notes issued by shell companies involving real estate transactions. Carter and Tilford were indicted last year and Guess is currently serving a 12-year prison sentence after pleading guilty to a similar but unrelated scheme.

Ford F. Graham, 55, and his wife Katherine B. Graham, of New Jersey, were sued by the New Jersey Bureau of Securities based on allegations that they were fraudulently selling investments in gas and oil projects. They raised more than $5 million through loans and sales of unregistered securities which they offered through their companies, Specialty Fuels Americas, LLC, Aries Energy Group Venture, LLC, CCC Holdings, LLC, and Rattler Partners, LLC. The lawsuit alleges that Graham represented that investor funds would be spent on specific oil and gas projects, but he instead transferred the funds among his companies and another company that he controlled, Vulcan Energy International LLC.

Jose Luis Leon, 56, Richard A. Renner, 56, and Natalie Marie Rogers, 53, all of Florida, were arrested and jailed on allegations that they stole about $7 million from more than 20 investors. They ran a purported investment fund company called Strategic Holdings Group in which they represented they could provide access to exclusive investments, such as “energy-related limited partnerships, real estate, tax liens, private equity, precious metals and other ‘alternative assets.’” They promised returns of about 8% annually. Instead, they used the investors’ funds on personal expenses.

Kevin Merrill, 53, was caught trying to give his wife, Amanda Merrill, instructions to “drink the good wine” and otherwise hide assets. A note with instructions to Amanda was found in his sock in prison when he was headed to a jailhouse visit with Amanda. Merrill has been charged with running a $364 million Ponzi scheme that defrauded more than 400 victims. He has pleaded not guilty to an alleged scheme run with Jay Ledford, 54, and Cameron Jezierski, 28.

John Kevin Moore, 62, of Montana was sentenced to 10 years and five months in prison and ordered to pay $2.2 million in restitution and $1.9 million in forfeiture in connection with a Ponzi scheme involving oil and gas leases. Moore ran the scheme through Big Sky Mineral Resources LLC and Glacier Gala, using the investors’ funds to supposedly buy oil and gas leases and to buy and sell lucrative art work. Prosecutors alleged that Moore collected $2.7 million from investors and spent $1.4 million on himself.

Ronald D. Morley and his wife, Diane Morley, were sanctioned in the amount of $4 million in connection with their sale of fraudulent securities through their companies, The New Wealth LLC, Main Street Estate Group, Inc., and Jenny DB Properties LLC. They defrauded 130 investors to invest $33 million in preferred stock in Nevada-based Summit Trust Company. They received $3 million in commissions through several Maryland-based businesses they operated in allegedly “fraudulent offerings of unregistered securities.”

James Mulholland and Thomas Mulholland had their prison sentences cut in half. The two brothers had been sentenced to 10 to 20 years in 2016 in connection with an $18.3 million Ponzi scheme that defrauded more than 250 investors. The judge cut the sentence to 3.75 to 20 years, noting that leaving them in prison would not help make the victims whole again. They owe approximately $208,000 in restitution.

William Rittenbaugh, 47, who is in custody for allegedly running a cattle Ponzi scheme, had his bond increased to $3.75 million. Additional charges were added relating to cattle and horse theft.

Daniel B. Rudden, 71, reached a plea agreement with prosecutors in connection with a $20 million Ponzi scheme that he ran through Financial Visions. The company took assignments of life insurance policies to pay funeral expenses and charged the surviving families 4% to 5% for the service. The scheme had about 200 investors and promised to pay them 12% to 15%.

Robert H. Shapiro and Woodbridge Group of Companies LLC were ordered to pay more than $1 billion to resolve the SEC’s claims that Woodbridge operated as a Ponzi scheme.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

John Bigatton, a director of BitConnect, had his assets frozen in connection with the virtual currency scheme. Bigatton was the representative of BitConnect in Australia but was also the director of BitConnect International PLC in the United Kingdom. BitConnect was supposedly a crypto lending platform and promised returns as high as 40% per month. His wife, Madeline, disappeared at the time investigations of Bigatton started and is presumed dead. She was the director of JB’s Investment Management.

Canada

Renee Michelle Penko was jailed for 30 days for her failure to appear at a debtor examination hearing. She was found in contempt. Penko, along with Irene G. Beilstein and Susan Grace Nemeth, were finders for a Ponzi scheme run through Global Wealth Creation Opportunities that defrauded 123 people out of $11.7 million. Investors were promised returns of 2% to 6% per month. The scheme was masterminded by Thomas Arthur Williams, who owes $21.8 million in fines and disgorgement fees in connection with the scheme.

Ghana

Menzgold Ghana Limited was flagged as a Ponzi scheme, and the Securities and Exchange Commission ordered the company to stop unlicensed public gold trading activities. Menzgold would buy gold and pay interest to investors in the amount of 10% per month. The firm has been unable to pay premiums to investors because of the order to stop taking deposits from customers. The scheme is believed to have impacted over 1.8 million customers. There is a warrant for the arrest of Nana Appiah, the Menzgold CEO, who is believed to be hiding in Nigeria or South Africa.

Winchester Profits Capital, claiming to trade in currencies and commodities, was accused of running a Ponzi scheme. More than 2,000 Ghanaians have subscribed online, pursuing the promised interest of 12.5% weekly.

India

Nalini Chidambaram, the wife of former Finance Minister P Chidambaram, was charged in connection with the Saradha Group of Companies Ponzi scheme.

Shaik Ismail Amjad, 42, was charged in connection with a scheme run through Winzee Welfare Society. Amjad misrepresented that he was collecting money to provide financial assistance to poor people for marriage expenses, health problems and monthly rations.

Police arrested 57 people in a crackdown relating to the QNet scam. QNet is a multi-level marketing scheme, and the assets of the company have been frozen. Dilip Raj, the director of Vihaan Direct Selling Pvt Ltd., a sub-franchisee of QNet, was arrested for allegedly running a Ponzi scheme. Chandan Kumar Chowdary and Athul Kumar were also arrested in connection with the alleged scheme.

Brajamohan Patnaik and his wife Tridhara Mohanty were accused of defrauding investors in connection with an alleged scheme run through finance company Datum. 

I Ravindran, 55, his wife R Indhumathi, 47, and son R Vignesh, 27, were arrested in connection with a scheme that defrauded nearly 1,500 investors who deposited 2.9 crore. The scheme was run through All Shine Agro Farm India Ltd.

Tabrez Pasha and Tabrez-Ullah Shariff were arrested in connection with an alleged scheme run through the Ajmera Group that defrauded about 950 investors.

Nigeria

Giniko Obi, a bishop, was arrested for allegedly defrauding thousands of victims in a Ponzi scheme.  Obi is the founder of Beloved Gideon Foundation and said he was “doing the will of God by trying to help the people fight poverty.”

South Africa

Fakazile Mazibuko, 55, and Wilson Gazu, 55, were each sentenced to 15 years in jail in connection with their Trade For Life scheme that offered a get-rich-quick plan in more than 3,000 investors. They had previously been involved in another scheme operated through Travel Venture International.

Taiwan

Officials pressed charges against 7 individuals for allegedly running a bitcoin Ponzi scheme. The scheme allegedly defrauded more than 1,000 investors out of $51 million.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A group of defrauded investors sued Zions Bank for allegedly aiding and abetting a fraudulent scheme run by Rust Rare Coin and its owner, Gaylen Rust.

The Fifth Circuit reversed the lower court’s ruling and found that one of Stanford International Bank’s largest investors cannot retain $79 million in fraudulent transfers that he received. Janvey v. GMAG LLC, 2019 U.S. App. LEXIS 759 (5th Cir. Jan. 9, 2019). The court found that an investor cannot successfully assert a good faith defense when on inquiry notice of the Ponzi scheme. Inquiry notice was defined in the jury instructions as follows: Inquiry notice was defined in the jury instructions as "knowledge of facts relating to the transaction at issue that would have excited the suspicions of a reasonable person and led that person to investigate."

A federal judge dismissed a series of cases asserting claims for aiding and abetting and unjust enrichment against Bank of America, TD Bank, and PricewaterhouseCoopers in connection with the Telexfree Ponzi scheme case. The court said that was not evidence that the defendants had participate in, or willfully ignored, the fraud. See, e.g., In re Telexfree Secs. Litig., 2019 U.S. Dist. LEXIS 13681 (D. Mass. Jan. 29, 2019).

The Eighth Circuit dismissed claims against Associated Bank for aiding and abetting in connection with the Trevor Cook Ponzi scheme. Cook was charged with running a $194 million Ponzi scheme. The court found that, “The record shows nothing beyond the provision of routine banking services or, at worst, sloppy banking. The bank provided nothing beyond its standard professional services to assist the scammers in perpetrating their Ponzi scheme. No reasonable factfinder could conclude that Associated Bank provided substantial assistance to the scammers’ tortious conduct.”