March 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for March 2016. The reported stories reflect: 7 guilty pleas or convictions in pending cases; over 120 years of newly imposed sentences for people involved in Ponzi schemes; at least 11 new Ponzi schemes worldwide involving more than $400 million; and an average age of approximately 50 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.

    Aequitas Capital Management and its founder and CEO, Robert Jesenik, executive vice president, Brian Oliver, and chief operating officer, N. Scott Gillis, were the subject of SEC charges that they were running a “Ponzi-like” scheme. The company agreed to the appointment of a receiver about one month after it had announced layoffs and hired a consulting firm to help it wind down the business. Aequitas stopped making payments on over $300 million in private notes that it sold to investors. Aequitas had entered into an agreement to buy hundreds of millions of dollars’ worth of student loans from Corinthian Colleges, which itself ended up in bankruptcy. The Corinthian notes may have accounted for 74% of Aequitas’ debt-buying business and had been paying $4 million to $7 million to Aequitas prior to defaulting on the obligations to Aequitas. Aequitas promised interest to investors of 5% to 15% on the $350 million it brought in from investors from January 2014 to January 2016.

    Robert Arrowood and his company, 2001 Trinity Fund LLC, were banned from the securities industry in Oklahoma. Arrowood operated an oil and gas lease firm, Trinity Resources Inc., in what is alleged to be a Ponzi scheme. Arrowood is alleged to have spent investors’ money on vacations and a motorcycle. The scheme defrauded about 30 victims, who were promised that their investments would mature in less than 60 days with a return rate of 90 percent.

    John Bivona, 75, and Frank Gregory Mazzola, 49 were charged by the SEC with running a Ponzi-like fraud through the firms Saddle River Advisors LLC and SRA Management Associates LLC. The SEC alleges that Bivona raised $53.4 million from investors by promising to invest in early- to late-stage technology companies that had not yet conducted initial public offerings. The SEC alleges that Bivona diverted $5.7 million for his personal use and that substantial sums were transferred to his nephew, Mazzola.

    Darrlye Douglas was arrested in California in connection with an order for civil contempt of court. Douglas allegedly had access to ZeekRewards database but has not returned it as ordered. Douglas may also be involved with a new scheme known as Auction Attics.

    Charles Leif Erickson pleaded guilty to charges that he stole about $3.5 million for a church congregation in a Ponzi scheme. Erickson said that the “Holy Spirit” guided him in a unique method for day trading in which he sold unregistered investments in trading futures to at least 25 people, promising them 4% per month, or 96% over two years.

    Daniel Fodiman, 52, was sentenced to up to 6 years in prison for his TJ Maxx Ponzi scheme. Fodiman told investors that he was purchasing merchandise to resell to TJ Maxx, but he in fact never sold anything to TJ Maxx.

    Claus C. Foerster, 55, was indicted on charges that he was running a Ponzi scheme through SG Investment Management. It is alleged that the company was “totally fictitious” and that he defrauded clients out of about $2.8 million while acting as a financial advisor.

    Charles Caleb Fackrell, 35, was charged in connection with an alleged Ponzi scheme that defrauded 20 people into investing $1.4 million. Fackrell ran his scheme through entities he controlled under the name “Robin Hood,” promising investors guaranteed returns.

    Dorian Garcia, 31, was sentenced to 6½ years in prison in connection with a Ponzi scheme that defrauded 111 investors. The scheme took in about $8.5 million, and about $5 million is still owed to the investors. Garcia at one point promised an investor a return of 300% to 600%. He spent investors’ funds on a lavish lifestyle including luxury cars, an expensive home and a personal chef. 

    Ian C. Gent, 73, was sentenced to 6 years in prison for conspiracy in assisting Guy W. Gane and Watermark Financial Services in running a Ponzi scheme. The scheme promised investors 10% returns in real estate investments, but Watermark never actually bought any property. Joseph F. Lagona was also convicted in connection with the scheme and was sentenced to 11 years in prison.

    Allen R. Hess, 51, pleaded not guilty to charges that he was running a Ponzi scheme that defrauded over 30 victims out of more than $700,000. The alleged scheme involved foreign currency and overseas oil.

    Francisco Illarremendi, 46, had his appeal of his sentence upheld by the Second Circuit. U.S. v. Illarramendi, 2016 U.S. App. LEXIS 4840 (2d Cir. Mar. 15, 2016). The court found that despite evidence showing investor losses exceeding 200 million, the district court had cautiously focused on Illarramendi’s gains, which totaled over $20 million, in calculating the sentence.

    Mark A. Jones, 63, was charged by the SEC with running a $10 million Ponzi scheme that supposedly generated profits from bridge loans to businesses in Jamaica. Jones is the former chairman and VP of Global Gateway Solutions Inc. and was charged with defrauding retirees in his “bridge loan” Ponzi scheme. He promised investors 15% to 20% interest per year and raised about $10 million from at least 21 investors. His assets were frozen and he was arrested on related criminal charges. Jones owns 49% of Global Gateway and his partner, Jacqueline Sutherland, owns the other 51% and is the current president of the company.

    Levi David Lindemann, 40, pleaded guilty to running a Ponzi scheme that defrauded approximately 50 investors out of more than $2.5 million. Lindemann ran the scheme through Alternative Wealth Solutions and provided counterfeit secured notes to investors as proof of their investments.

    David Christopher Mayhew, 43, was sentenced to 26 years in prison in connection with a Ponzi scheme that defrauded at least 11 people out of more than $2 million. Mayhew posed as a Christian who targeted churchgoers. Mayhew’s partner, Ronald Earl McCullough, 44, is at large and authorities continue to try to locate him. They called their enterprise “God’s Business Empire,” “GB Empire,” and “Empire Investments.”

    Jaymes Meyer, 47, pleaded guilty to charges related to the ZeekRewards and Rex Ventures LLC Ponzi scheme. Meyer was the CEO of Preferred Merchants LLC, a financial services firm that controlled about $17.4 million of Rex Ventures’ assets. Meyers originally told the SEC that he did not control any Rex Ventures’ assets, but has now admitted that he wired about $4.8 million from a Rex Ventures’ trust account into an account under his control within an hour of learning about the SEC investigation. Meyer used the money to purchase homes for himself and for other expenses.

    Daniel Nase and his company, BIC Real Estate Development Corp., were charged by the SEC for fraud for running an alleged Ponzi scheme. Nase, who was not registered with the SEC or state regulators, sold investments in real estate and promissory notes and then placed title to properties in his name, his wife’s name, or a family trust. He also used investor funds for personal expenses. When Nase learned of the SEC investigation, he placed stolen assets back into the company to make it appear that he was increasing his equity stake in the company.

    Derek A. Nelson was sentenced to 19 years in prison a day after being convicted of running a $37 million Ponzi scheme through Capital Mountain Holding Corp. 

    Aaron E. Olson filed a motion asking to delay the start of his prison sentence so he can finalize a $100,000 granite sale. At least $50,000 is to go to the victims of his alleged scheme that he ran through AEO Associates and KMO Associates. Olson is to be soon sentenced on tax evasion charges.  

    Gina Palasini, 54, pleaded guilty to one charge in connection with an alleged Ponzi scheme that she ran. Palasini, who was indicted on 19 federal counts last year, admitted to defrauding a man, Joseph Babb, through the U.S. Mail by sending him a withdrawal form and a supposed interest payment of about $3,300. Her scheme claimed to help citizens obtain Veterans Affairs of Medicaid benefits, and the total victim losses in the scheme are believed to be $2 million. Palasini is currently serving 10 years on a felony charge of false pretense and has received another 10 year sentence for another false pretense charge, as well as a 3 year sentence for a bad check charge.

    Daniel Rivera and his brother, Matthew Rivera, were charged by the SEC with running Ponzi scheme through a real estate venture called Robbins Lane. The Robbins Lane website recommended that investors sell their retirement assets to invest in the venture as the opportunity would give “the senior investor a guaranteed monthly income.” The scheme involved $2.7 million and targeted unsophisticated elderly investors.

    Keith Michael Rogers, 42, pleaded guilty to charges that he ran a Ponzi scheme that took in more than $2.5 million from investors. Rogers was an investment advisor who was accused of misleading investors by misrepresenting that their investment funds would be used to lawfully generate a return.

    Yamila Salvia, 38, was charged with running a Ponzi scheme that involved plane-ticket sales to Cuba. Salvia solicited investments in her purported business to buy discounted bulk airline tickets to Cuba and then reselling them at a profit. She promised investors returns of 12% to 20%.

    Steven C. Scudder, an attorney, was charged with aiding and abetting the alleged Ponzi scheme run by William Apostelos with the assistance of Apostelos’ sister and her daughter, Rebekah E. Fairchild and Rebekah L. Riddell.

    Joseph Signore, 51, was sentenced to 20 years in prison for running an $80 million Ponzi scheme. Signore’s ex-wife, Laura Grande, 42 was sentenced to 7 years. Paul Schumack, 58, was sentenced to 12 years in connection with the scheme. The scheme was run through JCS Enterprises in which 1,800 investors were promised returns from the supposed sale of video concierge machines. A fourth defendant in connection with the scheme, Craig Hipp, 55, went on trial last year and is serving 7 years in prison.

    Shirley Sooy, 65, pleaded guilty to running a Ponzi scheme through her group of companies known as TransVantage Solutions of Somerville, which were freight payment, logistics and shipping businesses. TransVantage, which Sooy took over from her late husband, would take in billions of advance payments from shipping companies. TransVantage was to audit the transactions and then release the funds to the carriers that delivered the goods. Sooy spent millions of dollars on personal expenses, and the companies were left with $42 million in losses.

    Michael J. Stewart, 68, was sentenced to 14 years in prison and ordered to pay about $9.2 million in restitution in connection with a Ponzi scheme that he ran through Pacific Property Assets. The scheme caused losses of $169 million for hundreds of investors. Stewart ran the scheme with John J. Packard, 65, who pleaded guilty in 2014. They refinanced mortgages and sold properties but were unable to do so at a profit so began using money from new investors to pay earlier investors.

    Michael Szafranski, 37, had his prison sentenced reduced from 30 months to 20 months due to his “substantial assistance” in the prosecution of Frank Spinosa in connection with the Scott Rothstein Ponzi scheme.

    William J. Wells, 42, pleaded guilty to charges that he defrauded 30 victims out of more than $1.5 million. Wells had misrepresented that he was successfully trading stocks and options though his company, Promitor Capital LLC. Wells lost a lot of money in unsuccessful trades and used the rest to fund his personal lifestyle, including payment of credit cards and private school tuition.

INTERNATIONAL PONZI SCHEME NEWS

Chile

    IM Forex, which is affiliated with the massive Ponzi scheme run by AC Inversiones, was charged for allegedly defrauding over 1,500 investors. The firm promised investors returns of 6% per month if they invested over $15,000 and did not withdraw the funds for over a year. The principal of IM Forex, Rodrigo Gonzalez, asserts that the case is a “witch hunt” against investment companies. Allegations were also made that AC Inversiones had misappropriated over $75 million. AC Inversiones filed bankruptcy.

China

    A court has sentenced Jiang Hongwei, 32, to life imprisonment for his role as the head of Guangdong Bangiia Leasing, which ran a scheme that defrauded 230,000 victims out of about HK 11.86 billion. The scheme lured elderly investors in more than 60 cities to buy memberships and to fund phantom loans. The investors were offered returns as high as 47%. Twenty-three others were sentenced in connection with the scheme to terms ranging from 3 to 14 years.

England

    Phillip Boakes had 2 years added to his 10 year sentence due to his failure to pay a confiscation order made at the time of his sentencing. Boakes was sentenced last year following conviction for defrauding at least 30 investors of £3.5 million. Boakes had offered investors returns of 20% on foreign exchange investments in his company, CurrencyTrader.

    Alan Smith, 57, was sentenced to 4 years in connection with a Ponzi scheme that defrauded 40 investors out of £500,000. Smith defrauded women that he met on a dating website into investing in his telecommunications company. He promised them 70% returns.

France

    The alleged Ponzi scheme run by Gerard Lheritier was shut down on allegations that he defrauded 18,000 people in France. Lheritier sold shares in rare manuscripts and letters with a supposed value of nearly 1 billion euros through his company, Aristophil. The company employed hundreds of sales staff and offered returns of 40% over 5 years, or 8% per year. 

India

    Police have alleged that Ramesh Jena has ties to Green India, a Ponzi scheme.

    Sanjay Das Burma was accused of having links to Artha Tatwa (AT) Group, a company accused of running a Ponzi scheme. Das Burma is said to be holding a vehicle for the head of AT, Pradeep Sethy.

    Firoz Khan, the managing director of Safex Infra India Pvt Ltd, was arrested on allegations that he defrauded investors out of more than Rs 15 crore.

    Amit Soni, 34, Ashok Sharma, 33, Rakesh M., 33, Nikunj Kumar, 29, Avinash Shah, 32, and Ankit Kandel, 34, were arrested in connection an alleged scheme through the company Onet.

Poland

    The trial of Marcin and Katarzyna P. began in which they are accused of running a $225 million Ponzi scheme through their investment firm, Amber Gold. They had promised clients rates of up to 16% per year for investments in gold or other precious metals. On the first day of trial, there was a false bomb alarm, and Marcin refused to answer all questions, including his own lawyer’s.

Russia

    Russian President Vladimir Putin signed into law a government bill introducing criminal punishment of up to 6 years of prison for organizing Ponzi schemes. The law provides for criminal liability for Ponzi scheme organizers for obtaining more than 1.5 million rubles ($21,800) in assets belonging to individuals and companies.

South Africa

    Prinasen Dhaver, 29, his parents Dr. Jay Dhaver and Dhanalutchmee Dhaver, his brother Deshan Dhaver, and his estranged wife, Selena Dahver, 26, were all charged in connection with a Ponzi scheme involving R28 million. Aaron Chetty, 27, Hareshmann Baboolal, 31, and Gonicela Rayvan Pillay, 44, were also charged in connection with the scheme. It is alleged that Dhaver, Chetty Baboolal and Pillay solicited investors to invest in entities and trusts they created and that the funds would be used in the trade of diesel and petroleum products by Innovatech International Solutions. Investors were promised returns of 2% to 8%. Innovatech invested some of the money in Carmol Distributors, which is in a liquidation proceeding.

Taiwan

    A couple known as “Shi” are accused of defrauding over 1,000 investors in a high-yield investment scheme that promised a 250% return on Bitcoin invested.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The Fourth Circuit affirmed the lower court’s ruling that Florida Congressman Alan M. Grayson, and his trust, AMG Trust, cannot sue Cyprus-based Vision International People Group PL because the company did not have sufficient contacts with the U.S. Grayson sought to bring claims against Vision International for its involvement in the Derivium Capital LLC Ponzi scheme.

    Many of the claims brought by the trustee of the Bernard Madoff Ponzi scheme were dismissed in a ruling that narrowed the scope of his complaint to recover $220 million in transfers made to Legacy Capital and Khronos LLC. Picard v. Legacy Capital Ltd. (In re Bernard L. Madoff Securities LLC), 2016 Bankr. LEXIS 777 (S.D.N.Y. Mar. 14, 2016).

    A district court certified a class of investors who seek to pursue claims against MRI International, Inc., Edwin J. Fujinaga, Junzo Suzuki, Paul Musashi Suzuki, LVT, Inc. dba Sterling Escrow. Takiguchi v. MRI International Inc., 2016 U.S. Dist. LEXIS 36129 (Mar. 21, 2016). The case is brought on behalf of 8,700 investors who invested with MRI International.

    A court denied the motion of Mizuho Bank Ltd. to dismiss claims brought by a proposed class of investors accusing the bank of defrauding clients of Mt. Gox, a now defunct bitcoin exchange. The lawsuit alleges that the bank contributed to the fraud by refusing to process outgoing transfers of investors’ funds while continuing to accept deposits.

    The Eighth Circuit ruled that Marlon Quan, a hedge fund manager, must pay back $81 million in profit he received for aiding Thomas Petter’s Ponzi scheme. SEC v. Quan, 2016 U.S. App. LEXIS 5202 (8th Cir. Mar. 22, 2016). Quan had sought a new trial, but the SEC sought a disgorgement order. The appellate court found that the jury instructions in the lower court were sufficient and that the district court was authorized to order disgorgement. Quan’s companies, Acorn Capital Group LLC, ACG II, LLC, and Stewardship Investment Advisors LLC, were co-defendants in the action.

    A jury verdict was issued in the case of Feldman v. Raggi & Weinstein LLP CPAs & Consultants in connection with the Ponzi scheme run by Ira Pressman and PJI Distribution Corporation. The bankruptcy trustee of Pressman and PJI had alleged that the accounting firm was “willfully blind” to evidence of their clients’ wrongdoing, which allowed the Ponzi scheme to grow. The trustee alleged that the firm prepared tax returns and financial statements that they knew were misleading, and then Pressman used this false financial information to obtain bank financing and solicit investments into the scheme. Pressman is currently serving an 8 year sentence.

    The Supreme Court denied the petitions for certiorari seeking to overturn the convictions of two former Stanford Financial Group executives for their role in the Stanford Ponzi scheme. Gilbert Lopez Jr. was the former chief accounting officer for Stanford Financial Group and Mark Kurht was a former executive as well. 

    The Fifth Circuit dismissed investor claims against law firms Proskauer Rose LLP and Chadbourne & Parke LLP in connection with the Allen Stanford scheme.  Troice v. Proskauer Rose LLP, 2016 U.S. App. LEXIS 4480 (5th Cir. Mar. 10, 2016). The court found that the lawsuit was barred by attorney immunity. About 18,000 investors claimed that the law firms knew that Stanford was selling fraudulent certificates of deposits.

    Former U.S. Ambassador to Ecuador, Peter Romero, was ordered to return $788,655 to the receiver of the R. Allen Stanford Ponzi scheme. Janvey v. Romero, 2016 U.S. App. LEXIS 4835 (5th Cir. Mar. 16, 2016). Stanford had paid Romero to be his international adviser for 8 years. The Fifth Circuit rejected Romero’s claims that the receiver did not timely file the complaint.

    The trustee of TelexFree reached a settlement with PricewaterhouseCoopers for repayment of $115,000 that was paid by TelexFree to Pricewaterhouse prior to the filing of the TelexFree bankruptcy case.

February 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for February 2016. The reported stories reflect: 10 guilty pleas or convictions in pending cases; over 108 years of newly imposed sentences for people involved in Ponzi schemes; at least 10 new Ponzi schemes worldwide involving more than $8.6 billion; and an average age of approximately 53 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.

    Terina K. Carney aka Terina Humphey, 50, was sentenced to 3 years in prison for her role in a Ponzi scheme to which she plead guilty. Carney ran the scheme through her company, Riverside Lease LLC, and told investors that their money would go to a business as a short term loan while the business awaited funding from a bank. Carney took in about $700,000 and kept about $400,000 of that amount for herself. 

    Whileon Chay, 39, and his company, 4X Solutions, Inc., were ordered to pay about $10 million in penalties and disgorgement in connection with a commodities scheme. Chay and 4X solicited $4.8 million from at least 10 participants, promising them 24% to 36% returns per year.

    Fred Davis Clark Jr., 57, was sentenced to 40 years in prison for his role in an alleged $300 million Ponzi scheme run through Cay Clubs Resorts and Marinas. The court also ordered Clark to forfeit $303.8 million for defrauding a bank and $3.3 million for obstructing the SEC’s investigation. The scheme, which took in more than $300 million from about 1,400 investors, offered returns for investments in the development of luxury resorts.

    David Richard Dance, 64, was sentenced to 4 years in prison for a Ponzi scheme that defrauded 10 victims out of $3.2 million. Dance was an “exchange facilitator” who purportedly held money for people that had sold investment properties until they reinvested the money in other properties. Dance invested the money with a developer, Brett Amendola, who defrauded Dance.

    Rebekah E. Fairchild, 53, and Rebekah L. Riddell, 30, pleaded guilty to charges relating to their role in a $30 million Ponzi scheme that defrauded more than 450 investors. Fairchild is the sister of William Apostelos, 54, and Riddell is her daughter. They were the receptionist and administrative assistant in Apostelos’ scheme. Apostelos and his wife, Connie Apostelos aka Connie Coleman, 50, are free on bond while they await their criminal trial. The Apostelos operated many companies, including WMA Enterprises LLC, Midwest Green Resources LLC, Roan Capital, Coleman Capital Inc., and Silver Bridle Racing LLC.

    Sidney M. Field was ordered to pay up to $16 million in reimbursements and penalties for his role in the $1.76 billion Medical Capital Holdings Inc. Ponzi scheme. The scheme had involved the sale of promissory notes with a promise that the money would be used to fund the medical device business. 

    John Fox, owner of Premier Cru dba Fox Ortega Enterprises, filed for bankruptcy while the FBI continues to investigate the wine entrepreneur. Premier Cru filed bankruptcy last month listing $70 million in debts owed to more than 9,000 customers and only about $6.8 million in wine inventory. Fox filed for bankruptcy this month claiming zero to $50,000 in assets and $50 million to $100 million in debts. Premier Cru sold wine at very low prices to customers who were willing to wait for future delivery or would pay “pre-arrival” of the wine. The wines were supposedly rare wines that were still in the bottling process. The trustee in the Premier Cru has confirmed that there are about 35,000 bottles of wine and that American Express is the largest creditor since it refunded charges made by customers for wines they did not receive.

    Robert Allen Helms and Janniece S. Kaelin were indicted on charges that they ran an $18 million Ponzi scheme through Vendetta Royalty Partners Ltd. and Iron Rock Royalty Partners LP. The alleged scheme defrauded at least 80 investors and involved oil and gas royalties which the companies had supposedly acquired, but which they had not. The indictment alleges that Vendetta transferred $2 million to Haley Oil Co., which Helms and Kaelin controlled. Haley Oil then transferred the money back to Vendetta.

    Allen R. Hess, 51, was arrested on allegations that he ran an alleged Ponzi scheme by convincing investors to invest in oil overseas. Hess pretended to be a knowledgeable investor to convince the investors to invest in his scheme.

    Jason Keryc, 38, was sentenced to 9 years in prison and ordered to pay $179 million in restitution for his role in the Agape World Inc. Ponzi scheme that defrauded about 5,000 investors. Keryc had been convicted by a jury and was found to have helped bring in more than $611 million from about 1,600 investors into the scheme. Keryc took about $9 million in commissions. The scheme, run by Nicholas Cosmo, defrauded more than 3,800 investors out of more than $370 million. Cosmo is currently serving his 25 year prison term.

    Tanisha Melvin, Ambert Mathias, and Marcia Caulder pleaded guilty to charges in connection with a Ponzi scheme run through Smith Advertising run by Gary Truman Smith. The three woman admitted to creating false invoices which allowed Smith to bring in new investors to pay off investors who wanted to get out of the scheme.

    Frederick E. Monroe Jr., 59, was sentenced to 5 1/3 to 16 years in prison for his involvement in $5 million Ponzi scheme that defrauded more than a dozen investors. Monroe was a vice president at Capital Financial Planning, where he had wealthy clients invest millions of dollars with him.

    James E. Neilsen, 55, was sentenced to 8 years in prison for operating a Ponzi scheme through Neilsen Financial Services and Ulysses Partners, LLC. The scheme defrauded investors out of more than $1.6 million and had promised investors returns of 9% to 10.5%.

    Gina Palasini, 54, who is awaiting sentencing in connection with a Ponzi scheme, was sentenced to 10 years in prison on a bad check charge. Palasini’s scheme involved her claims that her companies helped clients obtain veterans affairs and Medicaid benefits.

    Robert Rocco, 48, was sentenced to 51 months in prison after pleading guilty to running a $5 million Ponzi scheme through his company Limestone Capital Services. Limestone purportedly provided wholesale financing of cigarette purchases for a tobacco shop on a Native American Reservation. The company also supposedly provided credit card services to retail users seeking to purchase cigarettes from the Reservation. Investors were promised returns of 15% to 18%. More than two dozen investors were defrauded in the scheme. Rocco also defrauded at least one victim through his other company, Advent Equity Partners.

    Jonathan E. Rosenberg, 47, pleaded guilty to his involvement in a $148 million Ponzi scheme. Robert Feldman, 68, and Douglas A. Kuber, 55, previously pleaded guilty to their participation in the scheme. Richard Shusterman, 53, has pleaded not guilty. The scheme involved Rosenberg’s and Kuber’s company, Account Receivable Services LLC, which contracted with Feldman’s company, International Portfolio, Inc., to purchase and collect accounts receivable from hospitals. IPI acquired the accounts receivable, bundled them into investment portfolios, and then sold the portfolios to ARS at a discounted rate. Rosenberg owned three other companies that also recruited investors for medical accounts receivable portfolios - JER Receivables, LLC; International Portfolio Access, LLC; and Receivable Partners, LLC.

    Michael Schmidt, 60, was sentenced to 3 years in prison for defrauding 30 victims out of more than $744,000. Schmidt told his investors that they were investing in Toner Depot, a business which had contracts with Tennessee Eastman Company.

   Michael Skupin, 54, was charged with possession of child sexually abusive materials, larceny and racketeering in connection with a Ponzi scheme he was running as a gifting scheme called Pay It Forward. Victims would make $10,000 cash investments and would eventually be paid out of new investors’ money. Skupin’s computer was searched in connection with the investigation, which led to the child pornography charges. Skupin maintains his innocence in connection with the charges.

    Jerry Stauffer, 67, was convicted in connection with a $1.8 million Ponzi scheme that defrauded about 15 investors. Stauffer promised investors 5% returns but instead used their money for personal expenses and to pay returns to investors.

    United Development Funding was raided by the FBI on allegations that it was running a $1 billion Ponzi scheme. After the raid, the publicly traded shares of United Development Funding IV fell more than 50%. The allegation is that the company created new real estate investment funds to pay investors in old real estate investment funds.

    Charles S. Wang, 53, and Qian Cathy Zhang, 53, were ordered to disgorge $2.019 million and pay civil penalties in connection with the eAdGear Holdings Limited and eAdGear Inc. scheme. Francis Y. Yuen, 54, and Laurata P. Chan, 55, were ordered to disgorge $1.571 million. 

    Sydney “Jack” Williams, 67, was sentenced to one year and one day in prison for evading bank reporting requirements. The sentence was the same given to his wife, Lorie Ann Williams, for trying to conceal assets in a bankruptcy case resulting from their involvement in the $930 million Nevin Shapiro Ponzi scheme. Williams had been paid $12 million in commissions and fees in connection with the scheme, but was not charged criminally in connection with that scheme. He had, however, previously received a one year sentence for failing to report $6.4 million in taxes. They withdrew just under $10,000 at a time to avoid reporting the cash withdrawals from their bank accounts. 

INTERNATIONAL PONZI SCHEME NEWS

Australia

    The alleged Ponzi scheme run by Gunter Lang, 75, has collapsed. Lang was an unlicensed financial trader who lost about $7 million of investor funds. It is believed that 32 investors invested with Lang, who used the online platform, IG Markets.

    A judge found that Arena Capital, traded as BlackfortEx, was running a “simple Ponzi scheme.” Arena Capital, which has been in receivership since last May, has about 1110 clients who are owed about $7 million. Arena was run by Jimmie McNicholl, and the company was shut down last May.

Canada

   Doris Elizabeth Nelson, 56, was fined $37 million for her Ponzi scheme run through Little Loan Shoppe. The scheme defrauded 121 investors who invested $19 million. The scheme promised investors returns of 40% to 60%. Nelson pleaded guilty in 2014 and was sentenced to 9 years in prison. Nelson was fined 8.5 million for the money lost by investors and another $18.5 million in penalties.

China

    Chinese authorities accused Ezubao Ltd. and its parent, Yucheng International Holdings Group Ltd. of running a Ponzi scheme. Ezubo was an online peer-to-peer financing platform that pitched high-yield investments. Twenty-one executives, including founder Ding Ning, 34, and former Ezubao president Zhang Min, were arrested on suspicion of defrauding at least 900,000 investors out of $7.6 billion. Two excavators were used to uncover about 1,200 account books. Investors were promised annual returns, ranging from 9% to 14.6%.

England

    CWM FX took in about $73 million from investors who had been promised monthly returns of 5%. CWM FX was an online foreign exchange trading partner of Chelsea Football Club. The defrauded victims consisted of about 450 Gurkhas and Nepalese community members.

    Jolan Marc Saunders, 39, Michael Dean Strubel, 54, and Spencer Mitchell Steinberg, 46, were found guilty of conspiracy to defraud investors through Saunder’s company, Saunders Electrical Wholesale Ltd. Strubel was found guilty of abetting Saunders by soliciting investors. They represented that the company was supplying electrical goods to respected hotel chains and that it had a contract with the Olympic Village for the 2012 London Olympic Games. The scheme involved £45 million.

    Peter Pimley, 67, and his wife Wendy Pimley, 60, were accused of running a Ponzi-like scheme that defrauded more than a dozen investors.

    Geoffrey William Langdale, 64, who is already serving a 6 year prison sentence, was banned from the Insolvency Service when it was determined that he dishonestly obtained £2.3 million from clients. Langdale ran the fraud through his company, Langdale Accountants Limited, and told investors their funds would be invested in a high interest bearing savings account and could be withdrawn on 90 days’ notice.

India

    Allegations were made that Freedom 251 smartphone is a Ponzi scheme. The phone, being sold for $3.67, is being touted as the world’s cheapest smartphone, causing some to say it is too good to be true.

    Kamalakant Dhupati, the director of Adarsh Group, was arrested on charges that he ran a Rs 50 crore Ponzi scheme that defrauded investors.

Israel

    Aviv Talmor, the controlling shareholder of Utrade, was arrested on charges that he defrauded 600 clients in an investment program. Utrade, which had no license for managing investment portfolios, allegedly made false presentations to persuade clients to invest. The investors were provided access to a virtual account that falsely represented the amount in the account. It is believed that there are about $12 million of losses.

Italy

    Patrizio Benvenuti, an Argentine Vatican priest, was accused of running a $34 million Ponzi scheme along with Christian Ventisette. Benvenuti was put under house arrest in Italy earlier this month, and Ventisette was arrested in Madrid. Benvenuti held dinners, boasting of his Vatican connections, and persuaded about 300 million to put money in an investment fund and to donate to charity. The scheme was discovered when Benvenuti’s housekeeper started receiving paperwork at her home referring to a trust that had been set up in her name. Police have seized property, bank accounts and other items worth $11 million, including a luxurious Tuscan villa.

Singapore

    Sim Tee Peng, 39, was sentenced to 7 years and 5 month in prison in connection with a Ponzi scheme that took about $1.8 million from 21 victims. Peng took money from individuals who believed they were paying conveyancing fees in connection with their purchase of properties.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The Seventh Circuit upheld the 50 year prison sentence of Timothy Durham. U.S. v. Durham, 2016 U.S. App. LEXIS 1780 (7th Cir. Feb. 3, 2016). Durham had been convicted in connection with his Fair Finance Co. Ponzi scheme that defrauded 5,000 investors out of $200 million. The Seventh Circuit had previously ordered the lower court to re-sentence Durham when it found that the government presented insufficient evidence to support $300,000 in alleged transfers. The lower court then found that this wouldn’t have made a difference in the length of the sentence.

    The trustees of the Fairfield Sentry funds were denied their attempt to intervene in a proposed $55 million settlement between PricewaterhouseCoopers LLP and a class of investors relating to the Bernard Madoff scheme.

   The trustee of the Bernard Madoff scheme sought to block a proposed $64 billion class action lawsuit against Jeffry Picower, asserting that the class action is barred by a 2011 settlement. The complaint had previously been dismissed as being derivative of the trustees claims, but the plaintiffs now contend they have direct claims.

    The trustee in the Bernard Madoff case asked permission to amend his complaint against accountant Steven Mendelow so that he can add allegations that Mendelow knew that Madoff was not making stock trades. Rather, the trustee alleges that Mendelow received “special financial benefits,” including a 17% return on some of Mendelow’s accounts, in exchange for Mendelow referring new investors to Madoff.

    Mizuho Bank filed a motion to dismiss a lawsuit by clients filed in Illinois accusing it of aiding the Mt. Gox scheme. The Japanese bank says there is no basis for the claims and that the case should be heard in Japan.

    The Ninth Circuit upheld the lower court’s dismissal of claims against Stonefield Josephson Inc. in connection with the Private Equity Management Group, or PEMGroup, Ponzi scheme. Mosier v. Stonefield Josephson, Inc., 2016 U.S. App. LEXIS 3118 (9th Cir. Feb. 23, 2016). The appellate court agreed that the receiver could not sue on behalf of the defrauded investors regarding Stonefield’s audits because there had not been a showing of “reasonable reliance” and causation.

    The Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC) issued a $4 million joint penalty against Gibraltar Private Bank and Trust for “substantial” anti-money laundering deficiencies. The bank was found, among other things, to have failed to file at least 120 suspicious activity reports involving about $558 million in transactions in connection with the Scott Rothstein Ponzi scheme. Rothstein was sentenced to 50 years in prison in connection with his Ponzi scheme.

    The former CEO of Gibraltar Private Bank, Steven Hayworth, sued the bank, alleging fraud and breach of contract and seeking $40 million in damages. Hayworth alleges that he was used as a scapegoat by the bank’s board of directors and pressured into leaving after Gibraltar settled several of the lawsuits relating to the Scott Rothstein Ponzi scheme.

    The receiver of the $7 billion Allen Stanford Ponzi scheme is seeking to distribute another $50 million to victims, bringing the total distribution to about 2.5% of the victims’ claims.

    Chadbourne & Parke agreed to a settle claims by investors in the R. Allen Stanford Ponzi scheme. The terms of the settlement are confidential. The firm of Proskauer Rose and Stanford’s former lawyer, Thomas Sioblom remain as defendants in the case. Separately there are other class actions moving forward against Greenberg Traurig and Hunton & Williams.

   The assets of two promoters of the TelexFree scheme were frozen. A court froze the assets of Danill Shoyfer and Scott Miller, although neither has been charged by the SEC.

    The ZeekRewards receiver is seeking to recover $13.2 million from payment processing companies, Payza and Payment World.

January 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2016. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 70 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 53 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.

Angelo A. Alleca, 46, and Mark Morrow, 54, were indicted on charges that they operated a Ponzi scheme through Summit Wealth Management and Detroit Memorial Partners, promising returns to investors from investments in hedge funds and fixed-income securities. They falsely promised investors promissory notes secured by real property. The scheme allegedly defrauded more than 300 investors out of $35 million.

Lori Ann Anderson, 53, pleaded guilty to running a Ponzi scheme that defrauded about 70 investors out of over $1.7 million. Her investment business, SMTS Association, was a type of trading club.

Nikolai S. Battoo was the subject of a $500 million fine and restitution order in connection with a $140 million Ponzi scheme that defrauded about 250 pool participants. He ran a group of businesses under the name BC Capital Group. The CFTC sued them for fraud 3 years ago alleging that they committed fraud by failing to disclose the exposure of their investments in the Bernard Madoff Ponzi scheme as well as other trading losses that were suffered.

Roger Stanley Bliss, 57, was sentenced to one year and one day in prison in connection with a Ponzi scheme. He was convicted for obstruction of justice and a false declaration for violating a court order obtained by the SEC to freeze his assets when he gave his sailboat to his brother-in-law, Kevin Carl Fortney.

Diane Cobb, 58, was sentenced to 41 months in prison for her operation of a Ponzi scheme along with her business partner, Paul Sloane Davis, 76, through DM Financial. Cobb is a former mortgage broker who defrauded investors by promising returns from bridge loans that would be made to borrowers to purchase residential real estate. Cobb and Davis profited by more than $1 million from the scheme. Davis was sentenced to 3 years in prison.

Darryle Douglas is still the subject of an ongoing investigation and is wanted by the FBI, following his arrest that was ordered last month. Douglas violated a court order in connection with the ZeekRewards receivership case to turn over the ZeekRewards database and other information. Douglas is believed to now be associated with another possible scheme, Auction Attics.

Chad R. Deucher, Richard Clatfelter, and Marquis Properties LLC were named in an SEC complaint seeking an asset freeze.  The SEC alleged that the defendants were operating a Ponzi scheme and promising returns of 8% to 12% annually that were supposedly risk-free because the investments would be secured by a first deed of trust on the property. The scheme raised at least $28.2 million from more than 250 people. Marquis was supposedly an experienced property management company that specialized in acquiring and managing properties and was selling interests in “turnkey real estate properties, promissory notes secured by real properties, and joint venture agreements to purchase real properties.” The SEC alleged that investor funds were used to pay personal expenses, including payment of about $400,000 to Deucher’s wife.

Rebekah Fairchild and Rebekah L. Riddell both agreed to plead guilty to one count of conspiracy in connection with the $70 million Ponzi scheme run by William Apostelos. The scheme allegedly defrauded nearly 500 investors. Apostelos and his wife, Connie Apostelos, are free on bail pending their trial scheduled for May 2016. Fairchild was the receptionist for the business and handled accounts and banking activities. Riddell was an administrative assistant who allegedly prepared promissory notes, prepared investor statements, and communicated with investors.

Tate George, 47, was sentenced to 9 years in prison and ordered to pay $2.55 million in restitution in connection with a Ponzi scheme he operated through The George Group. George is a former professional basketball player who defrauded victims, including other professional athletes, by promising them returns from a supposedly successful real estate development company that had a portfolio of $500 million in assets.

Coral Rose Grant and her husband, Mac Grant, were accused in a class action lawsuit of running a Ponzi scheme through their company, The Secret to Life Coaching. The lawsuit alleges that Coral and Mac stole between $8 million and $20 million.

Lawrence Leland “Lee” Loomis, 58, pleaded guilty to charges related to a Ponzi scheme in which he took in more than $10 million of investor funds from 50 individuals through his company Loomis Wealth Solutions. Loomis promised 12% returns to investors through the purchase of life insurance policies or real estate investments.

Matthew McClintock aka Michael Willis was accused of defrauding at least 70 investors and 9 businesses in an alleged Ponzi scheme involved $25,000. McClintock solicited investors for a film project that purportedly featured Clint Eastwood. McClintock promised that the show would air on PBS and that a portion of the proceeds would go to the Western Montana Breast Cancer Fund.

Steven McKinlay, 58, and his wife, Kristi McKinlay, 56, were charged with running a Ponzi scheme through their company, God’s Sports Company. The company raised more than $3 million from investors for a prototype baseball. The funds were used to make payments to existing investors, for personal expenses, and for at least a $50,000 donation to their church.

Istvan Merchenthaler, 45, was sentenced to 11 years and 8 months in prison and ordered to pay $3.4 million in restitution in connection with a scheme that defrauded more than 250 investors out of $3 million. The scheme was run through his company, PhoneCard USA, a supposed prepaid phone-card and cellphone distributor. Merchenthaler was arrested in 2012 and fled when he was out on bail, but was ultimately located in 2013 when authorities found him along with multiple firearms and ammunition.

James E. Neilsen, 55, was sentenced to 8 years and one month in prison in connection with his Ponzi scheme that defrauded investors out of $1.6 million. The scheme was run through Ulysses Partners and Neilsen Financial Services. Investors were promised returns of 9% to 10.5%.

Brent Lee Newbold, 58, was sentenced to 4 years and 3 months in prison and ordered to pay $2.9 million in restitution in connection with a Ponzi scheme that defrauded 13 investors.

Rose Marie O’Reilly, 63, was sentenced to 4 years in prison and ordered to repay around $1.4 million in restitution in connection with a Ponzi scheme involving pink diamonds and silver antiques. O’Reilly defrauded investors by falsely claiming that she could buy and sell items owned by famous musicians or mob bosses for huge profits. O’Reilly had pleaded guilty last year.

Randy Poulson, 45, was sentenced to 6 years in prison for a Ponzi scheme that he ran through Equity Capital Investments. Poulson had admitted defrauding distressed homeowners by coaxing them to give him their houses and then soliciting fake real estate investments from private investors secured by those properties. Poulson netted more than $3 million from the scheme.

Richard Reynolds, 54, filed an appeal of his conviction relating to a $4 million Ponzi scheme that defrauded 140 investors. Reynolds was sentenced to 60 years in prison and ordered to pay $4.45 million in restitution. Prosecutors allege that Reynolds used his affinity with ministers, pastors, evangelists and other church-related people to solicit investors. Reynolds has appealed, claiming that the lower court improperly denied his motion to dismiss the case for a speedy trial violation.

Jeffrey Bruce Risinger has been barred for life from ever working in the securities industry or associating with any FINRA member institution. The sanction stems from an alleged Ponzi scheme that raised $15 million from 80 investors. Risinger ran the scheme through Veros Partners along with Matthew D. Haab and Tobin J. Senefeld.

Joel Wilson, 33, was convicted on charges including securities fraud in Saginaw County. Last year, Wilson was sentenced to 8 years to 20 years in connection with his scheme run through The Diversified Group Advisory Fund LLC. The scheme defrauded about 120 investors of about $6.4 million.

Thomas Franklin Tarbutton, 56, was found guilty in connection with a scheme run through Villa Capital Inc. that involved 11 victims and over $3 million. Investors understood that they were funding mortgages that would pay quick profits. A warrant had been issued for Tarbutton’s arrest in 2011, and Tarbutton fled to Brazil and then to Panama. He was detained in Panama in 2014, and returned to the U.S. to stand trial.

Steven Wessel aka Wes Wessels, 58, was sentenced to 4 years and 7 months in prison and ordered to pay $499,000 in restitution for his role in a scheme run through Steeplechase USA, LLC.

Robert Scott Wiens, 53, was sentenced to one year in jail and agreed to pay $260,000 out of $734,140 in restitution. Wiens had promoted an investment program in RXM Holdings Ltd., which he held out to be a proprietary trading operation. Wiens claimed to be a specialist in the purchase and sale of U.S. Stock Index future contracts.

Lorie Ann Williams, 49, was sentenced to one year and one day in prison for her role in evading requirements for bank reporting in connection with the her husband’s involvement in the $900 million Nevin Shapiro Ponzi scheme run through Capitol Investments USA Inc. Williams’ husband, Sydney “Jack” Williams, had brought about 60 people into the scheme and he was paid about $18 million in commissions while the investors lost $38 million. Lori Williams began withdrawing funds from her husband’s account in increments of less than the $10,000 limit to evade the currency reporting threshold after lawsuits were filed against him.

Joseph Paul Zada, 57, was sentenced to 17½ years in prison in connection with a scheme in which he defrauded more than 20 investors out of more than $20 million and possibly as much as $37 million. Zada promised that he would put the investors’ funds into oil ventures and currency trading through a top-secret board headquartered in London.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Provisional liquidators were appointed over 5 companies believed to be operating a Ponzi scheme. The companies are CME Capital Australia Pty Ltd., Boston Pacific Capital Australia Pty Ltd., GKN Capital Pty Ltd., Boston Pacific Capital Pty Ltd. and IMCG Pty Ltd. The companies raised about $13.55 million from investors. ANZ and the Commonwealth Bank of Austria were listed among the 13 co-defendants in the case.

Canada

The trial of Quintin Earl Sponagle, 51, was moved to Halifax due to the long length expected for the trial. Sponagle sought to further delay the trial because he does not have counsel. He is accused of defrauding 179 investors out of more than $4 million through his company, Jabez Financial Services Inc.

China

The government issued a warning to the public that the Russian-based website run by Sergei Mavrodi, known as MMM Global, is operating illegally in the country and is unlicensed to attract investors online. The notice stated that Mavrodi had served 4½ years in prison because of prior activities in defrauding investors.

India

Nirmal Singh Bhangoo was arrested in connection with his role in the Pearls Group Ponzi scheme. Bhangoo was affiliated of both PGF Limited and Pearls Australasia Private Limited. Others arrested in connection with the scheme are Sukhdev Singh, Gurmeet Singh, Subrata Bhattacharya. They were arrested almost two years after CBI had begun investigating the alleged Rs 45,000-crore ($6.7 billion) Ponzi scheme. The Pearl entities own more than 183,000 acres of land in India, and the scheme is believed to have defrauded 55 million investors.

The CBI took Gautam Kundu into custody. Kunda was the head of the Rose Valley Ponzi scheme.

Singapore

Sim Tee Peng pleaded guilty to having defrauded 21 victims out of more than $1,785,000 by acting as a paralegal supposedly helping four law firms. Peng represented himself as a lawyer and took victims money who thought they were buying properties for the purpose of paying conveyancing fees. He would instruct victims to deposit stamp duty payments into his personal bank account, telling the victims that he had issued payments on their behalf.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Sixth Circuit upheld the convictions of John Joseph Bravata and Antonio Bravata and also upheld John Bravata’s 20 year sentence. U.S. v. Bravata, 2016 U.S. App. LEXIS 1120 (6th Cir. Jan. 22, 2016). The father and son had been convicted of running a Ponzi scheme through BBC Equities, LLC. A third defendant, Richard Trabulsy, had pleaded guilty prior to trial. Antonio did not appeal his 5 year sentence.

The Tenth Circuit reversed the district court’s order dismissing the criminal case against Claud “Rick” Koerber with prejudice. U.S. v. Koerber, 2016 U.S. App. LEXIS 994 (10th Cir. Jan. 21, 2016). Koerber was indicted on charges that he ran a $100 million Ponzi scheme, but his criminal case remained pending for more than 5 years without reaching trial. The district court found a violation of the Speedy Trial Act, but the appellate court remanded, finding that the district court abused its discretion by considering improper factors regarding the seriousness-of-the-offense factors and by failing to fully consider Koerber’s own actions that may have contributed to the speedy-trial delay.

The trustee of the Bernard Madoff Ponzi scheme reached a settlement with Vizcaya Partners Ltd. a British Virgin Islands hedge fund, and its affiliates. Vizcaya agreed to pay $24.9 million to the trustee for their role as a feeder fund in the Madoff scheme.

PricewaterhouseCoopers LLP agreed to pay $55 million in connection with the Bernard Madoff Ponzi scheme to settle a class action lawsuit alleging that it failed to recognize and alert investors to red flags in connection with the scheme. The settlement will be paid to owners of shares or limited partnership interests in funds managed by Fairfield Greenwich Ltd. PWC did not admit any wrongdoing in the settlement.

The Second Circuit ruled that James Dimon, the chief executive of JPMorgan Chase & Co., along with 12 others, cannot be sued by the Steamfitters Local 449 Pension Fund and the Central Laborers’ Pension Fund for the alleged failure to flag irregular transactions in the account of Bernard Madoff’s business. The lawsuit had alleged that “JPMorgan – at its highest level – chose to turn a blind eye.”

An appellate court upheld a lower court decision in the Bernard Madoff case determining the proper method for calculating customers’ claims involving inter-account transfers .

A New York court of appeals affirmed the dismissal of a lawsuit against KPMG International and KPMG U.K. accusing them of wrongful conduct in connection with audits of Madoff Securities International Ltd. The court held that the New York courts did not have jurisdiction over the claims because the harm did not occur in New York.

A New York appeals court upheld the lower court’s dismissal of a lawsuit filed by investors in Bernard Madoff’s scheme that alleged HSBC Private Bank had breached its fiduciary duty and had wrongfully frozen their assets. The court found that the accounts agreements explicitly authorized the bank to freeze the accounts.

The Sixth Circuit denied the appeal of David McQueen, seeking to overturn his conviction.  U.S. v. McQueen, 2016 U.S. App. LEXIS 1052 (6th Cir. Jan. 19, 2016). McQueen was sentenced to 12 years in connection with a Ponzi scheme he had run through Multiple Return Trading along with Trent Francke. The scheme defrauded about 800 investors out of $46 million. McQueen had also established three other investment funds – International Opportunity Consultants, Diversified Global Finance and Diversified Liquid Asset Holdings. The appellate court found that sufficient evidence to convict McQueen and that his sentence did not violate the Eighth or Fourteenth Amendments and was not substantively or procedurally unreasonable.

A class action was filed against City National Bank, alleging that the bank helped Joel Barry Gillis, 75, and Edward Wishner, 77, run a $125 million Ponzi scheme through Nationwide Automated Systems Inc. City National Bank was the primary bank used by Gillis and Wishner. The investors’ complaint alleged that the bank "had before it the very nuts and bolts of the Ponzi scheme and could not perform even cursory due diligence without bumping up against evidence of the fraud. Not only was defendant City National Bank instrumental in lulling investors into a false sense of security by helping to ensure that virtually none of the fictitious profit checks bounced, but it also routinely served as a reference for Nationwide Automated Systems in its recruitment of potential investors."

The First Circuit affirmed the 242 month sentence of Dilean Reyes-Rivera in connection with a Ponzi scheme he operated largely in Puerto Rico that defrauded more than 230 people out of $22 million. U.S. v. Reyes-Rivera, 2016 U.S. App. LEXIS 1512 (1st Cir. Jan. 29, 2016). The scheme was run through Global Reach Trading in which he was president. Reyes-Rivera had pleaded guilty but appealed the length of his sentence. The appellate court found no error in the lower court’s ruling.

The TelexFree trustee filed a class action lawsuit against alleged winners in the scheme, naming 56 promoters. It is reported that there are between 78,000 and 93,000 other potential defendants who reside outside of the United States to be joined in a class action.  TelexFree had as many as 1.9 million participants.

The trustee in the Tom Petters bankruptcy case filed a plan of liquidation. The plan will create a liquidating trust to distribute the $160 million currently in the estate, plus an additional funds that may be brought into the estate through litigation. Petters, 58, was convicted of running a $3.5 billion Ponzi scheme and was sentenced to 50 years in prison.

December 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for December 2015. The reported stories reflect: 6 guilty pleas or convictions in pending cases; over 14 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 47 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.

    Lori Ann Anderson, 53, was charged in connection with an alleged Ponzi scheme in which she solicited investments for the purpose of day trading. Anderson was the agent for SMTS Association, an investment business she ran out of her house.

    Fred Davis Clark Jr. aka Dave Clark, 56, the ex-CEO of Cay Clubs Resorts and Marinas, was found guilty of running a $300 million Ponzi scheme. The scheme promised nearly 1,400 investors returns from the refurbishment of properties into luxury homes, guaranteeing returns of 15% to 20%. Two other Cay Clubs executives, Barry Graham and Ricky Stokes, previously pleaded guilty and were sentenced to 5 years each.

    Homero Joshua Garza, 30, and his companies, GAW Miner, LLC and ZenMiner, LLC, were named by the SEC in an enforcement action charging them with fraud. The defendants were allegedly running a Ponzi scheme by selling Hashlets, which were advertised as the “world’s first digital cloud miner” of virtual currency. Over 10,000 investors invested at least $19 million over a four month period in mid-2014.

    Tracy Gilmond, 45, was charged by the SEC in connection with her role as a promoter of the ZeekRewards $850 million Ponzi scheme. Gilmond spoke at ZeekRewards’ events and solicited investors into the scheme for which she was paid more than $1.7 million in commissions.

    Alex Haxton, 27, pleaded guilty to charges that he ran a fraudulent Internet-based investment scheme that defrauded more than 100 victims.

    Vu H. Le aka Vinh H. Le, 39, and TeamVinh.com LLC was accused by the SEC of running a Ponzi scheme. The scheme allegedly involved the purchase of VPAKs and raised more than $3 million from at least 5,600 investors. Team Vinh was using the name ACCESS WEW, which stood for “A Crazy Cost Effective Self-Sustainable Wealth the Easier Way.” The scheme involved a commodities trading program over the internet, promising 5% weekly returns.

    Levi Lindemann, 39, was charged in connection with an alleged Ponzi scheme that defrauded about 50 investors out of about $2.5 million. Lindemann was a broker who operated an investment firm called Gershwin Financial Inc., which did business as Alternative Wealth Solutions. He had been sued by the SEC last year. Lindemann used over $2.5 million of the $4.3 million that he raised from investors for personal expenses and to pay promised returns to investors.

    Christopher Maguire, 33, pleaded not guilty to charges that he ran a $13.4 million Ponzi scheme.  Maguire is accused of defrauding people associated with several churches and religious organizations and promising them returns of 20% for a “proof of funds” loan business.

    Steven Andrew McKinlay, 58, and his wife, Krista B. McKinlay aka Kristi Kindred, 56, were arrested and charged with operating a $3 million Ponzi scheme through their company, God’s Sports Company. The company offered a prototype baseball bat that offered “leading performance and durability.” They are accused of defrauding more than 10 individuals and using much of the money on personal expenditures such as $10,000 per month rent for their home, their daughter’s wedding, and cars.

    Frederick Monroe, 59, pleaded guilty to charges that he defrauded at least 20 victims of more than $1 million. Monroe solicited funds from investors by promising that he would invest in bonds for their retirement.

    Paul Moore IV, 51, was sentenced to 5 years in prison in connection with a Ponzi scheme he ran through his alleged hedge fund, Coast Capital Management LLC.  Moore took in more than $2.8 million and spent about $1.7 million on himself.

    Wayne Palmer, 60, and his company, National Note of Utah LLC, lost the trial brought by the SEC against them in an enforcement action accusing them of running a Ponzi scheme. The court found that National Note had raised about $100 million from over 600 investors, promising them returns of 12% in a real estate scheme.

    Sann Rodrigues was found in contempt of court in connection with the TelexFree Ponzi scheme case. The SEC alleged that Rodrigues violated a freeze order and transferred more than $334,000 and real estate in violation of the asset freeze.

    Martin Shkreli, 32, was arrested for allegedly running a Ponzi scheme through his company, Retrophin. Shkreli has also been sharply criticized for raising the price of a live-saving drug more than fiftyfold through his other company, Turing Pharmaceuticals. Shkreli has pleaded not guilty. Shkreli resigned from Turing and was terminated as CEO of KaloBios Pharmaceuticals following his arrest.  Evan Greenbel, 42, a New York lawyer, is alleged to have helped Shkreli in his schemes. Both Shkreli and Greenbel pleaded not guilty.

    Joseph Signore, 51, his soon-to-be ex-wife, Laura Grand-Signore, 41, and his business partner, Paul Schumack, 57, were found guilty in connection with an $80 million Ponzi scheme that defrauded investors in a virtual concierge business run through JCS Enterprises. A fourth defendant, Craig Hipp, 54, was previously found guilty and is serving 7 years in prison. Investors would purchase a virtual concierge machine for a fee ranging from $2,600 to $4,500 and were promised returns ranging from 80% to 120% annually.

    Frank Spinosa, 54, was sentenced to 2½ years in prison for his role in the Scott Rothstein $1.2 billion Ponzi scheme. Spinosa used his position at TD Bank to falsely assure some of Rothstein’s investors that their money was safe.

    Marcello Trebitsch, 37, was sentenced to 2 years in prison and ordered to pay nearly $6 million in restitution for his role in defrauding 4 investors out of $5.9 million in a Ponzi scheme that he ran through Allese Capital LLC. The investment supposedly generated annual returns of 14% to 16% through a day trading of large cap stocks. Trebitsch is the son-in-law of Sheldon Silver, the former New York Assembly speaker, who was convicted recently in an unrelated corruption case.

    William Donnelly Yotty, 69, was sentenced to 4 years and 9 months in prison and ordered to pay more than $15 million in restitution to 240 investors who were defrauded in Yotty’s two Ponzi schemes. Yotty operated his schemes through companies including The Money People Inc. and Fortuno Millionaire Club. The schemes involved the purchase of debt instruments for a promise of 25% returns, and a real estate flipping scheme that promised returns of 200% to 300%.

INTERNATIONAL PONZI SCHEME NEWS

Australia

    Maureen Gael Johnston and Douglas Gordon Johnston were charged in connection with a fraudulent scheme run though Investman Nominees (USA) Pty Ltd. and Small Business Management Pty Ltd. Investors were defrauded into investing $1.5 million into property developments in the United States and Australia.

India

    M Srivivas, 63, and has wife, B G Pushpalatha, 55, were arrested in connection with an alleged scheme run through their financial company, Shreyas Groups. Shreyas Groups is an umbrella company associated with Shreyas Finance & Investments, Shreyas Chits, and Shreyas Souharda Co-operative Limited.

    Balasaheb Bhapkar, 56, was arrested in connection with an alleged scheme run through Sai Prasad Group of Companies. The company has interests in real estate, infrastructure, energy, food and films.

    Bijay Ketan Das, the director of High-tech Regional Cooperative Limited, was arrested for allegedly defrauded 5,000 investors.

    At least 18 different locations of Ramel Group of Industries were searched in connection with an alleged Ponzi scheme that raised over Rs 97 crore from investors.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The SEC prevailed on its request to get emails of Steve H Karroum, the president of FX & Beyond Corp. Karroum had asserted that the Fourth Amendment and the marital privilege barred the production of his emails.

    The Trustee of the Bernard Madoff Ponzi scheme sent out checks in the sixth distribution made in the case. The distribution raises the recoveries to victims to $9.16 billion so far, which is about 57% of the cash that they lost.

    A federal judge denied the request of Kingate Global Fund for a quick appeal of a ruling that left intact most of a lawsuit of the Madoff trustee’s clawback lawsuit for $825 million against the feeder fund.

    The Second Circuit declined to reinstate a lawsuit by The R.W. Grand Lodge of Free and Accepted Masons of Pennsylvania against Meridian Capital Partners Inc. relating to losses suffered in the Madoff scheme.

    The Madoff trustee sought to block a lawsuit by investors against Madoff investor Jeffery Picower, whom the trustee had settled with in 2011 in a $7.2 billion settlement.

    The receiver in the Arthur Nadel Ponzi scheme made an additional distribution totaling $3 million to about 350 investors, which brings the recoveries to nearly 47% of their losses.

    Investors in the Martin Sigillito Ponzi scheme lost their claims against two banks in connection with the scheme. 56 victims had sued St. Louis Bank and 91 victims had sued PNC Bank, but the court found that neither bank knew about the fraud being committed in the bank accounts controlled by Sigillito.

    Kroll LLC has agreed to pay a $24 million settlement in connection with the Allen Stanford $7 billion Ponzi scheme. A lawsuit had alleged that Kroll was grossly negligent in submitting a falsely positive report about Stanford.