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

Kathy is a senior business trial attorney with more than 27 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

Tuesday, December 31, 2019

December 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for December 2019. The reported stories reflect at least 7 new Ponzi schemes worldwide; at least 4 guilty pleas and convictions, over 34 years of newly imposed sentences for people involved in Ponzi schemes; 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.
   
Matthew Brent Goettsche, 37, Iovadiah Sinclair Weeks, 38, and Joseph Franks Abel, 49, were charged in connection with an alleged high-tech Ponzi scheme run through BitClub Network. A fourth man, Silviu Catalin Balaci, was arrested in Germany in connection with the scheme. The scheme defrauded investors out of $722 million and took funds from investors to purportedly purchase shares of cryptocurrency mining pools. Internal chat messages intercepted by authorities state that the internal business model was built “on the back s of idiots” by targeting the “typical dumb MLM investor” who will convince other “morons” to join.
   
Lester Burroughs, 60, of Connecticut, pleaded guilty to charges that he ran a $575,000 Ponzi scheme through Burroughs Investment Group, a financial consulting firm. Burroughs was registered as an investment adviser and broker and guaranteed returns to his clients of 4% or 7%. He used investor funds to pay his own expenses and to pay the guaranteed returns to other clients.

Joey Stanton Dodson, 55, was indicted on charges relating to a $15 million Ponzi scheme involving about 50 victims. The scheme was run through Citadel Energy LLC, in which he solicited investments in three limited partnerships that were supposedly providing water-related services to oil and gas companies in North Dakota.

Edward Espinal, of New Jersey, and his company, Cash Flow Partners LLC, were charged by the SEC in connection with a $5 million Ponzi scheme that defrauded at least 90 investors. Many of the investors were members of the Hispanic community. Investors believed they were investing in a pooled fund that would purchase and renovate houses and they were promised guaranteed returns of between 1.25% and 4% per month.
 
Richard E. Gearhart, 69, pleaded guilty to charges that he ran a Ponzi scheme through Asset Preservation Specialists that took more than $6 million from more than 25 investors, resulting in losses of $3.5 million. Gearhart ran the scheme with George R. McKown, 66. They promised returns of 6% to 8% and persuaded investors to invest their existing retirement funds into the scheme.

International Investment Group lost its license due to “a string of frauds” in connection with its investment program in diversified trade finance portfolios. IIG was charged with concealing defaulted loans in its hedge fund and selling at least $60 million in fake loan assets to other clients.
 
Samuel Israel, 60, lost his bid for an early release from his 22-year prison sentence due to medical issues. Israel orchestrated the Bayou Group Ponzi scheme that defrauded investors out of $450 million.

Robert A. Karmann, 53, pleaded guilty to charges relating to his participation in the $960 million Ponzi scheme run though DC Solar that involved the sale and leaseback of mobile solar electrical generators. Investors would supposedly buy mobile solar electrical generators but did not take possession of them. Karmann was the CFO and disseminated false financial information to investors. Ronald J. Roach, 53, of California, pleaded guilty in October and was barred by the SEC this month. Joseph Bayliss, 44, also pleaded guilty to the scheme in October.

Perry Santillo aka King Perry, 39, pleaded guilty to charges in Pennsylvania that he defrauded 1,000 investors out of $113 million. Perry pleaded guilty last month to charges brought in New York.
 
Jamie Smith, 42, of Wisconsin was sentenced to 4 ½ years in prison for defrauding elderly people out of more than $1 million. Smith ran the scheme through American Platinum Gold & Silver Inc. aka American Independent Gold & Silver Inc.
 
Kari Sonovich, 48, was sentenced to 2 years and 3 months in prison in connection with a Ponzi scheme that promised returns of 500% every 90 days. Sonovich told investors their funds would be invested through her Las Vegas company, B&B Consulting Group LLC, by an international trader who would produce high returns.

Randy Wayne Sprinkle, 54, was sentenced to 15 years in prison for defrauding investors out of more than $300,000 in a scheme that misappropriated funds in connection with remodeling projects.

Robert C. Walberg, 58, was charged with running a Ponzi scheme that defrauded more than 20 investors out of more than $5.5 million.
 
Susan Margaret Werth, 58, of California, was sentenced to 5 years and 10 months in prison and ordered to pay $6.3 million in restitution for operating a $6 million Ponzi scheme through Commercial Exchange Solutions Inc. and Exchange Solutions Company Inc. Investors were promised returns  of 15% from purported short-terms construction loans.

Alvin Wilkinson, 61, was sentenced to 7 years in prison and ordered to pay $8 million in restitution in connection with a Ponzi scheme that spanned two decades. Wilkinson is an investment manager who pleaded guilty to defrauding friends, family members and others in a $13.5 million scheme that he ran through Chicago Index Partners LP and Wilkinson Financial Opportunity Fund LP. He promised returns from investments in options and futures.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

Tanya Pluckhahn, 41, and Aaron Parsons, 44, were charged with running a $900,000 scam that took money from investors under the pretense of kickstarting the career of country music singer Alys Ffion, who knew nothing of the scheme. The pair defrauded investors and then paid some money back so investors believed they were getting their money back.

China

Seventy-two people were arrested in connection with an alleged cryptocurrency scheme called CloudToken on charges that they defrauded more than 300 victims out of over $4 million. CloudToken promised 10% to 15% returns on investments. The scheme started in China but was also promoted in Korea, Japan, Indonesia, Malaysia and some countries in Africa.

India

Ajay Chakraborty and Sanjit Chakraborty were arrested in connection with an alleged Ponzi scheme run through Jugantor Realty and Jugantor Gold and Jewellery.

Nanda Chanda, the director of Amanat Group of Companies, was arrested after it was found that the companies were running a Ponzi scheme.

South Korea

Lime Asset Management is facing an investigation over suspicions that it continued to sell investments despite knowledge that certain fund options were invested with a U.S. hedge fund engaged in fraud. The SEC had revoked the registration of International Investment Group in November.
 
Uganda

Samson Lwanga was arrested in connection with an alleged scheme run through Dunamiscoins Resources Limited. The company is allegedly a cryptocurrency scam that defrauded over 10,000 people out of $2.7 million.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Texas Supreme Court found that a Stanford International Bank Ltd. investor could not claim good faith in response to a fraudulent transfer claim seeking recovery of $79 million. The court found that investor Gary Magness suspected fraud and had a duty to investigate that something fraudulent was happening. The court held that a defendant on inquiry notice who does not investigate is not entitled to the good faith defense even if inquiry would have been futile.

Saturday, November 30, 2019

November 2019 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for November 2019. The reported stories reflect at least 12 new Ponzi schemes worldwide; at least 8 guilty pleas and convictions, over 81 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 48 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
   
Mark Alan Blankespoor, 49, was sentenced to 80 months in prison and ordered to pay more than $8.4 million in restitution to more than 100 victims who were defrauded in a $15 million Ponzi scheme. The scheme promised 40% returns in the development of “medically oriented gyms.”
  
Morgan Bullock, 33, was sentenced to one year in prison in connection with a Ponzi-like scheme that defrauded 6 families buying homes out of about $400,000. Through his companies Bullock Building and Development LLC and Silver8 LLC, Bullock took deposits for new homes but did not deliver the homes to the victims.

Neil Burkholz and Frank Bianco, both of Florida, were the subject of an SEC enforcement action seeking a restraining order and asset freeze on allegations that they were running a $6 million Ponzi scheme called the “Amazing Profits Group.” They allegedly defrauded about 55 investors through their companies, Palm Financial Management LLC and Shore Management Systems, and falsely represented that their proprietary options trading strategies were highly profitable. They promised returns as high as 34% at a time when the fund actually  lost 55% of its value. The SEC complaint also names Rhoda Burkholz and Suzanne Bianco as relief defendants.

Marc Celello, 47, of Georgia, pleaded guilty to conspiracy charges relating to the Ponzi scheme run by James Torchia. Celello served as general counsel for several limited liability corporations owned and operated by Torchia that defrauded investors out of $40 million. Celello was vice president and general counsel to Credit Nation and also advised Credit Nation Capital, Credit Nation Acceptance, American Motor Credit, Credit Nation Auto and Spaghetti Junction.

Jin K. Chung, 56, a Korean national living in California, was sentenced to 10 years in prison after pleading guilty to running a $60 million Ponzi scheme with his business partner, Peter Son, 47. The scheme was run through NC Asset Management, Inc. and SNC Investments, Inc. and promised investors 24% to 36%  returns from foreign exchange trading.

Alcibiades Cifuentes, 36, and Jennifer Wee Cifuentes, 38, of New York, each pleaded guilty to defrauding about 25 investors out of more than $500,000 in a Ponzi scheme. They promised returns from investments in foreign currency and commodities markets through their company Cifuentes Fund Management.

Jamie Crager, of Nebraska, was indicted on allegations that he was running a Ponzi scheme through Blazefly.  Blazefly promised returns from rolling several phone apps into one and represented that President Trump was involved. Crager pleaded not guilty.

Derek Elliott, 49, was sentenced to 2 years in prison for his role in a Ponzi scheme involving vacation resorts in the Dominican Republic. Elliott had pleaded guilty about 5 years ago and had been working with authorities to provide evidence against James Catledge, one of the co-conspirators in the scheme.

David Gentile and his company GPB Capital Holdings were accused of running a Ponzi scheme in a class action lawsuit. The firm raised $1.8 billion from at least 2,000 investors to purportedly invest in auto dealerships and waste management companies. GPB promised investors returns of 8% annually.

Jordan Goodman was charged in connection with the Woodbridge Group of Companies LLC Ponzi scheme Goodman was paid almost $2.3 million for raising about $147 million from 1,200 retail investors who invested with Woodbridge.

Ford Graham, 56, and his wife Katherine Graham, 55, of New Jersey, were arrested in connection with a civil contempt order stemming from a jury verdict that they ran a fraudulent scheme through Vulcan Power Group. The Grahams had been sued for failure to pay a commission, among other things and, after appeals, the jury verdict of $2 million was upheld. The New Jersey Bureau of Securities had filed a lawsuit in January alleging violations in connection with a $5 million fraudulent sales of securities for low-risk, high-reward investment opportunities in gas and oil projects.

Hunter Hanson, 22, was sentenced to 8 years in prison in connection with a grain trading scheme that defrauded farmers. Hanson represented that he traded about $23 million in grain, operating Midwest Grain Trading, a roving grain buyer’s business, and then Nodak Grain, a warehouse business.

Konstantin Ignatov, 33, pleaded guilty to charges in connection with the OneCoin cryptocurrency scheme that defrauded investors out of $4 billion. Ignatov is the brother of Ruja Ignatova, 38, who is currently on the run and is accused of orchestrating the scheme. Ignatov has agreed to inform on his co-conspirators and has been offered witness protection.
 
Scott A. Kohn, 65, of California was charged on allegations that he was running a Ponzi scheme through Future Income Payments LLC. The scheme targeted veterans and over 2,600 victims lost about $300 million.
 
Donnie Laing, 39, of Louisiana, was indicted on charges stemming from an alleged Ponzi scheme run through Capital Energy Investments. Laing represented that investors’ funds would be invested in oil and gas equipment which would then be leased to companies engaged in oil and gas exploration.
 
Jay Ledford, 55, of Texas was sentenced to 14 years in prison for his role in the $396 million Ponzi scheme masterminded by Kevin B. Merrill. Ledford pitched investors in the scheme. Merrill was sentenced to 22 years in prison last month.

Anthony Wayne March, 48, was charged with securities fraud in connection with an alleged Ponzi scheme that defrauded at least 22 investors out of more than $8 million. The scheme was run through Asset Trader which is a purported nonprofit tax-exempt company formerly known as CGA Exchange or The CGA Exchange Inc. The company used its tax-exempt status to solicit tax-deductible donations in exchange for charitable gift annuities.

Joseph Meli pleaded guilty to defrauded more than 130 investors out of $95 million on promises that he would purchase tickets to various live events for resale at a profit. Craig Carton, 48, and Michael Wright, 41, were also charged in connection with the scheme. Carton contends he is a victim and is not guilty of the charges.

Stephen Condon Peters, 46, was sentenced to 40 years in prison and ordered to pay $15 million in restitution in connection with a Ponzi scheme run through VisionQuest Wealth Management. Peters promised returns of 8% to 9% per year on low risk investments.

Ruless Pierre, 50, of New York, was accused of defrauding at least 100 investors out of more than $2 million in his investment club, the Amongst Friends Investment Group. Pierre had two separate schemes that mostly defrauded Haitian investors. One was run through R. Pierre Consulting Group LLC in which he promised 20% returns every 60 days to 40% over 60 days. through stock trading. In the second, Pierre embezzled about $400,000 out of bank accounts belonging to two hotels that he previously worked for.

Brett Pittsenbargar of Texas was accused of making $1 million in commissions in selling more than $18 million of securities to at least 45 investors as an unregistered agent in connection with the Woodbridge Group of Companies LLC scheme. Pittsenbargar used his companies, MGM Home Remodeling aka BP Financial and Tax Design Group to sell the investments.

Daniel Rivera, 60, pleaded guilty to charges that he ran a Ponzi scheme through Robbins Lane Properties Inc. Rivera represented that real estate professionals would invest in real estate ventures. Rivera engaged in a $2.7 million Ponzi scheme that targeted approximately 30 investors. Rivera told investors that they would share in the profits of Robbins Lane from the purported buying, redevelopment and selling of properties.

Merrill Robertson Jr., a former Philadelphia Eagles player, pleaded guilty to charges relating to a $10 million Ponzi scheme. Merrill had previously been tried and convicted in connection with the scheme that he ran with Sherman C. Vaughn Jr. through Cavalier Union Investments LLC. The conviction and 40-year prison sentence were vacated and the case remanded. Robertson and Vaughn defrauded more than 60 investors and promised them 10% to 20% returns from business ventures such as restaurants, real estate, alternative energy and assisted living facilities.
 
David Gilbert Saffron and Circle of Society Corp were accused by the CFTC of fraudulent conduct relating to foreign currencies and cryptocurrency. They guaranteed rates of return of up to 300%.

Mark Scott was found guilty of laundering $400 million in connection with the OneCoin crypto scheme. Scott was the lawyer behind the scheme run by Ruja Ignatova. Amer Abdulaziz Salman, 56, who started Phoenix Thoroughbreds in 2017, has been accused of stealing €100 million in connection with the scheme.
   
Burt Whalen, 45, of Indianapolis, was accused of running a Ponzi scheme with Clayton Morris. The scheme was run through Oceanpointe Property Management and involved the renovations of run-down homes. Real estate investors were provided false information about the condition of the properties and fake leases for unoccupied properties.
 
INTERNATIONAL PONZI SCHEME NEWS 

Canada

Todd Norman John Bezzasso was found to have defrauded 85 investors through a Ponzi scheme. The $5 million scheme was run through Bezzaz Holdings Group Ltd. and Nexus Global Trading Ltd. Investors were told that Bezzaz owned Nexus, which was a company that distributed certain brands of alcohol. Bezzaz also supposedly sold health supplements and e-cigarettes. Rates of return between 5% and 30% were promised through post-dated checks and about 85 investors were defrauded. Wei Kai Liao aka Kevin Liao sold $1.6 million worth of securities to 27 investors.

Dubai

Aziz Com Mirza was arrested on charges that he created a fictitious cryptocurrency. The Leverage Programme was one of the ventures through which the scam was run. About 1,200 investors were defrauded. Other scams were run by Mirza, such as Habibi Coin and International Success Group.
 
England

Alistair Greig, 65, was accused of running a £13 million 'Ponzi scheme' fraud in which he guaranteed high returns on short term deposits.

Germany

Authorities issued a cease and desist order against Karatbit Foundation, alleging that it was issuing KaratGoldCoin without the necessary license. Karatbit represented that it had a blockchain-based payment system that enables customers to conduct transactions with gold and to also trade gold with cryptocurrencies. Karatbars claims that it owns a share in a gold mine in Madagascar that supposedly contains $990 million worth of precious metal.

India

Investors protested outside of Kanva Souharda Credit Cooperative Society Ltd. alleging fraud. The company offered 12.5% returns on investments but stopped paying investors over the past several months.

Ganesh Shinde, Abhijeet Jadhav, Samadhan Chinchole, Sanjay Gaware and Babban Sadaar were arrested in connection with a scheme that allegedly cheated over 4,000 people of Rs 14 crore. The scheme was run through Capital Club Transfers. Investors would get two grams to 30 grams of gold or 4 grams to 60 grams of silver along with a 3% return per week on their investments.
 
Rasiklal Shah, 55 and Nilesh Rasiklal Shah, 53, two brothers, were arrested on charges that they ran a scheme through Rasiklal Sankalchand Jewellery that defrauded customers out of Rs 300 crore.

Balaraju Mallikarjun Raju, the director of Sastra Enterprises Limited, was arrested on charges that he was running a fraudulent scheme that defrauded hundreds of investors.

Ireland

Arrests were made in connection with an alleged Ponzi scheme run through Custom House Capital.

Malta

Regulators cautioned residents about a new unlicensed Bitcoin scheme run through Bitcoin Future. Authorities caution that the scheme is a Ponzi scheme.

South Korea

Kang-mo, the CEO of CoinUp was sentenced to 16 years in prison for his role in the $384 million scheme that promised returns of up to 200% on cryptocurrency investments in 4 to 10 weeks. The firm’s chief financial officers, Mr. Kwon and Mr. Shinmo were each sentenced to 11 years in prison, and the “governor” of CoinUp, Mr. Yunmo, was sentenced to 7 years in prison.
 
Thailand

Wantanee “Mae Manee” Tippaveth, 28, and her husband, Metee Chinpa, 20, were charged with fraud in connection with a scheme that promised investors a 93% profit per month from a “gold shop.” The scheme is known as Forex 3D and there are 3,400 known victims who have lost more than 850 million baht. They have denied any wrongdoing. Authorities believe that up to 30,000 victims were defrauded. Wilaiwan Hongprachasap, 25, Thawalrat Tippaveth, 47, who is the mother of Mae Manee, and downline recruiters, Piya Khirisuwannakul, Pornsawan Phuin-oy and Suphanee Nikornkul, were also detained in connection with the scheme.