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

Kathy is a senior business trial attorney with more than 30 years experience prosecuting and defending claims for high net worth 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. She also handles SEC and CFTC whistleblower claims. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring detailed knowledge about fraud or Ponzi schemes.

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

Wednesday, April 30, 2014

April 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

     Below is a summary of the activity reported for April 2014. The reported stories reflect: at least 9 guilty pleas or convictions in pending cases; over 85 years of newly imposed sentences for Ponzi schemers; 11 newly discovered schemes allegedly involving over 700,000 victims and nearly $1.2 billion; and an average age of 50 for the alleged Ponzi schemers in the stories reported. 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.

     Russell Adler, 52, pleaded guilty to charges relating to the Ponzi scheme run by Scott Rothstein and through their firm, Rothstein Rosenfeldt Adler. Adler pleaded guilty to charges that he violated federal campaign finance laws.

     Ron Battistella was arrested and has been accused of securities fraud in connection with an alleged $1.3 million Ponzi scheme that promised 10% annual returns. Battistella ran a car dealer and promised investors that their investments were backed by the cars in his showroom.

     Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez moved to overturn their guilty verdicts. The five Madoff employees were found guilty last month in connection with the Bernard Madoff Ponzi scheme, and now cite flawed jury deliberations and a lack of evidence in their request to overturn the jury verdicts.

     Lt. David Benjamin, 48, and Detective Jeff Poole, 47, were charged with conspiracy in connection with the Scott Rothstein Ponzi scheme. Benjamin and Poole were both Ft. Lauderdale sheriff’s deputies at the time they allegedly accepted over $100,000 in cash and gifts from Rothstein for supposedly illegally arresting of the ex-wife of one of Rothstein’s acquaintances, Douglas Bates, to give Bates the upper hand in a child custody dispute. Both Benjamin and Poole surrendered to face the charges, and both were fired from their jobs. They are expected to plead not guilty but may ultimately enter guilty pleas.

     Ivan Brown, 45, of Utah, was ordered to pay the SEC $1.43 million in connection with a $27 million Ponzi scheme run through Highland Residential LLC and Avanti Capital Partners. Brown had formed the companies for the purpose of making real estate loans called “bridge loans” to people who could not obtain conventional home loans.

     Brian R. Callahan, 44, pleaded guilty to charges relating to his operation of a $96 million Ponzi scheme that defrauded at least 40 investors. Callahan promised the investor funds would be placed in mutual and hedge funds and securities paying high dividends. Instead, he used the money on personal expenses and to retain ownership of Panoramic View Resort & Residence in Montauk. Callahan’s brother-in-law, Adam J. Manson, was also indicted and has pleaded not guilty.

     Timothy J. Coughlin, 63, and his two companies, Oxford International Credit Union and Oxford International Cooperative Union, were charged by the SEC with conducting a Ponzi scheme through a fictitious credit union. The scheme allegedly defrauded more than 5,000 investors who deposited more than $12.8 million. The Oxford International Credit union website (www.oxfordicu.com) reflected that investor deposits were purportedly earning average daily returns of .471%, but the defendants did not actually make investments sufficient to generate those kinds of returns. A criminal complaint was also filed against Coughlin.

     Gregory L. Crabtree, 52, pleaded guilty to a charge in connection with his role in the alleged $81 million Ponzi scheme run by former University of Georgia football coach Jim Donnan. Crabtree and Donnan were partners in GLC Limited Inc., a West Virginia-based business that operated retail stores. Crabtree admitted that that they offered and sold short-terms investments, promising rates of return ranging from 50% to 200%, telling investors that the company purchased “seconds” and discounted merchandise that they were able to sell for a profit. Donnan has denied the charges against him.

     Patrick Daoud, 55, a well known jeweler, was sentenced to house arrest for 10 months for helping to hide a 12.08 carat yellow diamond that Scott Rothstein’s wife was trying to conceal from federal authorities.

     Richard Freer, 68, agreed to enter into a non-trial disposition in connection with charges relating to his alleged $10 million Ponzi scheme that defrauded about 80 people, so he will not face trial as scheduled.

     Tate George, 45, had his sentencing postponed until May. George was convicted on charges relating to a Ponzi scheme that involved about $7 million and 10 victims. George was a well-known University of Connecticut basketball player.

     Johnny “Jay” Grivette Jr., 39, was sentenced to 4½ years in prison and ordered to pay $4 million in restitution in connection with a $100 million Ponzi scheme. Grivette’s company, Advantage Financial Partners of California was part of Loomis Wealth Solutions. Lawrence Leland “Lee” Loomis has been charged in connection with the scheme as well.
     Gordon Leroy Hall, 61, was sentenced to 15 years in prison following his guilty plea in connection with his involvement in the Ron Wilson Ponzi scheme run through Atlantic Bullion & Coin. Hall had agreed to hide at least $1.5 million, a bag of gold and 1,000 silver coins, along with 128 acres of property belonging to co-conspirator Wallace Lindsey Howell. Hall, along with his son, Benton Hall, had also created fictitious bonds for 43.5 million in an attempt to secure Howell’s release from jail.

     Joseph Hennessy, 53, was charged with running a Ponzi-type scheme that defrauded at least 10 investors of about $2.9 million. Hennessy co-owned Resource Planning Group Inc., which was operating a private equity fund and promising investors 15% returns.

     Keiko Kawamura, 27, of Hawaii, was doing business as Kawamura Financial and was charged by the SEC with running a fraudulent scheme that defrauded about 70 investors of more than $50,000. Kawamura charged investors a subscription fee of between $94.95 and $174.95 per month to receive access to a locked Twitter account that Kawamura said would provide recommendations on when to sell or purchase particular stocks and options.

     Michael Kwasnik, 42, was indicted on new charges of violating state securities laws. Kwasnik had pleaded guilty in New Jersey last year to money laundering charges in connection with the theft of $1.1 million from a 96 year old widow while managing her investment accounts.  Kwasnik was affiliated with Liberty State Benefits and Liberty State Financial Holdings Corp., two investment companies. Kwasnik’s license to practice law has been suspended and he is awaiting a final decision on whether to permanently bar him from practicing law.

     Anthony M. Livoti Jr., 65, was sentenced to 10 years in prison in connection with charges relating to his role in the $1.25 billion Mutual Benefits Ponzi scheme run by Joel Steinger.  Livoti requested a 6 year sentence, the prosecutors recommended 30 years, the federal sentencing guidelines had a potential of 80 years, and the judge decided on 10 years.

     Lawrence “Lee” Loomis was permanently enjoined barring him from further securities violations. Loomis had been found liable for such violations in connection with his business, Loomis Wealth Solutions, in which Loomis had allegedly defrauded $10,000 from investors. SEC v. Loomis, 2014 U.S. Dist. LEXIS 57423 (E.D. Cal. April 24, 2014).

     Duncan MacDonald III, 50, of Texas, was sentenced to 5 years in prison for his role in a $10 million Ponzi scheme run through Global Corporate Alliance, a holding company that managed North American Consumer Alliance. The scheme sold an “overage program” related to insured benefit association healthcare programs. Co-conspirator, Gloria Ann Solomon, 71, pleaded guilty to a charge in connection with the scheme.

     Gary D. Martin, 62, and Brenda K. Martin, 57, of Florida, were fined $4.3 million and $1.4 million, respectively, for their role in the $32.5 million Ponzi scheme run through Queen Shoals Consultants LLC. The scheme promised investors returns from foreign currency and precious metals. The Martins lured customers into the scheme by misrepresenting their experience and then paid their money over to the mastermind of the scheme, Sidney S. Hanson, who is now serving a 22 year sentence. Gary Martin was sentenced to 10 years. No criminal charges were brought against Brenda Martin.

     Gary Lynn McDuff, 59, of Texas, was sentenced to 25 years in prison and ordered to pay $6.5 million in restitution in connection with the $11 million Ponzi scheme run through Lancorp Investment Fund involving purported top-rated bonds. Two of McDuff’s co-conspirators, Gary Lancaster, 62, and Robert Reese, had previously pleaded guilty and were sentenced to prison.

     David McQueen’s criminal trial began over allegations that he ran a $46 million Ponzi scheme. McQueen is said to have operated an alleged foreign exchange trading, real property and ethanol-related projects using funds placed into his investment funds - Accelerated Investment Group, or AIG, International Opportunity Consultants, IOC, Diversified Liquid Asset Holdings, DLAH, and Diversified Global Finance.

     Barry Minkow, 47, was sentenced to 5 years in prison for his latest fraud. Minkow pleaded guilty to stealing from the San Diego Community Bible Church. He had previously been convicted in 1988 of defrauding investors our of $26 million through his company, ZZZZ Best Co. Minkow was paroled after serving less than 1/3 of his 25 year sentence and became a pastor and formed the Fraud Discovery Institute to serve as a fraud detection expert. This latest sentencing comes at a time when Minkow is already in custody in Florida on unrelated securities fraud charges.

     Doris “Dee” Nelson, 55, pleaded guilty to charges relating to a $126 million short-term lending Ponzi scheme run through Little Loan Shoppe that defrauded at least 800 investors. Nelson rejected a plea agreement and instead pleaded guilty to all 110 criminal charges brought against her. Nelson had promised the 650 investors returns of between 40% and 60% annually. Nelson had used over $3 million of the investor funds on personal expenses such as clothing, jewelry, luxury vehicles and gambling.
     Aaron E. Olson entered into a plea agreement admitting that he defrauded investors of $27.8 million and diverted $2.6 million of those funds to his personal use. Olson plans to plead guilty to tax evasion. Olson had purportedly invested the funds in commodity, stock and bond markets.

     Steven Palladino, 57, has been charged with 25 counts of criminal contempt for violating court orders that froze his assets last year. Palladino, along with his wife and son, had operated a Ponzi scheme through the loan company, Viking Financial Group Inc., and were all convicted in January. Palladino is now accused of spending money that he had been ordered to deposit into an escrow account established by the court.

     Luis Felipe Perez testified against Hialeah former Mayor Julio Robaina, 49, and his wife Raiza Robaina, who are standing trial on charges that they failed to report about $2 million of income, some in the form of cash payments, received from Perez in connection with Perez’s Ponzi scheme. Perez is currently serving a 10 year prison sentence for the scheme, but is testifying relating to an agreement that he had with Robaina that cash payments would be dropped off as interest on Robaina’s investment.

     Dunya Predovan, 59, was sentenced to 5 years on prison and ordered to pay more than $750,000 in restitution. Predovan had pleaded guilty to charges relating to a Ponzi scheme in which she represented to investors that they were investing in a hedge fund overseen by George Soros.
     David Prenatt, 53, is facing new charges for allegedly defrauding 17 investors out of $13 million in connection with a Ponzi scheme that involved home or hotel deals. Prenatt is already serving 4 years in prison but could face another 45 years.

     Richard Reynolds aka Richard Adkins, 52, will represent himself during his sentencing hearing. Reynolds was convicted of charges relating to a $4.34 million Ponzi scheme that defrauded at least 140 investors in 20 states.

     Richard Roop and his company Bottom Line Results Inc. were ordered to stop selling interests in mortgages on distressed houses in connection with an alleged $1.6 million Ponzi scheme that allegedly defrauded 25 investors. Roop accused the Colorado Division of Securities of using “numerous inaccurate and misleading statements” to obtain the court order.

     Ronald E. Russell was sentenced to 13 years, 4 months in prison in connection with his "Rent to Own" Ponzi scheme. Russell charged homeowners $2,900 each to get investors to buy their home and then allowed the current occupant to rent it back and continue living there. There were 51 victims who lost a total of $139,000.

     Irene Shannon fka Irene Stay, 50, the former chief financial officer of Scott Rothstein’s law firm, Rothstein Rosendfeldt Adler, was charged with conspiracy in connection with the $1.2 billion scheme and has pleaded not guilty. Shannon oversaw much of the accounting and the banking at the law firm, and it is alleged that she helped Rothstein by moving hundreds of millions of dollars around between accounts to pay investors. It is expected that she will eventually plead guilty. Rothstein has testified that Shannon could be a “knucklehead” but that her duties were “an instrumental part” of the fraud.

     Martin Sigillito, 64, of Missouri, has claimed that the reason he was convicted and is now serving a 40 year prison sentence for his $50 million Ponzi scheme is because he attorneys failed to represent him adequately. Sigillito was a priest who persuaded parishioners to invest in his “British Lending Program,” claiming that their money would go to real estate investments in the United Kingdom. Sigillito alleges in a lawsuit against his lawyers that they helped him set up loan agreements with investors and that the lawyers “knew that funds received from later lenders were used to pay principal and interest due prior lenders.” Sigillito says that at no time did his lawyers advise him that this could be considered to be a Ponzi scheme or involve criminal exposure.

     Joseph Signore, 49, and Paul Schumack, 56, were arrested and charged in connection with an alleged $70.9 million Ponzi scheme that defrauded more than 1,000 investors. Signore and his wife, Laura Grande Signore, are the president and vice-president of JCS Enterprises, and Schumack owns T.B.T.I., Inc., an ATM sales and service business, with his wife Christine Schumack. The scheme involved Virtual Concierge machines, and investors signed contracts providing for income of $300 per month from each $3,500 machine they purchased. The Internet-based kiosks were to be placed in hotels, hospitals, casinos, stadiums and other locations to provide services such as ordering food, downloading movies, playing games or using Skype. Two days after Signore was released from custody, the U.S. Attorney’s Office asked the court to revoke Signore’s bond, alleging that Signore had “brazenly” violated the terms of his release by making direct e-mail contact with investors. Signore's bond was revoked, but Signore requested that he be released based on new information. A Florida court appointed a receiver over the businesses and ordered the company, My Gee Bo, Inc., to be included in the receivership.

     Douglas L. Swenson, 65, along with his two sons, Jeremy Swenson, 41, and David Swenson, 36, as well as Mark Ellison, were found guilty in connection with the real estate Ponzi scheme run through DBSI Inc. that defrauded nearly 10,000 investors. The defendants have asked that the verdicts be overturned or that they be granted a new trial.

     TelexFree LLC, TelexFree Inc. and TelexFree Financial Inc. filed Chapter 11 bankruptcy petitions in Nevada. Telex is also the subject of an enforcement action by the Massachusetts Securities Division which has alleged that Telex is running a pyramid or Ponzi scheme. Prosecutors in Brazil have also alleged that the business is a Ponzi scheme, and fraud warnings have been issued in Uganda and Rwanda. The SEC also filed civil fraud charges against the entities, along with the officers and promoters: M. Merrill, Carlos N. Wanzeler, Steven M. Labriola, Joseph H. Craft, Sanderley Rodrigues de Vasconcelos, Santiago de la Rosa, Randy N. Crosby, and Faith R. Sloan. The Dominican Republic has also launched an investigation into the TelexFree business in that country. TelexFree has denied the Ponzi scheme allegations.  Meanwhile, there have already been at least 6 suicides in the Dominican Republic attributable to TelexFree.

     Deepal Wannakuwatte, 63, announced his plans to change his plea to guilty in response to allegations that he ran a Ponzi scheme through his medical supply business, International Manufacturing Group Inc. Wannakuwatte had allegedly defrauded investors out of $150 million by representing that he had $100 million worth of contracts to supply latex gloves to veterans’ hospitals, when he actually only had contracts worth $25,000 a year. Investor Sammy Cemo won a default judgment against Wannakuwatte and his wife and daughter for $7.1 million. Wannakuwatte is also being sued by a group of about 20 other investors.

     WCM777 had a receiver appointed over its assets at the request of the receiver, and the receiver estimates that there may be more than 479,000 “member accounts” related to this alleged $65 million Ponzi scheme. The receiver identified a $5 million transfer made by WCM777’s operator, Phil Ming Xu, to lawyer Vincent Messina a month before the asset freeze.

     Eliyahu Weinstein aka Edward Weinstein aka Eddie Weinstein, 38, already serving 22 years in prison for a $200 million real estate scam, is facing new charges that he defrauded investors of an additional $8 million. Weinstein had falsely promised investors returns from his supposed access to large blocks of Facebook shares prior to that company’s initial public offering.

     Michael Zuno Zuniga, 43, was sentenced to 5 years in prison and ordered to pay $1.2 million in restitution for his role in a $1.5 million Ponzi scheme that targeted seniors in the Los Angeles area. Zuniga ran the scheme through Omega Investment Group, an unlicensed entity that targeted Latino seniors to refinance their homes and invest in his scheme. Zuniga represented that he would buy and sell real estate that was in foreclosure and that he could guarantee 15% returns. About $663,000 of the investors’ funds was paid to an entity known as Home Brought Current. 18 victims were identified.



     Ronald Jerry Fast sat through his sentencing hearing relating to his $16.8 million Ponzi scheme. At the hearing, 13 investors of Fast’s companies, Marathon Leasing Corp., NuDawn Enterprises Ltd. and H.H. Fast Investments, read victim impact statements describing the scheme. The decision on sentencing has been reserved.


     Stephan Evans, 30, was found guilty of running a £4.4m Ponzi scheme. Evans has been dubbed the “Wolf of Old Hall Street.” He worked as a stockbroker and financial advisor for Globaleye Investment and One International in the United Arab Emirates and then set up his own company, Stephan Evans Investments Ltd.

     Alok Dhanda, 53, is facing charges that he orchestrated a £600,000 Ponzi scheme. It is alleged that Dhanda obtained funds from investors in which he represented their funds would be used for a property venture in Bangalore, India. Dhanda has pleaded not guilty.

     Alex Hope, 25, is accused of masterminding a £5.6 million forex Ponzi scheme. During his trial, it was revealed that he spent about £2 million on extravagant personal expenditures. Hope’s partner, Raj Von Badlo, 56, is also charged with involvement in the scheme.


     The principal of Pearls Group, Nirmal Singh Bhangoo, had his passport confiscated as officials investigate an alleged Ponzi scheme that involved Rs 45,000 crore and about five crore investors. The investors were given fake guarantees that they would be provided plots of agricultural land. Cases are pending against Pearls Agrotech Corporation Limited and Pearls Golden Forest Limited.

     Regulators sought permission to attach properties of Aastha International and Green Ray International. The two companies are allegedly part of a larger multi-crore rupee chit fund scam have allegedly defrauded depositors of more than `500 crore.

     Investors in the Saradha Group are estimated to have lost Rs 1,983 crore as has been reported in a draft forensic audit report commissioned by the Securities & Exchange Board of India.

New Zealand

     Convicted Ponzi scheme David Ross, who ran a Ponzi scheme through his company, Ross Asset Management, was removed from the Chartered Accountants registry and ordered to pay $7,209.

South Africa

     Net Income Solutions aka DefenceX, along with Zantech Trading, were found guilty of violating the Banks Act by operating a Ponzi scheme with about 200,000 investors that involved about R816 million.


     A lawsuit against TD Bank filed by investors Oleg and Angela Shtutman in connection with the Car Miller Ponzi scheme run by Everett C. Miller was permitted to proceed in state court. The lawsuit seeks recovery of $1.5 million for money lost in the scheme that was deposited into a joint TD account with Miller.

     Investors in the $58 million David Dadante Ponzi scheme case are to receive 100% on their claims. The 105 victims may receive about 10% interest on their claims as well. The receiver recovered $59 million. Dadante, 60, is serving a 13 year prison sentence for the scheme. He had defrauded victims by representing that he knew an executive at Goldman Sachs who could provide an opportunity to purchase stock in exclusive public offerings that promised annual returns of 10% to 20%. 

     A civil lawsuit was filed against Farallon Capital Management in connection with an alleged Ponzi scheme that defrauded German real estate investors of $67 million. The founder of Farallon, Tom Steyer, is a billionaire environmentalist who has pledged to raise more than $100 million to elect environmentalist Democrats to Congress through his political group, NextGen Climate Action.  Farallon has not been found to have violated the law in connection with the scheme and denies any wrongdoing.

     Victims of the J.V. Huffman Jr. Ponzi scheme received distribution checks from the receiver in the case. The victims will receive 10.567% of the money they invested. The receiver of the Huffman estate reported that he recovered a total of $3.26 million and, after payment to the receiver and his professionals, $2.9 million will be available for distribution. Huffman was sentenced to 30 years in prison more than 4 years ago. Huffman had operated his scheme through Biltmore Financial Group, promising investors their money would be invested in a mutual fund. Huffman represented he was earning interest between 8.02% and 16.54%.

     The lawsuit brought by Jay Wexler against Tremont Group Holdings, one of the largest feeder funds into Bernard Madoff’s scheme, was dismissed. The lawsuit had accused Tremont of not heeding and investigating red flags that Madoff never actually bought or sold securities. Tremont allegedly had invested $3.3 billion with Madoff. The New York Supreme Court dismissed the case, noting that the complaint “fails to explain how one or more alleged red flags made it so obvious that Madoff was running a Ponzi scheme that defendants must have known about the scheme and wanted to further it.”

     A group of investors in the Bernard Madoff scheme were given permission to add state law claims to their class action lawsuit following the Supreme Court ruling in Chadbourne & Park v. Troice, 2014 U.S. LEXIS 1644 (Feb. 26, 2014). In the Madoff case, the court also raised the possibility that KPMG LLP could be reinstated as a defendant in the lawsuit by Tremont Group Holdings Inc. In re Tremont Secs. Law v. Tremont Group Holdings, 2014 U.S. Dist. LEXIS 52082.

     The BVI liquidator of three feeder funds to the Bernard Madoff scheme – Fairfield Sentry, Fairfield Sigma and Fairfield Lambda – was barred in the British Virgin Islands from pursing the return of more than $1.4 billion from investors who withdrew their funds prior to the demise of the Madoff scheme. The funds’ investors lost about $6 billion to $7 billion.

     The receiver in the Arthur Nadel Ponzi scheme case plans to distribute another $5 million to about 350 victims who were defrauded in the scheme, bringing the total recovery to about 44% of the losses. This will be the fourth distribution by the receiver, bringing the total distributed to $58.2 million. The scheme was run through Nadel’s company, Scoop Management.

     An additional distribution payment was made to victims of the Lou Pearlman Ponzi scheme. The Trustee made a second distribution payment of $5.6 million, in addition to an earlier distribution of $10.4 million that had been made. The recovery so far for victims is about 3.3%, but the trustee anticipates making a third and final distribution later this year. Pearlman is serving a 25 year prison sentence.

     The trustee for the bankruptcy entities once run by Thomas Petters has asked the bankruptcy court for permission to sue to avoid fraudulent transfers in 26 countries. More than 200 lawsuits have already been filed against 382 defendants in the U.S. to recover assets transferred as “false profits, bonuses, commissions, gifts.”

     JPMorgan Chase and other financial institutions sought to move a lawsuit pending against them arising from the Thomas Petters Ponzi scheme to New York federal court. The lawsuit, filed by Ritchie Capital Management LLC, accuses the financial institutions of playing a role in the Petters scheme.

     Charles Ponzi’s house was publicly listed for sale for the first time. The list price is $3.3 million. Ponzi had occupied the house for only 6 weeks in 1920 before he was arrested. All previous sales of the house have been private. Ponzi had first offered $25,000 for the house but raised his offer to $39,000 on the condition that the seller invest in Ponzi’s Securities Exchange Company. Ponzi ultimately paid $9,000 in cash and delivered a Securities Exchange Company certificate that he promised would eventually be worth $30,000.

     The $8.2 million settlement between Bank of America Corp. and a class of victims was approved in connection with claims arising from the Ponzi scheme of Juan Rangel and his company, Financial Plus Investments. The class action involving the claims of more than 400 victims alleged that the Bank of America branch manager accepted bribes from Rangel in returns for laundering $1 million in proceeds from the scheme to bank accounts in Mexico. Rangel had represented that investor funds would be used to buy and sell properties and to make high interest loans to distressed homeowners, and he guaranteed returns as high as 60% per year. Rangel pleaded guilty and was sentenced in 2011 to 22 years in prison.

     Almost 100 defrauded victims in the Scott Rothstein Ponzi scheme filed lawsuits against Bank of America and 4 current and former employees of the bank. The victims, who lost more than $385 million, claim that the Bank and some of its employees knew about and “helped” Rothstein run his fraudulent scheme. The victims are also seeking punitive damages, alleging that Bank of America “concealed, covered up, and possibly destroyed documents reasons: to avoid massive liability and a public relations nightmare.”

     The trustee of the bankruptcy case of Scott Rothstein’s law firm, Rothstein Rosenfeldt Adler, reached a settlement with Frank Preve to pay cash and property to resolve claims against Preve. The settlement is valued at $471,000 on the claim of $5.06 million that was sought by the trustee.
Investors who were placed into the Ponzi scheme run by Joel David Salinas were awarded a judgment by an arbitration panel against a brokerage firm, Golden Beneficial Securities Corp., for its failure to supervise of its employees. The claimants alleged that they invested more than $3 million through the broker but their assets were commingled with funds in the $50 million Ponzi scheme.

     The victims of Nickolas Skaltsis, 64, will receive some compensation. An agreement was reached with Tobias Investments LLC and the victim for allocation of net proceeds to be obtained from the sale of properties owned by Tobias. Skaltsis had run his business, Pheonix Asset Group, as a management company for the properties owned by Tobias. Skaltsis is currently serving time in prison for his scheme.

     The Fifth Circuit affirmed the dismissal of a class action accusing the SEC of facilitating Allen Stanford’s $7 billion Ponzi scheme. The court found that the SEC’s negligence was not a matter of policy and that the SEC was protected by the discretionary function exception of the Federal Tort Claims Act.

     Halo Cos. settled with the SEC appointed receiver over Stewardship Fund run by James Temme to resolve claims that Halo had received $1.2 million from the $35 million Ponzi scheme. Temme asserted his Fifth Amendment privilege and refused to testify in the litigation, and Halo agreed to pay a total of $250,000 in settlement of the fraudulent transfer claim.

     The lawyers for a group of 740 victims sought clarification and/or reconsideration of an order in the ZeekRewards case regarding payment on account of those victims claims. The lawyers seek a contingency fee for their work in assisting the victims to file proofs of claim, while the receiver of ZeekRewards seeks to pay the victims directly rather than paying the lawyers who will retain a contingency fee. The receiver stated that the motion for clarification is another challenge to “the Court’s decision by seeking to change the approved distribution process to require the Receiver to aid the Movant’s attorneys in collecting their attorneys’ fees from the Movants.”

1 comment:

  1. Prince arhin, GhanaJune 3, 2014 at 1:35 PM

    I am writing my project on managing operational risks for financial institutions. Ponzi schemes have increased reputational damage/risks for the financial institutions all around the world. Dealing with such schemers are ripping their investors of their financial security. Detecting them early is key.