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

Friday, August 5, 2016

July 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for July 2016. The reported stories reflect: 7 guilty pleas or convictions in pending cases; over 21 years of newly imposed sentences for people involved in Ponzi schemes; at least 3 new Ponzi schemes worldwide; and an average age of approximately 51 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

    Thomas Abdallah, 52, Mark George, 59, and Jeffrey Gainer, 52, pleaded guilty to charges in connection with a Ponzi scheme run through KGTA Petroleum Ltd. KGTA promised investors returns of 60% from the sale of fuel products. Other co-defendants - Kenneth Grant, Jerry Cicolani and Kelly Hood – previously pleaded guilty and are awaiting sentencing. About 70 investors lost $17 million in the scheme.

    Eric Bartoli, 61, pleaded guilty to charges that he operated a Ponzi scheme through his company, Cyprus Funds Inc. Bartoli was accused of raising $65 million from about 800 investors. Two other co-conspirators, Douglas Shisler and Peter Esposito were already tried and convicted. A third partner, James Binge, died while his case was pending.

    William Joseph Boyle, 47, was indicted on charges that he ran a $415,000 Ponzi scheme that defrauded his mostly elderly clientele. Boyle was an investment advisor and stock broker who promised his clients that their money would be invested in low or no-risk stocks, state municipal bonds, interest-bearing investment and real estate. He continued to defraud clients even after his licenses were suspended and he was barred from the securities industry.

    Paul Burks, 69, was found guilty by a jury for his involvement in the $900 million ZeekRewards Ponzi scheme. Burks was accused of misleading investors with false promises of 125% returns. Burks allegedly pocketed $11 million from ZeekRewards in 2011 alone. Burks was the owner of Rex Venture Group LLC through which he owned and operated ZeekRewards. The jury returned the guilty verdict in less than 3 hours. Burks faces a maximum of 65 years in prison.

    Andrew W.W. Caspersen, 39, withdrew his not guilty plea and admitted to defrauding family members and friends in a Ponzi-like scheme. His plea agreements requires him to forfeit nearly $45.2 million. It was alleged that Caspersen defrauded investors out of nearly $150 million. Caspersen said that he ran the scheme to fuel his gambling addiction.

    Patrick E. Churchville, 47, pleaded guilty to charges that he ran a $21 million Ponzi scheme. Churchville was president and owner of ClearPath Wealth Management LLC and had lost an $18 million investment he made in JER Receivables. Rather than notifying his clients of the losses, he took in $21 million from new investors to pay back old investors. 

    Thomas D. Conrad Jr., 85, and his son, Stuart P. Conrad, were accused of running a Ponzi scheme in a group of hedge funds they managed. The funds held $10.7 million. They had invested in another Ponzi scheme, Valhala Investment Partners and were forced to repay $2.3 million in false profits they had received. Additionally, Thomas Conrad had failed to disclose that he had been subject disciplinary action in 1971 and had been barred from the investment industry.

    Dorian Garcia, 31, was the subject of a verdict against him on charges brought by the CFTC alleging that he was running a Ponzi scheme. The judgment requires that Garcia and his companies, DG Wealth Management, Macroquantum Capital LLC, UKUSA Currency Fund, and DG Wealth’s successor, Quanttra LP, were required to pay restitution in the amount of over $5 million. Garcia and his companies are also liable for a $7.5 million civil penalty and almost $5 million in ill-gotten gains, for a total of about $17.5 million.

    Diane Kaylor, 40, was sentenced to 6½ years in prison for her role in the Agape World Ponzi scheme that was run by Nicholas Cosmo. The scheme defrauded approximately 3,800 investors out of about $150 million. Kaylor was a broker who took $3.6 million in commissions during the scheme which she spent on luxury automobiles, exotic vacations, and home improvements. Previously, another ex-broker, Jason Keryc, was sentenced to 9 years in prison, Anthony Ciccone, also an ex-broker, was sentenced to 7 years, and Cosmo was sentenced to 25 years in 2011 after pleading guilty.

    Lawrence Leland “Lee” Loomis, 59, revoked his guilty plea. He had entered into a plea agreement that could have sent him to prison for 18 years, but he had a change of heart. Loomis is accused of running a $10 million Ponzi scheme through his company, Loomis Wealth Solution, that defrauded 50 investors. Loomis promised 12% returns to investors through the purchase of life insurance policies or real estate investments.

    Adam Jonathan Martin, 35, was charged with running a Ponzi scheme through which he allegedly stole more than $350,000 from a Minnesota brewery and another $330,000 from family and friends.

    Ronald Earl McCullough, 45, was caught in Atlanta after fleeing North Carolina following an indictment in 2013 alleging that he ran a Ponzi scheme. McCullough posed as a religious leader and defrauded church members out of more than $1 million.

    Joey Preston, who was identified as a promoter of the Ponzi scheme run by Ron Wilson through Atlantic Bullion & Coin, agreed to repay $1.2 million that he received from the Ponzi scheme. Preston invested $192,000 but received back $1.4 million. The receiver of Atlantic Bullion had alleged that Preston had hosted parties at his home to entice investors and did not disclose to investors his failure to understand the investment. 

   Kim Rothstein aka Kim Wendell, 42, ex-wife of Scott Rothstein, requested that the court shave off the last 8 months of her probation, and her request was granted. Kim has been working as a car saleswoman at a luxury car dealership and says that she has turned her life around. She served 15 months in prison for trying to hide more than $1 million worth of assets from prosecutors and in bankruptcy proceedings. Kim said she would be eligible for a promotion at her work if her probation was terminated early.

    David Scoville, 36, and his company, Traffic Monsoon LLC, were the subject of an SEC lawsuit asking for a temporary restraining order against them.  The SEC alleged that Traffic Monsoon is a Ponzi scheme that took $207 million from more than 160,000 investors around the world. The company has about $60 million in cash in the U.S., Canada and the U.K. It was supposedly an online advertising services company in which users could buy “Banner AdPacks” for $50 each and could earn $5 per AdPack in two months, for a return of about 10%.

    Trendon Shavers, 33, was sentenced to 18 months in prison in connection with his Ponzi scheme run through Bitcoin Savings and Trust. He was ordered to forfeit $1.23 million and pay restitution in that amount for what the judge called a “class Ponzi scheme.” He raised at least 764,000 bitcoins, which at the time were worth more than $4.5 million, promising rates of return of 7% per week to investors who loaned bitcoins to Bitcoin Savings and Trust. Out of the 100 investors, at least 48 suffered losses of about $1.23 million.

    Justin Spearman was sentenced to 2 years and 3 months in prison in connection with his Ponzi scheme. Spearman’s scheme was based on gas and oil well royalties, and he promised investors that their money was being invested in oil and gas leases, and investments and real property in Texas. 

    Barry Carlton Taylor, 64, was sentenced to more than 11 years in prison and ordered to pay $2.2 million in restitution in connection with a Ponzi scheme in which he falsely claimed he was an expert in the foreign currency exchange market. Taylor represented that he had a computer software system that enabled him to generate very high returns. He spent more than $500,000 on himself and lost the rest of the money. Taylor pleaded guilty in January.

    Quten “Tony” Tran, 60, and his wife Mai “Lisa” Tran, 56, were charged with felony grand theft and warrants were issued for their arrest in connection with an alleged Ponzi scheme. It is alleged that the couple stole $256,000 from 8 investors who were fellow members of their Vietnamese church and social circles. The couple promised them returns from a fake pharmaceutical company’s public stock offering.

    Tyson D. Williams, 44, and D. Stanley Parrish, 44, were hit with judgments in favor of the SEC in connection with their scheme that took more than $7 million for approximately 50 investors. The scheme was run through STV Ventures, in which investors were told they could purchase collateralized mortgage obligations which could be leveraged to produce a high return.



    Dorian da Silva Santos was found murdered in Brazil amid speculation that the death may have been tied to the TelexFree scheme in Brazil. Santos participated in TelexFree through a company known as Ympactus. The trustee of the U.S. based TelexFree bankruptcy case does not believe that Santos was a participant in the U.S.-based TelexFree operation.


A government agency announced that Empire Big Capital Ltd. and related firms AIF and ICA were engaged in investment fraud.


    Exential Group was shut down by authorities on suspicion that it was running a Ponzi scheme. The company managed a foreign exchange fund and promised annual returns of up to 120%. Exential Group also used the names Exential Mideast Commercial Brokers LLC, Tadawul ME, and Exential Mideast Investment LLC.


    Michael Hunte, one of 9 men charged with running a Ponzi scheme that defrauded Quaker Oats, stood trial for the scheme. Charges were withdrawn against six of the others -- Mark Knapp, Benjamin Walsh, Patrick Whalen, Giovanni Martino, Claude Battiste and Santo Raso. Mark Alexander and Jeffrey Paquette pleaded guilty for their roles in the scheme.

    The Financial Conduct Authority warned that Bit Management Ltd. is providing financial services or products without regulatory permission. The website reflects that it is a high-yield investment program the promises high returns on investments.


    The Central Bureau of Investigation filed charge sheets against two companies on allegations that they were running Ponzi schemes. One of the companies charged is Tower Infotech Ltd. along with its directors, Ramendu Chattopadhyay and Ashis Chatterjee. The only company charged is Aha Agro Equipment Industries India Ltd., along with its three directors, Ranjit Santra, Tarun Kumar Barui and Parimal Biswas.

    Binayak Mishra, 53, and Gitanjali Panigrahi, 45, two directors of Maa Mangala Savings & Credit Cooperative Limited, were sentenced to five and three years in prison, respectively.

    Charges were filed against Sastra Enterprises Pvt. Ltd and its managing director, V. Sampath, in connection with an alleged Ponzi scheme.

    Soubhagya Samal and his wife, Nirupama Samal, were arrested on allegations that they defrauded investors out of about Rs 50 crore through Midas Touch Assets and Securities Ltd. and Midas Touch Realtech Ltd., companies in which they were directors. 


    The offices of The First Group, a real estate development company, were locked up on suspicion that the firm may be at the center of a Ponzi scheme that allegedly defrauded Nigerians out of more than $200 billion. 


    Eleven directors of Afinsa were sentenced to up to 12 years in connection with a Ponzi scheme that defrauded more than 190,000 investors out of $2.8 billion.


    A class action lawsuit was filed by a group of victims of the alleged Ponzi scheme run by William Apostelos against PNC Bank. The victims allege that the bank missed red flag warnings that Apostelos used his accounts in a suspicious manner. The complaint stated that “PNC knew or should have known Apostelos was using the PNC accounts to launder money as part of some larger criminal undertaking.” The lawsuit seeks damages of at least $30 million.

    The trustee in the Bernard L. Madoff Securities LLC case had his claims for $905 million against Avellino & Bienes limited. Picard v. Avellino et. al. (In re Bernard L. Madoff Investment Securities LLC), 2016 Bankr. LEXIS 2686 (Bankr. S.D. July 21, 2016). The court held that the trustee cannot recover transfers made before 2001. The trustee has alleged that the principals of the firm, Frank Avellino and Michael Bienes, assisted Madoff in concealing the Ponzi scheme.

    The Second Circuit denied the appeal of Ritchie Capital Management LLC against Costco Wholesale Corp. Ritchie Capital had argued that Costco knew that Thomas Petters was using counterfeit purchases to obtain loans to finance his Ponzi scheme. 

    TD Bank has filed $300,000,000 in claims against its insurance companies to try to recover some of the money that it paid in settlements to resolve claims against it in connection with the Scott Rothstein Ponzi scheme case.

    A court approved a settlement between the trustee of Banyon 1030-32 LLC and St. Paul Fire and Marine Insurance Co. and Federal Insurance Co. in which the insurers agreed to pay $2.2 million to the trustee. The settlement arises from the Scott Rothstein $1.2 billion Ponzi scheme.

    The receiver is ZeekRewards reported that he has recovered $356 million and has disbursed $251 million to 107,096 claimants.

    British Virgin Island foreign exchange trader,  Capital World Market Ltd. (CWM Ltd.) and associated companies, along with Cayman Islands-based DMS Bank & Trust Ltd., were sued by 318 people for the loss of $65.9 million they allege were lost in a Ponzi scheme.

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