November 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for November 2015. The reported stories reflect: 3 guilty pleas or convictions in pending cases; over 77 years of newly imposed sentences for people involved in Ponzi schemes; at least 9 new Ponzi schemes worldwide; and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

    Troy Barnes, 53, was indicted in connection with an alleged Ponzi scheme operated through Work with Troy Barnes Inc., which later changed its name to The Achieve Community.  Kristine Louis Johnson, 60, pleaded guilty to charges in June 2015. The scheme defrauded over 10,000 investors who lost at least $7 million, having been promised returns of up to 700%. At the time the scheme shut down for the self-stated reason that it could not handle “the volume of money we’re paying our members,” the company owed promised returns of about $51 million.

    John Paul Baron, 55, was sentenced to 6 years in prison in connection with a $3 million Ponzi scheme. Baron had promised annual tax free returns of 15% to 28%. Terrence McGill, 57, was previously sentenced to 23 months of house arrest in connection with the scheme.

    Ian Parker Bick, 20, was convicted on charges that he ran a Ponzi scheme defrauding over 15 investors out of nearly $500,000. Bick is the owner of Tuxedo Junction, an all-ages night club/juice bar. Bick used his other entities such as This is Where It’s At Entertainment, Planet Youth Entertainment, W&B Wholesale and W&B Investments, to solicit investments. Bick represented that he was buying electronics and reselling them for a profit and that he was organizing and promoting concerts.

    Scott A. Doak was barred by the SEC from the financial services industry in connection with his involvement in a Ponzi scheme through his company, OVO Wealth Management LLC. Doak founded OVO with William Apostelos. Apostelos’ other companies involved in the scheme were WMA Enterprises and Midwest Green Resources LLC. They raised more than $66 million from about 350 investors. Doak wound down OVO and directed clients to Apostelos’ companies, failing to tell them that he and others were unsuccessful in withdrawing their money, among other things.

    Joel Barry Gillis, 75, and Edward Wishner, 77, were sentenced to 10 years and 9 years, respectively, in connection with a 13 year long Ponzi scheme run though Nationwide Automated System Inc. (NASI). The scheme defrauded more than 1,300 investors out of at least $123 million, promising the investors returns of at least 20% from the sale and operation of ATMs. Investors could purchase ATMs that were then leased back to NASI in exchange for rent based upon a set price for each ATM transaction. Corporate records reflected more than 31,000 leaseback arrangements, but in fact only 253 ATMs were being serviced.

    Jon Michael Harder, 50, the former Sunwest Management CEO, was sentenced to 15 years in prison. Sunwest operated assisted living homes and defrauded more than 1,000 investors out of at least $120 million.

    Michael Holcomb, 72, Gary Holcomb¸ 70, Kristin Van Breeman, 42, and Jennifer Chalmers, 44, were indicted on charges that their family-owned insurance financing businesses, Berjac of Oregon and Berjac of Portland, were a Ponzi scheme. The scheme is believed to involve $40 million and more than 400 investors.

    James A. MacCallum, 44, was charged in connection with running an alleged Ponzi scheme that targeted more than 6 investors out of about $3.4 million. MacCallum, now a disbarred lawyer, had solicited investors while he was a practicing attorney to invest in real estate and life insurance policies through his company, Andrew Mitchell Holdings LLC. Investors were issued promissory notes bearing annual interest rates of at least 15%.

    Bernard M. Parker, 54, was charged by the SEC with stealing $1.2 million in an alleged Ponzi-like scheme that he ran through his company, Parker Financial Services. Parker represented to investors that he was using their money to purchase tax lien certificates and promised them high rates of return. Parker was a broker at Edward D. Jones & Co. at the time, and was terminated following a customer complaint.

    Richard Roop was jailed following contempt proceedings for his violation of orders to stop selling securities. Roop and his company, Bottom Line Results, had been permanently barred from the securities industry, but Roop continued to sell promissory notes to investors as an unlicensed broker. The funds from these sales were used to purchase distressed real estate without proper disclosure of risk and to pay off earlier investors.

    Matthew John Ryan saw his 10 year prison sentence affirmed by the Second Circuit. Ryan had pleaded guilty to running a real estate Ponzi scheme through his firm Prime Rate and Return LLC aka American Integrity.

    Anthony Saumell, 45, was sentenced to 3 years and two months in prison in connection with a Ponzi scheme run through his company, Gear Management Corp. Saumell guaranteed returns of 10% within 30 days from the supposed resale of aircraft parts.

    David Miguel Nanes Schnitzer aka David Banes, 47, was arrested in Belize in connection with the Stanford Financial Ponzi scheme. Nanes Schnitzer headed the Mexican arm of Stanford's Ponzi scheme, which allegedly defrauded investors in Mexico of $42 million. Although there are no criminal charges pending against Nanes Schnitzer in the U.S., the Stanford receiver has filed a civil lawsuit against him for breach of fiduciary.

    Jerry Stauffer, 66, has been soliciting victims of his alleged $1.5 million Ponzi scheme to help pay for private counsel in lieu of his public defender. Stauffer has been accused of running a Ponzi scheme in foreign exchange trading to generate returns of up to 10% monthly.

    James A. Torchia, 56, and his companies, Credit Nation Capital and Credit National Acceptance, were the subject of an SEC complaint accusing them of running a Ponzi scheme involving the sale of bogus promissory notes and selling interests in life settlements. The SEC complaint alleges that Torchia promised 9% returns and approximately $30 million was owed to note holders. The complaint also alleges that two companies he controls, Spaghetti Junction LLC and Willie’s West LLC, transferred hundreds of thousands of dollars to Torchia and his wife.

    Scott Valente, 58, was sentenced to 20 years in prison and ordered to pay $8.3 million in restitution for operating a Ponzi scheme that defrauded more than 100 investors out of more than $10 million. Valente ran his scheme through his investment company, the ELIV Group LLC, claiming that he had annual investment returns of 36% to more than 48% when in fact he was losing money each year.

    Hector Vega, 40, pleaded guilty to charges accusing him of running a Ponzi scheme in which he promoted music concerts.

    Sydney “Jack” Williams, 66, pleaded guilty to charges that he made a series of bank withdrawals. His wife, Lori Ann Williams, pleaded guilty a few weeks earlier.

    Tropikgadget FZE, Tropikgadget Unipessoal LDA, Compasswinner LDA, and Happy SGPS SA, operating under the $23.5 million Wings Network Ponzi scheme, were ordered to pay $36 million as fines and restitution to thousands of mostly Latino investors.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    Rashida Samji, 61, sought a stay of charges relating to an alleged $110 million Ponzi scheme, claiming that the charges would violate her constitutional right not to be tried twice for the same offense. Samji was previously fined $33 million by the BC Securities Commission for defrauding more than 200 investors, and she was banned from the B.C.’s capital markets. Samji’s investors were advised that they were investing in a winery that was expanding into South America and South Africa. About 90 of the investors came to her through Arvindbhai Bakaorbhai Patel, a financial planner at Coast Capital Savings. Patel was previously charged in connection with the scheme.

England

    Phillip Harold Boakes, 56, was sentenced to 10 years in prison following his conviction in March for defrauding investors of at least £3.5m ($5.3m, €5m). Boakes promised investors returns of 20% or more through a foreign exchange spread betting program in his company, CurrencyTrader.

    Richard Rufus, 40, was found to have operated a Ponzi scheme that defrauded almost 100 victims out of almost £9 million. Rufus had collected more than £16 million, but lost more than £5 million through currency exchange trading and used more than £3 for himself. Restrictions were imposed on Rufus’s ability to borrow money and work in business for the next 15 years. It is unclear whether he will face criminal charges.

Germany

    The trial got underway of Jorg Biehl and five other executives of Infinus, which is believed to have run a Ponzi scheme defrauding 22,000 investors out of €312 million, or $336 million.

India

    Four directors of ASSDA - Nabarun Dutta, Jasim Hossain, Jamir Hossain and Asgar Ali – were arrested for allegedly raising money from the public illegally and misappropriating funds.

    The Supreme Court dismissed the bail plea of Matang Sing, who had previously been arrested in connection with the Saradha Ponzi scheme.

    Omkar Singh was arrested in connection with an alleged Ponzi scheme involving more than 15 crore, through the companies, Ambitious Diversified Projects Management Ltd. and OAK India Multi-State Credit Cooperative Society.

    Davanidhi Mohapatra, the managing director of Tresty Securities Limited, was arrested for allegedly defrauding investors out of Rs 10 crore.

    Two directors of Akashdeep Projects, Pinak Ranjan Choudhary and Tapas Pramanik, were arrested and were alleged to be “involved in criminal conspiracy with other directors.”

    Nirmal Infra Home Corporations Limited was raided in connection with charges that it defrauded investors of about Rs 50 crore. Nirmal claimed to have operations in real estate and hospitality businesses and promised high returns.

Philippines

    The SEC alleged that EmGoldEx, which was renamed at Global Intergold, was a Ponzi scheme, and that Prosperous Infinite Philippines Holdings, Corp., was later incorporated. The SEC issued a warning in advanced of a promotional event at which 2,000 people were expected to attend. Individuals alleged to be associated with the scheme are Kevin Miranda, Ryan Manuit, Charles Juiz Padilla, Rabel Ymas, John Rafael Calicdan, and Paul Alviar. Weng Faye Cabreros Cabusas aka Rowena Faye Cabusas, Gavino Mariano Tan, and Romell Enriquez Tan of Goldxtream Trading Co. were charged in connection with an alleged Ponzi scheme that promised returns of P25,000 for an investment of P5,000 after 11 days.

Thailand

    Over 20 million baht worth of assets were seized from Wannachai Boonchu, who alleged defrauded victims into investing in gold futures through a China-based company. The scheme defrauded over 1,000 people.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The trustee of Tim Durham’s Fair Finance Co. $208 million Ponzi scheme sought approval to distribute $18 million to investors. The distribution represents less than 9 cents on the dollar for the 5,000 investors. Fair Finance, founded in 1934 but acquired by Durham in 2002, bought finance contracts from fitness clubs, timeshare condominium developers and other firms that offered customers extended payment plans. Durham, who pulled out tens of millions of dollars for himself, is serving a 50 year prison sentence.

    Ernst & Young was found liable by a jury in a lawsuit filed by investment firm FutureSelect Portfolio Management Inc. for negligent audit reports of a Bernard Madoff feeder fund prepared by Ernst & Young. Ernst & Young had audited Rye Funds, which were managed by Tremont Group Holdings Inc., and contends that it followed generally accepted accounting principles in auditing the fund. The jury rendered a verdict of $20.3 million, with Ernst & Young liable for half of that amount, but the liability could reach nearly $25 million when prejudgment interest is added.

    A court declined to dismiss claims brought by investors in the Stanford Financial Ponzi scheme against Toronto-Dominion Bank, alleging that TD failed to conduct proper due diligence and was negligent in providing services to Stanford International Bank.

    A bankruptcy court has ruled that TelexFree LLC, TelexFree Inc. and TelexFree Financial Inc. were engaged in a Ponzi and pyramid scheme. The trustee had sought such a ruling as part of the proposed claims procedure process, but he will likely also use the ruling in connection with lawsuits to recover voidable transactions.

    The lawyer appointed by the court to defend thousands of net winners in the ZeekRewards case has established a website to communicate with the Net Winner Class in the case. The website can be found at http://www.zeeknetwinnerclass.com/index.

October 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for October 2015. The reported stories reflect: 3 guilty pleas or convictions in pending cases; over 93 years of newly imposed sentences for people involved in Ponzi schemes; at least 4 new Ponzi schemes; and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

    William Apostelos, 54, and Connie Apostelos aka Connie Coleman, 50, were indicted on charges relating to an alleged $70 million Ponzi scheme that defrauded over 480 investors. The Apostelos ran the scheme through their investment business, WMA Enterprises LLC, Midwest Green Resources LLC, and Roan Capital. Connie Apostelos also operated Coleman Capital Inc. and Silver Bridle Racing LLC. The investors are believed to have lost $30 million collectively.

    Eric Bartoli, 61, was extradited from Peru, after having been wanted by the FBI since 2003 for masterminding a $65 million Ponzi scheme. Bartoli had run his scheme through Cyprus Funds, Inc. and took money from more than 800 investors. It is believed that about $30 million was returned to investors by Bartoli, and the receiver over the scheme has made nearly $10 million in distributions to the victims.

    Chuckie Beaver, 52, was sentenced to 4 years and 9 months in prison for defrauded at least 30 victims out of about $2 million. Beaver owned Best Services Inc., which repaired industrial electronic equipment. He solicited investors to provide capital to supposedly buy materials to complete a large number of outstanding repair orders for major corporations. Beaver delivered fake documents to the investors, including bogus repair orders, and promised them returns of up to 100%.

    Charles A. Bennett, 57, pleaded guilty to running a $5 million Ponzi scheme that involved at least 30 investors. Bennett was once a lawyer at Skadden Arps Slate Meagher & Flom LLP, but later started soliciting investments in a supposed European real estate mortgage-backed securities scheme. The scheme first came to light after Bennett’s failed suicide attempt last year in which he revealed that “the bulk of the funds were used in classic Ponzi scheme fashion to pay off other supposed ‘investors’ and my absurd lifestyle.”

    John Steven Blount, 55, was sentenced to 19½ years in prison and was ordered to pay $4.3 million in restitution in connection with a $5.8 million Ponzi scheme through his company, Professional Consultants LLC. The scheme defrauded at least 73 investors by promising above-market returns from investments in fictitious companies, bonds and IRAs.

    Robert Cephas Brown Jr., 61, had his 10 year prison sentence reduced by about 5 ½ years as a result of his appeal to the Ninth Circuit. The appellate court found that the lower court had overreached in the use of the sentencing enhancements.

    John R. Bullar, 53, and his company Executive Management Advisors LLC, were permanently banned from future violations of the Commodity Exchange Act. They were also imposed with a restitution obligation in the amount of $31 million. Bullar was sentenced earlier in the year to 100 months in prison and ordered to pay about $6.2 million in restitution for running an $8.7 million Ponzi scheme. Bullar was also the sole owner and operator of Priapus Group, LLC.

    Steve Chen, and his companies, Gemcoin, its parent company, Alliance Financial Group, Inc., its subsidiary, US Fine Investment Arts, Inc., along with other related companies, Amauction, Inc., Aborell Mgmt I, LLC, Aborell Advisors I, LLC, Aborell REIT II, LLC, Ahome Real Estate, LLC, Alliance NGN, Inc., Apollo REIT I, Inc., Apollo REIT II, LLC, Amkey, Inc., US China Consultation Association, and Quail Ranch Golf Course, LLC, were the subject of an SEC complaint alleging that they were operating a fraudulent scheme. Investors were told that the companies owned amber mines in Argentina and Dominican Republic with assets of $50 billion. Chen and his companies allegedly raised at least $32 million from investors, claiming to have converted the holdings of the investors into “Gemcoins,” which was supposedly a digital currency secured by the amber holdings in the company. Chen told investors that the U.S government had purchased 705 of Gemcoins and that a 6,400% profit was guaranteed. An anonymous investor in Gemcoin filed a lawsuit making allegations against former Arcadia Mayor, John Wuo, who promptly resigned from his position stating “health and personal reasons.”

    Paul Sloane Davis, 74, was sentenced to 3 years in prison and ordered to pay $1.7 million in restitution in connection with a $2.4 million Ponzi scheme. The scheme was run with his partner Dianne Cobb, 58, through a company called DM Financial, and defrauded 21 investors.

    Gordon Driver, 58, was sentenced to 12½ years in prison and ordered to pay about $9.6 million in restitution in connection with his operation of a Ponzi scheme through Axcess Automation LLC and for his lying to the SEC under oath. The scheme took in about $17.4 million from about 150 people. Of those, 88 lost nearly $10 million. Driver had told investors that he was producing profits of 1% to 5% a week through a commodity futures trading program involving E-mini S&P 500 futures contracts.

    Jeffrey Heady, a former Phoenix policy officer, was sentenced to 5 years in prison and ordered to pay more than $1 million in restitution in connection with his Ponzi scheme that defrauded 15 victims out of more than $1 million.  Heady was selling bridge loan investments through his company, Investment Acquisition Group. He told investors he would use their money to buy and resell commercial properties, promising a return of 11% to 19% per year.

    Jenifer Hoffman, 51, was sentenced to 9 years in prison for defrauding more than 100 people out of more than $10 million. Hoffman used her company, Assured Capital Consultants, to solicit the investors into a scheme run with John Boschert, 43, and Bryan Zuzga, 37. Boschert and Zuzga both previously pleaded guilty and are serving prison terms of 9 years and 6 years, respectively.

    Michael William Kwasnik, 46, Joseph Michael Schifano, 49, and Daniel Francis McCorry, 59, were ordered to pay back $8.6 million to 73 elderly investors in a Ponzi scheme and an additional $5.4 million in penalties. They had promised 12% returns from the purchase of life insurance policies and interests in irrevocable life insurance trusts.

    Kurtis Keith Lowe, 63, and Robert Allen Blackburn, 49, were each sentenced to 5 years in prison and ordered to pay about $2.3 million in restitution, jointly and severally. Lowe and Blackburn pleaded guilty in July 2015 to charges relating to a scheme run through Omni Capital Management Trust. Lowe owned Omni and Blackburn recruited investors into the company, as well as two other bogus companies, Amwest Capital Management and National Fidelity Management. Lowe and Blackburn defrauded 21 investors out of more than $2.4 million.

    Patricia Maldonado was hit with a $50 million jury verdict in connection with her role as the former treasury manager of Stanford Financial. The receiver of Stanford Financial had alleged that Maldonado breached her fiduciary duties in connection with improper transfers from customer deposit accounts, including transfers of more than $200 million to a secret Swiss bank account that was used to pay bribes.

    James Hurst Miller, 67, was sentenced to 7 years in prison for his role in a Ponzi scheme run by developer Kelly Gearhart. Miller raised money for the scheme through his company, Hurst Financial Corp., acting as a middleman in recruiting investors.

    Jason A. Muskey, 39, was sentenced to 11 years in prison for his role in connection with a Ponzi scheme he ran through Muskey Financial Services that raised $2 million from 26 investors. He was also barred from the financial industry by the SEC.

    Dror Soref, 65, and Michelle Seward, 43, were charged with in connection with an alleged Ponzi scheme that defrauded nearly 140 investors to raise money for the film “Not Forgotten” through their company, Windsor Pictures LLC.

    Frank Spinosa, 54, pleaded guilty to charges that he provided false assurances to investors in the Scott Rothstein $1.2 billion Ponzi scheme. Spinosa was the regional vice president of TD Bank, which was found liable for $67 million to a group of investors who sued the bank for aiding and abetting Rothstein’s fraud. Spinosa had signed “lock letters” assuring the investors that their money was safe in TD bank accounts. More than two dozen people have been charged and convicted in connection with the Rothstein Ponzi scheme.

    R. Allen Stanford, 65, lost his appeal of his conviction and 110 year prison sentence. The Fifth Circuit rejected Stanford’s 10 arguments raised on appeal, including that: he was not competent to stand trial, the government did not prove its case; the sentence was too long; and the trial judge was biased toward the prosecutors. U.S. v. Stanford, 2015 U.S. App. LEXIS 18861 (5th Cir. Oct. 29, 2015).

    Michael Szafrankski, 37, was sentenced to 2½ years for his role in the Scott Rothstein Ponzi scheme. Szafrankski has been hired by several hedge funds to act as an “independent asset verifier” to vet the investments that Rothstein was promoting. Szafrankski became friends with Rothstein and then began soliciting investors for the scheme. It was alleged that Szafrankski brought over $200 million of new investments into the scheme.

    Alan James Watson, 50, and Michael S. Potts were ordered to pay more than $91.9 million in restitution and penalties in connection with a commodity pool Ponzi scheme run through Cash Flow Financial LLC. They also used Safevest LLC and Trade LLC as part of the scheme. The two were accused of soliciting at least $45 million from more than 600 investors.  Watson was previously sentenced to 12 years in prison.

    William J. Wells was arrested and also became the subject of a complaint filed by the SEC accusing him of running a Ponzi scheme through Promitor Capital Management LLC that defrauded more than 30 investors out of more than $1.5 million. Wells allegedly falsely told investors that he was a registered investment advisor and would invest their money in specific stocks. Instead, he invested in high risk options and had to bring in money from new investors to cover his losses. In response to an investors accusation that he was running a Ponzi scheme, Wells responded, “I’m an idiot and was trying to get some big trades to . . . make you more money.” Criminal charges were also filed against Wells.

    Lorie Ann Williams, 48, pleaded guilty to evading bank reporting requirements in connection with Ponzi scheme of Nevin Shapiro. Williams admitting to withdrawing $332,500 worth of cash in chunks of $9,500, intending to avoid the $10,000 threshold at which cash transactions must be reported. She withdrew the cash after lawsuits were filed against her husband, Sydney “Jack Williams, 66, the top recruiter in the Shapiro’s Capitol Investments Ponzi scheme, earning up to $18 million in interest and commissions. Sydney Williams had previously pleaded guilty to tax fraud for failing to report $6.4 million in income. Sydney and Lorie Ann Williams are now accused of conspiring to move funds shortly before Sydney filed bankruptcy in 2010.

    Daniel H. Williford, 57, was sentenced to 9 years and 2 months and ordered to pay $17.9 million in restitution in connection with a $44 million Ponzi scheme that took in money from more than 200 investors. Williford had promised investors that their funds would be invested in wireless internet equipment, internet towers and other facilities. Instead, Williford invested only $7.7 million of the victim’s money and used $32 million to make Ponzi scheme payments to earlier investors and to pay his personal expenses. More than 100 investors lost nearly $18 million in the scheme.

    Joseph Zada, 57, was found guilty last month for his role in a $50 million Ponzi scheme in which he told investors he was putting their money in oil and currency trading through a secret European board. Since then, and prior to his sentencing, evidence has come out that Zada has been receiving substantial financial assistance from Alex Molinaroli, the CEO of Johnson Controls Inc., in the form of housing and money. Prosecutors, in arguing that Zada may be a flight risk, say that Molinaroli has paid Zada’s legal fees, bought a mansion for Zada to live in, and offered to pay up to $20 million in restitution for Zada. Molinaroli says he gave money to Zada understanding that Zada was investing it and that he regrets ever meeting Zada.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    Leanne Houle, 47, had charges against her dropped in connection with an alleged $3 million Ponzi scheme in which 22 investors had understood their money was being invested in high-return currency trading with tax-free returns of 15% to 28%. John Paul Baron, 55, had previously been convicted on charges relating to the scheme, and Terrence McGill, 57, had previously been sentenced to 23 months of house arrest.

China

    Fanya Metal Exchange is the subject of public protests, among other things, that it is a Ponzi scheme. It is estimated that thousands of Chinese investors have invested an estimated $6 billion into the company, believing that they were investing in a business that bought, sold and traded rare metals. China’s state banks had recommended Fanya to customers, national television stations tacitly endorsed the business, and local regulators approved it. Fanya has been in business since 2011, and it is reported that its prices were far disassociated from the global buying and selling of rare metals. Retail investors would lend money to buyers to pay for products and would get a “warehouse warrant” of the rare metals that their money had bought, pledging that the metals exist. The end buyers of the metal would pay investors daily interest of .003%, or 13.7% on an annual basis.

India

    The Central Bureau of Investigation arrested three directors of MPS Greenery Developers Ltd.: Shantanu Chowdhury, Prabir Kumar Chanda, and Madhusudan. They have been accused of conspiring with the managing director, P.N. Manna, to defraud poor investors in a Ponzi scheme and collecting Rs. 2,500 crore from the public with permission from any regulatory body.

South Africa

    The Reserve Bank applied to have the company Carmol be determined insolvent and to be liquidated. Carmol was allegedly a Ponzi scheme that promised returns of between 72% and 96% a year. Carmol claimed to be involved in the selling and distributing of Petrol and diesel products, but instead is alleged to have been running an unlawful deposit-taking scheme. Yunus Moola and Fathima Carawan are directors of Carmol.

Thailand

    The Department of Special Investigation seized assets exceeding 700 million baht from Digital Crown Holdings Limited, which is accused of running a Ponzi scheme that defrauded more than 8,000 people out of 900 million baht.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    Victims of Steve Blount’s Ponzi scheme filed a lawsuit against Blount’s companies and JD Bank, alleging that the bank aided and abetted the fraud and added unwarranted legitimacy to the business. Blount was sentenced to almost 20 years in prior for the scheme that defrauded more than 70 victims.

    John R. Merlino Jr. won an appeal of a malpractice lawsuit brought against him by a couple who had invested $3 million with Merlino’s client, Antoinette Hodgson, who was convicted of running a Ponzi scheme.

    The trustee of the Bernard Madoff Ponzi scheme had his lawsuits dismissed that were seeking to recover payments made to foreign investment companies. The court found that since the transfers did not take place on U.S. soil, the U.S. Bankruptcy Code does not apply to them.

    The United States Supreme Court denied a petition for writ of certiorari filed by a group of investors in the Madoff scheme seeking review of a Second Circuit decision denying them the ability to collect inflation or interest on their losses. The Court upheld that the finding that the Securities Investor Protection Act does not allow the liquidating trustee to adjust investors’ net equity claims for inflation or interest. The Madoff trustee is now free to disburse $1.249 billion that he has been holding in reserve while the litigation over time-based damages was pending. Any customer who invested up to $1,161,000 will be made completely whole in the latest round of distribution payments.

    FutureSelect Portfolio Management Inc. began its jury trial against Ernst & Young, alleging that E&Y certified $4.2 billion in fake assets that Bernard Madoff claimed to have. The FutureSelect investors say they never would have invested but for the certification of E&Y of the financials of Madoff.

    The Madoff trustee began a trial against Andrew Cohen, a former Madoff employee, to recover $1.1 million on a fraudulent transfer theory.

    A court granted a request by the liquidator of Fairfield Sentry Ltd. to disapprove the sale of a $230 million claim against Madoff to a hedge fund.

    Three brokers have agreed to pay $2.75 million to settle arbitration claims relating to their role in investments purchased by Gregory McKnight, who was found guilty for running a $72 million Ponzi scheme. McKnight was previously sentenced to 15 years in prison for the scheme that involved more than 3,000 investors. McKnight promoted his scheme in a pooled investment program called Legisi, which promised returns of 15% to 18%.

    Huntington Bank sought a stay of a $72 million judgment obtained against it in connection with the CyberNet and Cyberco Holdings Inc. Ponzi scheme run by Barton Watson. The scheme promised investors returns for the use of their money to purchase computer hardware from Teleservices Group, Inc., a company also controlled by Watson. Huntington Bank had provided banking services to Watson and his companies, including a $17 million credit line on which more than $73 million payments were made. The bank’s good faith defense was rejected, with the court noting examples of the bank turning a blind eye to obvious red flags. The court found that the bank is entitled to a stay if it posts a bond of $80 million to cover the judgment and the $9 million of interest. Huntington Bank says that that bond would cost the bank $800,000 to $1.6 million.

    The TelexFree trustee has filed a motion seeking to institute an electronic claims process to deal with the hundreds of thousands of potential claims. The trustee believes there are likely in excess of one million claimants and that an exclusive online portal is the most practical and cost-effective means of managing the claims process.

    The ZeekRewards receiver sued MLM attorney Gerald Nehra and his law firm, Nehra and Waak, along with his partner, Richard W. Waak. The receiver alleges damages of at least $100 million, contending that they encouraged investors to participate in the scheme by knowingly allowing their names to be used to provide “a false façade of legality and legitimacy…”

September 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for September 2015. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 51 years of newly imposed sentences for people involved in Ponzi schemes; at least 3 new Ponzi schemes; and an average age of approximately 52 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.

    Roger Stanley Bliss, 57, pleaded guilty to charges relating to his attempt to hide a sailboat after he was accused of running a $25 million Ponzi scheme by representing that he was trading exclusively in the shares of Apple. Bliss is also facing charges that he operated an investment club that took in money from about 708 investors, promising returns of up to 300%.

    Charles L. Erickson, 72, was arrested and accused of running a $3.4 million Ponzi scheme that defrauded at least 8 victims. Erickson allegedly took money from fellow members of his Ashland church in Massachusetts, claiming that the Holy Spirit revealed an investment strategy to him.

    Gregory G. Jones resigned as a lawyer in lieu of discipline by the State Bar of Texas. Jones was the subject of a disciplinary proceeding for his role in advising clients to invest in Edwards Exploration LLC and Edwards Operating Co. LLC. Jones represented that he knew the principal of the companies, Spencer Edwards, and that he was familiar with the business ventures. But the businesses were actually running a Ponzi scheme.

    George Lindell, 67, and Holly Hoaeae, 40, were found guilty in connection with a Ponzi scheme called “The Parking Lot” in which 166 people invested over $26 million and lost a net amount of $8.9 million. The scheme was run in connection with the operation of their business, “The Mortgage Store.”

    Stafford S. Maxwell, 46, was sentenced to 3 years and 9 months in prison and ordered to pay about $1.4 in restitution in connection with the Millennium Capital Exchange Inc. Ponzi scheme. Maxwell was the former Chief Executive Officer and former owner of Millennium who defrauded victims out of more than $2 million. The company was supposedly engaged in foreign exchange trading and promised investors returns of 48% to 72%.

    James E. Neilsen, 55, pleaded guilty to charges relating to a Ponzi scheme that defrauded investors out of $1.6 million. Neilsen ran the scheme through Neilsen Financial Services and Ulysses Partners LLC. He promised 9% to 10.5% returns to investors from supposedly investing their money in business ventures, but instead used the money to pay back earlier investors or on himself.

    Gina Palasini was indicted in connection with an alleged Ponzi scheme that defrauded 6 investors out of over $1 million. Palasini is already serving a 10 year prison sentence on related state charges. Palasini continued to sell accident, life and death insurance even after her insurance license was revoked in 2006. Palasini also promised her clients assistance in obtaining Medicaid or Veterans Affairs benefits and encouraged them to invest in annuities, sometimes promising them that they would qualify for benefits and 10% interest.

    Gaeton “Guy” Della Penna, 62, was sentenced to 5 years in prison and ordered to pay $2.8 million in restitution for his role in a Ponzi scheme in which he promised investors a 5% return plus principal repayment after 18 months.

    James Peister, 63, was sentenced to 6 years in prison for running a $17.9 million Ponzi scheme that defrauded 74 investors. Peister had sent fictitious account statements to investors and false financial statements to an independent auditor.

    Trendon Shavers, 33, pleaded guilty to operating a Ponzi scheme that involved the virtual currency, Bitcoin. Shavers ran the scheme through his company, Bitcoin Savings & Trust and claimed that he would pay investors 1% interest on their investment every 3 days, or 7% per week. Shavers had more than 750,000 Bitcoins worth about $4.5 million when he shut down the company in 2012. The SEC charged Shavers and ordered him to pay back $40.7 million in a civil lawsuit.

    Sunil Sharma was sentenced to 33 months in prison for running a Ponzi scheme through his companies, Gold Coast Holding and Safe Harbor Tax Lien Acquisitions. Sharma raised $8.36 million from 32 companies and told investors he would invest in bonds in emerging markets in Brazil, Russia, India, and China. Instead, he engaged in day-trading stock options and spent the investors’ money on a home, a Mediterranean cruise and lease vehicles.

    Jerry Smith, 52, saw his 40 year prison sentenced dismissed by an appellate court. Smith had pleaded guilty to charges relating to the Ponzi scheme run with his business partner, Jasen Snelling. The appellate court concluded that Smith committed one single act of criminal conduct by failing to register as a broker-dealer and that the proper analysis was not the number of times Smith transacted business. The court remanded for the trial court to re-sentence Smith with the court’s calculation to find that the total term Smith may receive is 10 years.

    Dror Soref, 75, was arrested in connection with an alleged Ponzi scheme run through Not Forgotten LLC. Soref, CEO of Skyline Pictures, is a film director known for making Weird Al Yanovic music videos, but is now accused of working with Michelle Kenen Seward, 42, in defrauding investors out of at least $11 million, promising them returns of 10% to 18%. Such returns were also promised by another company run by the two of them called Windsor Pictures LLC. It is estimated that at least 140 victims invested over $21 million with Soref and Steward.

 

    Frank Spinosa, 54, is scheduled to plead guilty to charges relating to his relationship to Scott Rothstein while he was a vice president at TD Bank. Spinosa was accused of making oral assurances to at least two investors that certain accounts contained hundreds of millions of dollar when these “locked” accounts actually only held about $100. Spinosa was facing many years in prison if convicted on all charges, but may only face a maximum of 5 years for the single count of wire fraud conspiracy.

    Kaveh Vahedi, 53, who was convicted of running a Ponzi scheme through KGV Investments and Countrywide Financial, was sentenced to 18 years in prison. The 18 year sentence was imposed despite the fact that the government was asking for an 8 year sentence and the probation office recommended 10 years. The scheme defrauded 31 investors who invested more than $12 million in supposed development projects on promises of a profit of 50% of their principal investment within 9 months. The sentencing judge call the scheme the “most heartbreaking, vicious fraud ever,” because Vahedi had defrauded cancer victims, the elderly, and others already in financial trouble, convincing them to mortgage their homes in order to invest.

    Charles Wooden, 48, and Hendrickx Toussaint, 44, were sentenced to 7 years and 3 years 10 months in prison, respectively, for their $5 million real estate Ponzi scheme run through Aeon Capital Management LLC. They provided fake documents to investors to conceal that the money was not used to purchase real estate as promised and fake bank account statements to reflect that investors’ money was still in escrow.

    Troy Wragg, 34, Amanda Knorr, 32, and Wayde McKelvy, 52, were charged with running a $54 million green energy Ponzi scheme through Mantria Corp. The SEC had filed a civil action against them and each of them were ordered to pay $37 million in 2012. The scheme promised as returns high as 484% from a green energy technology called “biochar” that would turn trash into fuel and “carbon-negative” housing developments. The scheme raised $54.5 million. Before the Ponzi scheme was shut down, former President Bill Clinton’s Clinton Global Initiative had honored Mantria for its effort to “help mitigate global warming.”

    Joseph Zada, 57, was found guilty of charges relating to a $50 million Ponzi scheme. The SEC had previously obtained final judgments against Zada and his company, Zada Enterprises LLC, in connection with a $27.5 million Ponzi scheme that defrauded at least 60 investors. Zada had promised 7% to 12% interest rates and promised some investors 48% returns in connection with oil-related investments in the Middle East.

    Brian Zuzga, 39, was sentenced to 6 years in prison and ordered to pay $10.7 million in restitution for his role in a Ponzi scheme that defrauded more than 100 victims out of more than $11 million. Zuzga had previously pleaded guilty to running the scheme through Assured Capital Consultants, along with Jenifer E. Hoffman and John C. Boschert.

INTERNATIONAL PONZI SCHEME NEWS

England

    Spencer Mitchell Steinberg, 45, and Michael Strubel, 53, are on trial for allegedly using fake contracts with the London 2012 Olympics to defraud £40m from friends and family. The two defendants, along with Jolan Marc Saunders, 39, who has pleaded guilty, told investors that Saunders Electrical Wholesaters Limited supplied electricals including trouser presses and kettles to major hotel chains. It is alleged that instead they used the funds to purchase expensive homes and vehicles.

India

    Shibonoy Datta and Ashok Saha were arrested in connection with the Rose Valley Ltd. Ponzi scheme.

    Chittaranjan Mohanty, Bikram Pradham and Manas Kanungo were arrested in connection with allegations that they were running a Ponzi scheme through Unique SMCS, a cooperative society that used 700 local youths as agents to collect money from people. Unique SMCS ran 5 schemes and promised investors that they would double their money in 5 years and get 7 times their money in 10 years.

    The Securities and Exchange Board of India imposed a record penalty of 72.7 billion rupees ($1.1 billion) on real estate developer PACL Ltd.

South Africa

    The National Consumer Commission has launched preliminary investigations into the following nine alleged Ponzi schemes: WorldVentures, Kipi aka Mydeposit241, Make Believe, NMT Investments, Instant Wealth Club, MMM South Africa, DIPESA, Sikhese (Pty) Ltd., and the Wealth Creation Club.

Thailand

    Thirteen defendants appeared in Criminal Court in Bangkok in connection with the alleged scheme of the Ufun Store. The scheme allegedly defrauded about 120,000 people out of more than 20 billion baht. The company had been granted permission to sell herbal drinks, fruit drinks and cosmetics last year, but is believed to have been operating a scheme to bring in new members rather than sell products. The defendants are Apicharat Saenkla, 40, Ratthawit Thiti-arunwat, 34, Chaithorn Thonglorlert, 41, Ritthidej Warong, 39, Monpan Thanabundit, 41, Peeraya Kanphrom, 26, Chotipat Wuthipanpokin, 38, Nipaporn Lamee, 36, Theerawat Patcharasuyayai, 21, Natwaran Uttamakaeo, 24, Chaisong Wanasbodiwong, 36, Kevin Lai, 48, and Yang Yuan Zhao.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES
 
    An appellate court upheld a $72 million judgment against Huntington Bancshares Inc. in connection with the Cyberco Holdings Inc. Ponzi scheme. The ruling upheld a bankruptcy court decision that found that Huntington ignored signs of wrongdoing and continued to allow a related company to move money in its accounts. Meoli v. Huntington Nat’l Bank, 2015 U.S. Dist. LEXIS 129909 (W.D. Mich. Sept. 28, 2015).

   
    The bankruptcy trustee of Fair Finance Company, a company run by Tim Durham, announced his intention to make a first distribution to victims of the Ponzi scheme. The distribution will be $18 million, or about 8% - 9% of the losses in the case. Nearly $230 million of claims were submitted in the bankruptcy case. Durham is serving his 50 year prison sentence and his co-conspirators Jim Cochran and Rick Snow were sentenced to 25 years and 10 years, respectively.

    Cleveland Cavaliers forward Mike Miller filed a lawsuit to recover the balance of his $1.7 million loss from the alleged Ponzi scheme run by Randy Hansen and Vincent Puma through RAHFCO Hedge Funds.

    A lawsuit was filed by about 30 investors against CommunityOne Bank in North Carolina in connection with the $40 million Ponzi scheme run by Keith Franklin Simmons, who was previously sentenced to 40 years in prison. Simmons was sentenced to 40 years after a jury trial last year in which he was found to have defrauded more than 400 investors who placed more than $35 million with Black Diamond.

    The Receiver in the R. Allen Stanford $7 billion Ponzi scheme won a summary judgment finding that 6 investors must return approximately $2 million in profits they received.

    A court approved a settlement between thousands of investors in the Allen Stanford scheme and BDO for the sum of $40 million.

    A class action attorney asked a federal court for permission to sue at least 20,000 net winners in the TelexFree Ponzi scheme. Daniil Shoyfer, a TelexFree promoter, would be the lead class-action defendant.

    3M, a multinational conglomerate ranked No. 101 on the Fortune 500 list, was denied its insurance claim seeking to recover funds in connection with its investment of its employee-benefit plan assets in the Ponzi scheme run by WG Trading Company. Even though 3M recovered all of its money invested through the receivership proceedings, it sought to be paid earning on those investments. A court ruled in favor of the insurance company, finding that 3M owned a limited partnership interest in WG Trading and that it did not own the earnings of WG Trading, so 3M’s insurers are not obligated to compensate 3M for a loss when it never possessed the earnings. 3M Co. v. Nat'l Union Fire Ins. Co., 2015 U.S. Dist. LEXIS 131197 (D. Minn. Sept. 28, 2015).

August 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for August 2015. The reported stories reflect: 3 guilty pleas or convictions in pending cases; over 39 years of newly imposed sentences for people involved in Ponzi schemes; at least 3 new Ponzi schemes involving over $143 million; and an average age of approximately 59 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.

    Bryan Anderson, 41, was sentenced to 7 years and 3 months in prison in connection with a Ponzi scheme to which he had previously pleaded guilty. Anderson defrauded a dozen investors out of more than $3 million. During most of the scheme, Anderson was a registered financial broker working with MetLife Securities and then Pruco Securities.

    Roland Barrera, a bar owner, was ordered to pay a $150,000 penalty for breaking federal regulations when he helped persuade a businessman to invest $3 million in a Ponzi scheme run by Robert Helms and Janniece Kaelin through their company, Vendetta Royalty Partners, Ltd., claiming to have royalties on 2,000 oil and gas wells. The scheme involved as many as 129 investors who invested at least $18 million. Helms and Kaelin were the subject of a summary judgment against them, stripping them of their ability to work in investment industry.

    John R. Burns III, 56, was sentenced to 7 years in prison in connection with a Ponzi scheme run through USA Retirement Management Services. Burns persuaded investors to invest in bogus Turkish bonds. His scheme was part of a large scheme run with Robert Pribilski, 57, and Mahmt Erhan Durmaz, 45, in which they defrauded 120 investors out of $28 million. Pribilski pleaded guilty last year, and Durmaz fled the U.S. in 2010 and is believed to be residing in Turkey.

    Terina Carney aka Teina Humphrey, 49, pleaded guilty to running a Ponzi scheme in which she stole more than $415,000. Carney ran her scheme through Riverside Lease LLC, and investors were promised returns of 10% to 30%.

    Cristal Clark, 41, was acquitted of charges of running a Ponzi scheme through Cay Clubs, and a mistrial was declared as to her husband, Fred “Dave” Clark. Cay Clubs had sold interests in luxury resorts that were to be developed nationwide, promising returns of 15% to 20%. They had raised more than $300 million from approximately 1,400 investors. An SEC action against the Clarks had previously been dismissed as being untimely. Two others involved with Cay Clubs, Barry Graham and Ricky Lynn Stokes, had previously pleaded guilty and received sentences of 5 years each.

    Carlos Garza and his brother, Josh Garza, were sued by the SEC in connection with GAW Miners. GAW is alleged to have violated securities laws through its sale of Hashlet miners and its cryptocurrency, Paycoin. Last year, GAW moved more toward its “Paybase” system of payments and formed strategic partnerships with Walmart and Amazon.

    Richard M. Higgins, was sentenced to 14 years in prison after pleading guilty to charges that he ran a Ponzi scheme through Higgins Capital Management and Higgins Equity Partners. Higgins defrauded investors out of more than $600,000 by assuring them that he was a registered advisor and reporting returns to them of between 18% and 174%. In fact, he experienced losses of between 80% and 91%.

    Irwin Lipkin, 77, was sentenced to 6 months in prison in connection with the Bernard Madoff Ponzi scheme. Lipkin had pleaded guilty to charges relating to the falsification of documents at a time when he was Controller for Madoff’s company. When he left the company, he instructed his successor on how to falsify the records and he also manipulated his own account to retain significant capital gains. Lipkin’s wife also remained on the payroll for many years, even when she was not performing any services.

    James H. Mason, 67, was sentenced to 8 years in prison and ordered to pay $4.3 million in restitution in connection with a $4.7 million Ponzi scheme that defrauded at least 500 investors. The scheme purported to be a foreign exchange investment program.

    Ron Earl McCullough and David Christopher Mayhew had a default judgment entered against them, which provides that they will have to pay $1,223,388.43 in restitution and 42,486,619.87 in civil monetary penalties for operating a foreign exchange Ponzi scheme. McCullough and Mayhew were accused by the CFTC of violating commodities laws in connection with a fraudulent scheme that solicited about $2.3 million from at least 11 victims.

    Steven Palladino, 58, was sentenced to 2 years in prison for violating an asset freeze and other court orders in a civil case brought by the SEC relating to a Ponzi scheme for which he is already serving a 10 to 12 year sentence. Palladino was sentenced last year after pleading guilty to stealing $10 million from investors through his company, Viking Financial Group.

    Wayne Palmer, 60, and his cousin Julieann Palmer Martin, 47, of Utah, were indicted on charges that they ran a Ponzi scheme which defrauded more than 600 investors out of $140 million. They ran the scheme through National Note of Utah, a company that supposedly extended real estate loans, engaged in other real estate activities, operated a mint, and extracted precious metals from mine tailings. The company promised investors consistent returns of 12% per annum.

    Albert Rossini, 67, Babajan Khoshabe, 74, and Anthony Khoshabe, 33, were indicted on allegations that they defrauded at least 15 victims out of $2.9 million. They represented that investors would receive rental income from purchasing purported mortgage notes on apartment buildings in foreclosure, and that they would get title following the foreclosure. Thomas Murray, 61, a licensed Illinois attorney, was also indicted for his alleged role in validating the sale of the mortgage notes through a phone “Guaranty Agreement” that he prepared and gave to Rossini to present to victims. Rossini and Babajan Khoshabe allegedly told prospective investors that Anthony Khoshabe managed the mortgaged properties through his position at Reliant Management, which shared office space with Devon Street Investments Ltd.

    Keith F. Simmons, 50, and Deanna Salazar received one of the largest fines ever handed out by the CFTC. They were fined $76 million for fraudulently soliciting and accepting $40 million from 240 individuals for their off-exchange forex trading program known as Black Diamond. Simmons was sentenced to 40 years in prison and Salazar was sentenced to 4.5 years, and both are currently serving their sentences. The court entered consent orders against Simmons and Salazar and her companies, Life Plus Group LLC and Black Diamond Holdings LLC. Also charged are Bryan Coats and his company, Genesis Wealth Management LLC, and Jonathan Davey, and his companies, Divine Circulation Services LLC, Divine Stewardship LLC, Safe Harbor Ventures Inc., Safe Harbor Wealth Investments Inc., and Safe Harbor Wealth Inc.

    Michael J. Stewart, 68, was convicted in connection with a Ponzi scheme that defrauded 647 investors out of $169 million. Stewart represented to investors that he would acquire distressed apartment buildings that he would flip for a profit. Stewart ran the scheme through Pacific Property Assets with John Packard. Pacific Property had filed for bankruptcy in 2009, listing 647 investors. Packard had pleaded guilty in 2014 and testified against Stewart at trial. Both are scheduled to be sentenced in November.

    Frederick Alan Voight, 58, was the subject of an SEC complaint alleging that Voight raised $114 million through his enterprises, DayStar, FAVA, Rhine, Topside, Intercore, and IRC, to fund a Ponzi scheme. Voight claimed that he was using the money to fund research for public companies and he promised up to 42% annual interest. One investment opportunity supposedly funded a technology called “DADS”, a Driver Alertness Detection System that would warn sleepy drivers.

    William Donnelly Yotty, 69, pleaded guilty to charges in connection with his operation of a $16 million Ponzi scheme through companies he operated under the names Global Capital Associates, Inc., Infostar Systems, Inc., Pacific Financial Solutions, Inc., and The Money People, Inc. The schemes defrauded about 240 investors. Yotty offered investments in corporate debt obligations and in distressed real estate, offering investors annual returns as high as 25%. In a separate scheme that he operated under the name Fortuno, Yotty offered victims the opportunity to purchase foreclosed real estate at below-market prices so that they could supposedly flip the properties at two or three time the purchase price.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    Keith Henry Alexander admitted to engaging in the illegal distribution of securities and unregistered trading in connection with the Ponzi scheme run through The Little Loan Shoppe by Doris Nelson. Alexander raised $14 million from 13 investors.

    Milowe Brost, 61, filed an appeal following his conviction for running a $400 million Ponzi scheme along with Gary Sorenson, 71. The scheme defrauded more than 3,000 investors and was run through their company, Syndicated Gold Depository S.A. They formed an agreement to lend money to Merendon Mining, promising a high rate of return. Victims invested in offshore shell companies marketed by Brost's firms, Capital Alternatives Inc. and Institute for Financial Learning Group of Companies Inc. Both men were sentenced to 12 years in prison.

    Christopher Steeves and his brother, Jeremy Steeves, lost an arbitration in which they were ordered to pay about $658,000 for their role in a Ponzi scheme. The brothers received unlawful referral commissions for recruiting investors into Golden Oaks Enterprises, a company owned by J.C. Lacasse. The brothers also received more than 60% annually on their own investments and secured second mortgages on 18 properties owned by Lacasse’s Rent 2 Own Canada.

Cayman

    Brighton SPC Fund was taken over by the Cayman Islands Monetary Authority. The fund, believed to be worth $130 million, belonged to Belvedere Group.

China

    Lu Kuan-wei and Chen Yun-fei were arrested in Taiwan in connection with the alleged Ponzi scheme targeting bitcoin users through a company called MyCoin. Investors were convinced to invest 90 bitcoins ($49,600), and they were to receive a return of .63 BTC per day. They were to receive back their principal after 4 1/2 months, which would be an annual return of 255%.

India

    Manoj Kumar Sahu, Pintu Saha, and Adhis Haldar were arrested for alleged involvement in Ponzi scheme activities of MPA Agro Animal Projects.

South Africa

    The Financial Services Board provisionally withdrew the license of Ntinga Health and Financial Services following allegations that Ntinga was running a Ponzi scheme. The company promised guaranteed returns of 98% per year. The FSB identified Armstrong Luthando Mazizi as the individual running Ntinga, as well as Geinisiko Mantashe as a signatory on the company’s bank accounts.

    The Financial Services Board provisionally withdrew the license of a foreign exchange brokerage firm called ACM Gold and Trading for its links to a Ponzi scheme. ACM held short-term investment accounts for Platinum Forex, whose assets were frozen last month. Platinum Forex was run by pastor Colin Davids, who promised returns of up to 84% by trading funds on the forex market.

    Sergey Mavrodi, previously convicted of fraud in Russia, has launched a new online allegedly fraudulent scheme in South Africa. The scheme, called MMM like his predecessor scheme, offers returns of 30% per month. The website contains the following message: “This is the first sprout of something new in the modern soulless and ruthless world of greed and hard cash. The goal here is not the money. The goal is to destroy the world's unjust financial system.” The website also describes the system as a “technical basic program, which helps millions of participants worldwide to find those who need help, and those who are ready to provide help for free.”

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The motion of Associated Bank to dismiss the complaint of the receiver of Trevor Cook was denied. The lawsuit alleges that the Bank is liable in connection with Cook’s $194 million scheme. The bank had tried, unsuccessfully, to dismiss the receiver’s suit on in pari delicto and res judicata grounds. Cook had promised risk-free returns to over 700 investors in commodities and futures trading, raising more than $200 million.

    Federal prosecutors have challenged a court order directing them to turnover the tax returns of wealthy investors who were defrauded in the alleged $190 million Ponzi scheme of Ramon DeSage, 64, that he ran through his company, Cadeau Express. DeSage contends that the investors failed to report to the IRS the cash that he paid back to investors. He wants to use the tax returns to attack their credibility. Prosecutors say that the court order “order authorizes a rank fishing expedition that puts the victims' sensitive financial data in the hands of the defendant, effectively victimizing them a second time.”

    Henry J. Haff and Diane M. Lis Haff were not permitted to take an additional $731,000 tax deduction relating to funds they claimed were owing to them from a Ponzi scheme called GSH Development LLC. They argued that the funds were never included in income.

    A settlement was documented in connection with the Bernard Madoff Ponzi scheme in which Citco Group Ltd. agreed to pay $125 million to settle claims brought by Fairfield Greenwich Ltd., one of the Madoff feeder funds. Fairfield alleged that Citco had failed to properly administer funds that ended up being invested in the Madoff scheme. About 3,000 investors claim an interest through Fairfield.

    California Polytechnic State University has agreed to pay $480,000 to have the name of Al Moriarty removed from a 53-foot advertisement on the scoreboard in the school’s football stadium. Moriarty was previously convicted or running a $22 million Ponzi scheme. Moriarty used his company, Moriarty Enterprises, to solicit investor into his scheme promising 10% returns from a program that provided home loans to educators. Moriarty was known for his philanthropy and had donated $625,000 to Cal Poly in exchange for the advertisement in Cal Poly’s football stadium.

    A court dismissed a lawsuit against GE Capital Corp. that arose from the Tom Petters Ponzi scheme. The trustee of Ark Discovery, a lender to Petters, had sued GE Capital alleging that it had aided and abetted Petters’ fraud.

    FSC Securities Corp. was found liable for $1.28 million in an arbitration brought by investors who were defrauded in the Ponzi scheme run by Aubrey Lee Price. FSC was one of the broker dealers involved in the scheme, and investors had alleged that FSC failed to supervise brokers who sold the investors “unspecified fraudulent securities as part of a Ponzi scheme.”

    About 14,000 victims in the TelexFree Ponzi scheme received a distribution from a $3.5 million fund that was set up as a result of a settlement between the Massachusetts Securities Division and Fidelity Co-Operative Bank.

    The ZeekRewards receiver made a third distribution to victims of the scheme for 489.2 million. The raises the total amount distributed to $24605 million. The scheme is believed to have raised money from at least 2.2 million customers.

July 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for July 2015. The reported stories reflect: 10 guilty pleas or convictions in pending cases; over 166 years of newly imposed sentences for people involved in Ponzi schemes; at least 11 new Ponzi schemes involving over $112 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.

    Alisa Adler, 54, was charged with running a Ponzi scheme the involved a real estate development business run through ASG Real Estate Services Group. She solicited investor funds to supposedly purchase and develop real estate but instead used the money to make Ponzi scheme payments and for her personal expenses.

    Will Allen, 36, was indicted for his involvement with a Ponzi scheme run with Susan Daub, 55, through Capital Financial Partners LLC.  The scheme involved $31 million and supposedly provided high interest short term loans to athletes. More than 40 people invested in the scheme and were promised 18% returns.

    John Steven Blount, 54, pleaded guilty to charges relating to a $5.8 million Ponzi scheme that he ran through his company, Professional Consultants LLC. Blount offered investments in fictitious companies, bonds and IRAs. The scheme defrauded at least 73 investors to which he sent false account statements.

    Michael M. Burke had his law license suspended for 18 month by the New Hampshire Supreme Court for his role in the FRM Ponzi scheme.

    Hernan Del Valle, 61, was charged in connection with an alleged meat exporting Ponzi scheme that involved $750,000. Del Valle ran a firm called Lion Trading Corp. in which it supposedly shipped meat products to 9 businesses in the Dominican Republic. Valle submitted false invoices to banks to obtain loans and then used the cash to pay off earlier loans.

    Todd Dyer, 51, already facing charges that he ran a $1.5 million Ponzi scheme through Midwest Farmland Properties and American Farmland Properties, was indicted in connection with a particular transaction in which he stole funds from an investor promising that he had other investors and universities ready to fund an additional $25 million. Dyer had previously received a 70 month sentence in 1999 for a Ponzi scheme. 

    Michael R. Enea, 60, was sentenced to 2 years in prison for his $2.1 million Ponzi scheme that defrauded at least 10 people. Enea had promised investors annual returns between 20% and 35%.  The scheme was run through his business, Credit Card Equipment Plus Inc. Enea had spent $1.35 million of the $2.1 million to pay false returns to investors and spent the rest on himself.

    Daniel Fernandes Rojo Filho, 47, and his company, DFRF Enterprises, were charged by the SEC with operating a combined pyramid and Ponzi scheme. The alleged scheme targeted Spanish and Portuguese-speaking communities, and investors were told that DFRF’s gold mines in Brazil and Africa would realize a return of 100% on each kilogram produced. The scheme allegedly raised more than $15 million from at least 1,400 investors. The SEC complaint ties Filho to Sannderley Rodrigues de Vasconcelos, who has been tied to the TelexFree scheme. Others charged in connection with the scheme were Wanderley M. Dalman, 49, Gaspar C. Jesus, Eduardo N. Da Silva, 40, Heriberto C. Perez Valdes, 46, Jeffrey A. Feldman, 56, and Romildo Da Cunha. Filho was then arrested after he was captured outside of a Boca Raton restaurant.

    Edwin Fujinaga, 68, Junzo Suzuki, 66, and Paul Suzuki, 36, were criminally charged with their roles in the MRI International Inc. Ponzi scheme that defrauded thousands of Japanese victims. The scheme involved $1.5 billion, and investors were told that their investments would be held by a third party escrow agent in Nevada. Investors were promised that their money would be used to purchase medical accounts receivable. Meanwhile, the SEC obtained a judgment against June Fujinaga and the Yunjo Trust to return $2.4 million in ill-gotten gains.

    Dorian Garcia, 30, pleaded guilty to running a $7 million Ponzi scheme. Garcia was accused of defrauded 80 victims out of $4.7 million through his businesses, DG Wealth Management, Macroquantum Capital LLC and UKUSA Currency Fund LP.

    Kelly Gearhart, 54, was sentenced to 14 years in prison following his guilty plea that he misrepresented information about his Vista Del Hombre real estate project through Hurst Financial Corp. Gearhart was accused of defrauding more than 250 investors out of $15 million. James Hurst Miller Jr. is scheduled to be sentenced in October.

    Stephen Bruce Gordon, 62, was sentenced to 4 years and 2 months in prison for running a $4 million Ponzi scheme. Gordon was once a high profile basketball trainer who worked for the Seattle Supersonics. He admitted to running schemes that defrauded about 30 investors.

    Neal Goyal, 34, was sentenced to 6 years in prison and ordered to pay $9.2 million in restitution in connection with a $9 million Ponzi scheme that he ran through his companies, Blue Horizon Asset Management LLC and Caldera Investment Group. Goyal created false statements to give to investors to support his supposed trading business, in which he promised returns of at least 17% per year.  He stole money from his family and friends in his Hindu community. He raised more than $11 million from at least 35 investors.

    Jenifer E. Hoffman pleaded guilty to charges in connection with the $11 million Ponzi scheme that defrauded 100 investors. Hoffman had been charged along with John Boschert and Bryan T. Zuzga for their involvement with the scheme run through Assured Capital Consultants, LLC. They had represented that the investments would provide weekly returns of up to 50% and would be invested in Assured Capital’s offshore, confidential trading program.

    Charles D. Jones, 61, was sentenced to 6 years in prison for stealing more than $9 million from his clients in a Ponzi-like scheme. Jones ran the scheme through his company, Charles D. Jones Capital Management Inc.

    Phillip A. Kramer and Timothy C. Constantine were found guilty of defrauding NHL players and other investors. The two defendants ran at last four separate schemes: Hawaii Real Estate Investment, Eufora LLC, Global Settlement Fund, and Sag Harbor.

    Paul Konigsberg, 79, was spared prison time following his guilty plea last year to conspiracy charges and falsifying books and records in connection with the Bernard Madoff Ponzi scheme. Konigsberg has said that he “had no knowledge that Bernard Madoff was a diabolical monster masking himself in the clothing of a self-made billionaire.” Konigsberg, an accountant, was accused of looking the other way as Madoff employees amended information on some of his clients’ transactions. The judge agreed that what Konigsberg did was "seriously wrong" but that he did not know that Madoff was defrauding investors out of $20 billion. The judge found that he had earned leniency through his cooperation.

    Shaine Joseph LaVoie, 46, was sentenced to 20 years in prison and ordered to pay more than $820,000 in restitution for a Ponzi scheme involving close out clothing and a fictitious apparel company. LaVoie had turned down a 5 year plea deal. There were 12 victims who were promised 100% returns in 3 months.

    Charles Maguire, 33, is the subject of many civil complaints, at least one of which alleges that Maguire was running a $13.4 million Ponzi scheme that defrauded individuals associated with Christian churches and organizations. Maguire represented that he ran a financial company, Vivid Funding LLC, that provided "proof of funds" letters for corporations. Corporations would supposedly use his bank accounts to show they had assets when applying for bank loans. Maguire also had another company, M-Development Inc., that was supposedly involved in mobile application software. William Peterseim has been identified by the U.S. Attorney's office has being a financial advisor involved with the scheme.  Maguire has not yet been criminally charged.

    Claude Darrell McDougal, 56, was sentenced to 6½ years and ordered to pay about $2 million in restitution for running a Ponzi scheme that defrauded over 25 investors out of more than $2.5 million. He promised investors returns of 6% to 15% and that their money would be invested in securities in the form of promissory notes offered by US Financial Alliance Consultants, LLC.

    Sean M. Meadows, 42, was sentenced to 25 years in prison for running a Ponzi scheme that defrauded about 55 victims out of more than $10 million. Meadows solicited funds through his investment adviser business, Meadows Financial Group, and he promised he would invest funds in bonds, real estate or other investments and pay 10% returns.

    Stavroula Mendez, 68, Lazaro Mendez, 42, and Marie Mendez, 49, were sentenced to 135 months, 108 months, and 57 months, respectively, in connection with a $27.8 million mortgage fraud Ponzi scheme. The defendants owned condominium developments and would locate straw buyers. They would then submit falsified mortgage applications to secure home loans to purchase condo units in the development that they owned. When they units sold, they would retain both the profits on the sale and control over the units.

    Paul Lee Moore IV, 51, pleaded guilty to charges relating to a Ponzi scheme that defrauded investors out of about $2 million. Moore ran his securities scheme through Coast Capital Management LLC. The SEC also charged Moore in connection with the scheme.

    Eric Nicholas Morgan was charged in connection with an alleged Ponzi scheme that he ran through his company, Liquid Ninja. Neither Morgan nor Liquid Ninja are licensed in the state of Indiana. Liquid Ninja marketed a new energy drink and investors were promised 7.5% returns for two years for investing in the company. At the end of two years, investors were told they could either redeem their principal or receive a 15% interest in the company. The money was used by Morgan for his own personal expenses, and Liquid Ninja has closed its business.

    Leigh Morse, 59, was denied her request to have her restitution obligation of $1.7 million reduced or eliminated. Morse was involved as the dealer in the Salander-O’Reilly Galleries Ponzi scheme. Morse had been found guilty in 2011 of defrauding artist estates and foundations by misleading them about the status of works that the gallery sold or traded away. Morse has proclaimed her innocence and claims that she cannot pay the restitution.

    Dee Allen Randall, 64, was ordered to stand trial in connection with an alleged Ponzi scheme that defrauded about 700 people out of $72 million.  Randall was the owner of Horizon Mortgage & Investment, Horizon Financial & Insurance Group and Horizon Auto Funding, and his agents sold “Horizon Notes” that promised 9% to 17% returns for the supposed use of investor funds to finance car loans and real estate.

    Keith Everts Rode, 48, was sentenced to 70 months in prison in connection with the Ponzi scheme run through GLR Growth Fund, which Rode ran with John Geringer and Christopher Luck, 58. The scheme promised returns of 17% to 25%. Geringer and Luck were already sentenced to 12 years and one month and 10 years and 8 months, respectively.

    Guillermo M. Sanchez, 60, his daughter Isabel C. Sanchez, 36, and son-in-law Gustavo Giral, 38, were indicted in connection with an alleged $10 million Ponzi scheme that involved fake merchandise sales and a factoring scheme.

    Michael Szafranski, 37, pleaded guilty to charges relating to the Scott Rothstein $1.2 billion Ponzi scheme. Szafranski was accused of deceiving his clients in encouraging them to invest in Rothstein’s scheme

    Perry Sawano, 51, was sentenced to 28 years in prison in in connection with a Ponzi scheme that defrauded 28 investors out of $4.4 million. Sawano operated his scheme through Integrity Financial Consulting.

    Malcolm Segal, 69, was accused by the SEC of conducting a Ponzi scheme that defrauded at least 6 people out of $3 million. Segal is a financial advisor that is accused of using investor money to pay for a Florida condominium, vacations and other personal expenses. He ran his own branch office of Aegis Capital Corp., operating under the name of J& M Financial. Before that he was a financial adviser at Cumberland Brokerage Corporation. Segal purchased CDs but did not put them in his clients’ names; rather, he maintained control over them and redeemed at least 76 of the 134 CDs purchased, using $5 million proceeds for Ponzi-like payments and for his own expenses.

    Justin T. Spearman, 27, was arrested on charges that he ran a multi-million dollar oil and gas Ponzi scheme. Spearman operated his company, Justin T. Spearman Petroleum Land Services LLC, in Texas.

    Bogdan K. Stepien, 34, was indicted on charges that he ran a Ponzi scheme through his day trading business.  The indictment alleges that Stepien defrauded 8 people and that he sent them bogus trading account statements and spreadsheets.

    Richard L. Thompson, 60, was charged with defrauding investors in his $2 million real estate Ponzi scheme. The scheme was run through Latten Management LLC. Thompson represented that his company owned three properties in Tennessee and that he would develop them into vacation destinations. Thompson never put properties in the name of the business.

    Marcello Trebitsch aka Yair Trebitsch, 37, pleaded guilty to operating a Ponzi scheme that defrauded investors out of about $6 million through his company, Allese Capital LLC. Trebitsch is the son-in-law of the former New York Assembly Speaker Sheldon Silver. Trebitsch promised investors annual return of 14% to 16% from day trading large cap stocks.

    Charles S. Wang and Francis Y. Yuen pleaded guilty to charges relating to the eAdGear Ponzi scheme. The SEC had charged eAdGear on September 2014 alleging a $129 million scheme.

    Carl David Wright was fined $1 million by the CFTC for defrauding 16 customers in a commodities Ponzi scheme. Wright was previously sentenced to 4 years in prison for the scheme.

    Bingqing Yang, and her company Luca International Group LLC, were charged by the SEC for running a $68 million Ponzi scheme that targeted Chinese Americans in California. Her other companies, Luca Resource Group LLC and Luca Energy Fund LLC, were also charged. The scheme used the E-B 5 Immigrant Investor Program to solicit funds.  The SEC’s complaint also names Lei (Lily) Lei, Luca’s former vice president of business development; Anthony V. Pollace, former CFO; and Yong (Michael) Chen, owner of Entholpy EMC dba Mastermind College Funding Group. Luca was represented to be a successful oil and gas company and returns of 20% to 30% were promised to investors. It is believed that George W Bush was paid $200,000 by Luca to speak at a 2012 “energy summit.”

INTERNATIONAL PONZI SCHEME NEWS

Bulgaria

    Tsvetan Vasilev denied charges that he ran Corporate Commercial Bank as a Ponzi scheme.

Canada

    The Alberta Securities Commission has started publishing the names of individuals and entities that have been fined for financial-related crimes but have not paid the fines and penalties. The list current contains over 100 names that have failed to pay over $100 million in the aggregate.

    Gary Sorenson, 71, and Milowe Brost, 61, were sentenced to 12 years in prison following their conviction for operating a Ponzi scheme which that defrauded up to 2400 international investors of between $100-400 million. The two promised investors of $99,000 they would receive annual returns of 34% and that the $99,000 would turn into $1 million within eight years.

    Regulators warned that Nix Investment is not licensed to carry out business in Ontario. The company’s website shows signs of being a Ponzi scheme, stating, “We invest in Stock, Index, Commodities, Bitcoins and Forex. We aim for a 10-15% return per month which is 300% per year. So investment of $100 with us for 5 years can yield you more than $20000-25000. Recommend investment ($100-500).”

    Douglas Warren Welder was disbarred for his role as a lawyer representing a corporation that was operating a Ponzi scheme. Welder was not the perpetrator of the scheme but failed in his duties as a lawyer by not advising investors that he was not protecting their interests.

 
India

    Three directors of Bishal Group, which is accused of running a Ponzi scheme, were taken into custody. The directors are Ratan Chowdhury, Sujit Krishnapada Acharjee and Kanta Dubey.

Israel

    A check-cashing scheme that affected the ultra-Orthodox community in Bnei Brak was disclosed. The alleged scheme was run by Yaakov Domb, who defrauded individuals and businesses out of tens of millions of shekels that they had invested with him. Domb has disappeared without a trace.

New Zealand

    David John Hobbs agreed to never again direct a New Zealand company and to not provide financial advice or brokering services in the country. Hobbs was previously found to have breached laws in operating 14 schemes that involved over AUD $50 million.

    Hamish McIntosh, a lawyer who was ordered to repay $454,000 in profits that he received from the Ross Asset Management Ponzi scheme, has filed an appeal to the ruling. The liquidator of the scheme is considering cross-appealing.

Philippines

    The Securities and Exchange Commission is investigating Arnel Gacer and his company, Flag Prosperity Marketing Inc. aka Freedom Life Advanced Global Prosperity Marketing Inc. The SEC believes that the company recruits investors to invest in one to 15 slots, where one slot amounts to P1,500 and has a promised return of P2,200.

Spain

    Twenty people were arrested in connection with an alleged Ponzi scheme run by Unetenet. The scheme reportedly defrauded 50,000 investors out of 50 million euros.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    A court approved a settlement between the SEC and the receiver for Diversified Lending Group under which DLG will disgorge $163 million to end the SEC's civil suit.

    The trustee of the Deepal Wannakuwatte and IMG Inc. Ponzi scheme sued two real estate developers, Jack Sweigart and Larry Carter, alleging that they knew or at least should have known about the fraud that caused more than 100 investors to lose $150 million. The trustee alleges that the scheme could not have grown to its size without the letters of credit supplied by Sweigert, Carter and their companies, JTS Communities and Bristol Insurance Co. The trustee also sued two of Wannakuwatte’s lenders, Bridge Bank of Santa Clara and General Electric Capital Corp. Wannakuwatte was sentenced to 20 years in prison last year.

    The estate of Gladys C. Luria is seeking a $7.4 million refund from the IRS in connection with a false tax return filed by Bernard Madoff at Lurie's death claiming that she was worth $32 million. Luria's estate says that $7.4 million of the estate tax paid should be refunded because the balance of her Madoff accounts at the time of her death were actually zero. Madoff and his brother, Peter Madoff, were the co-executors of her estate. The estate argued that Madoff knowingly filed a false tax return to cover up his fraud.

 

    More than 100 investors from around the world have filed a class action lawsuit against Pearce & Durick, a law firm which was the escrow agent for North Dakota Developments LLC. The alleged Ponzi scheme defrauded people out of $62 million. The lawsuit alleges malpractice in that the law firm failed to advise investors that they were investing in unlawful securities.  The scheme involved 980 investors from 66 countries.

    BMO Harris Bank agreed to pay $16 million to settle litigation arising from the Thomas Petters Ponzi scheme. The lawsuit, filed by the major feeder funds in the scheme, Palm Beach Finance II LP and Palm Beach Finance Partners LP, alleged that M&I Marshall & Ilsley Bank, which BMO acquired, was complicit in the fraud.

    TD Bank agreed to pay $20 million to settle a class action lawsuit in relation to a Ponzi scheme that defrauded over 1,000 European investors out of more than $223 million. The investors had bought life settlements marketed through Quality Investments, a Dutch company. It was alleged that the bank had failed to report suspicious activity in connection with the scheme.