January 2016 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2016. The reported stories reflect: 5 guilty pleas or convictions in pending cases; over 70 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 53 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

INTERNATIONAL PONZI SCHEME NEWS

Australia

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

Canada

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

China

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

India

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

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

Singapore

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

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

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

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

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

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

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

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

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

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

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

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

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

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

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

December 2015 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for December 2015. The reported stories reflect: 6 guilty pleas or convictions in pending cases; over 14 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 47 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

INTERNATIONAL PONZI SCHEME NEWS

Australia

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

India

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

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

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

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

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

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

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

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

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

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

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

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

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

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).