February 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for February 2018. The reported stories reflect at least 3 new Ponzi schemes worldwide: over 90 years of newly imposed sentences for people involved in Ponzi schemes; 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. Check out the new cryptocurrency section at the end of the post.

Glenn Arcaro, a director of BitConnect, was sued along with Trevon Brown aka Trevon James, Ryan Hildreth, Craig Grant and Crytponick in a class action lawsuit alleging that Bitconnect guaranteed investors returns of up to 40% per month.  The lawsuit claims that founders of OneCoin were involved with BitConnect including Nigel Allen, Ruja Ignatova and Sebastian Greenwood. 

Richard Alan Bazzell, 42, was sentenced to 3½ years in prison and ordered to pay back about $2.5 million to 22 victims. Bazzell ran a Ponzi scheme through his company, Prosperitas Capital LLC, and he ran a side project known as TrailSteaks. Bazzell promised an 8% return.

Amrit Jaswant Singh Chahal, 30, was arrested on charges that he ran a Ponzi scheme through The Kane Capital Investment Group LLC. Chahal alleged promised returns of 28% to 34% annually. The criminal complaint alleges that Chahal falsified brokerage statements to conceal losses.

Peter E. Dahl was accused in a lawsuit of running a $2.8 million Ponzi scheme. Dahl is the founder and former CEO of Crown Bank who left the bank abruptly last year. Dahl is said to have engaged in a pattern of borrowing money from one individual or entity and repaying it from new money borrowed from someone else. The lawsuit also names Crown Bancshares which owns Crown Bank, alleging that the bank board knew or should have known of the fraud.

David deBerardinis, 56, pleaded not guilty to charges that he defrauded investors out of $96 million. Investors, mostly from Louisiana, believed they were buying into legitimate energy trades and were promised 17% returns. Prosecutors allege that deBerardinis was running a Ponzi scheme, that there were no actual trades, and that emails confirming trades were forged.

Ronald T. Dunn, 67, was sentenced to 25 years in prison for a Ponzi scheme that took $693,000 from 13 victims. Dunn was working for Prudential Financial when he committed the financial crimes. Prudential was not involved in the scheme but has offered restitution to the victims.

Anthony Fregenti, 46, is facing new charges after he was released from prison from a prior conviction in 2014 that led to a 5-year prison sentence. Fregenti was released but faced new charges for embezzling more than $500,000 from investors.

Jesse W. Harris was ordered by the Kansas Securities Commissioner to cease and desist operating his business, Harris Custom Projects LLC. The order alleges that Harris solicited more than $5 million in investments to supposedly be used to purchase and resell concrete in connection with construction jobs.

Michael Holcomb, 74, and Gary Holcomb,72, were each sentenced to 6 years in prison for the $40 million Berjac Ponzi scheme. The brothers had pleaded guilty last year to running the scheme. Michael was in charge of Berjac of Oregon and Gary was in charge of Berjac of Portland. They promised investors returns of 5% to 7% from offering loans to small businesses looking to pay insurance premiums. Instead, the Holcombs used the money for speculative real estate projects and their personal use. Michael’s daughters, Jennifer Chalmers, 46, and Kristen Van Breemen, 44, pleaded guilty to single counts of money laundering and were each sentenced to 5 years of probation and 250 hours of community service. 

Lee Loomis, 60, was sentenced to 12 years in prison for a Ponzi scheme that he ran through Loomis Wealth Solutions. Loomis defrauded investors out of more than $10 million to invest in a Naras Fund.

Jeremy Lundin was sentenced to 9 years in prison for running a $1 million Ponzi scheme through his company, Big Island Capital. Lundin’s wife, Alex Lundin, was charged in December for her role in the scheme.

Jason Nissen, 44, the former CEO of National Events Holdings LLC, is planning to enter a guilty plea in connection with a $70 million Ponzi scheme.

Saddle River Advisors and its affiliated investment funds were permanently barred from soliciting investments and were ordered to pay $44.9 million in disgorgement. The SEC had sued John Bivona, Saddle River and SRA Management Associates in March 2016, alleging that Bivona had raised more than $53 million from investors in a fraudulent scheme. Millions of dollars of the investor funds were diverted, and some of the funds went to Frank Mazzola, who had been barred from the securities industry in 2014 for running a similar scheme.

Sherman Carl Vaughn, Jr., 46,was sentenced to 12 years in prison in connection with a $10 million Ponzi scheme that he ran with Merrill Robertson. The scheme was run through Cavalier Union Investments LLC and defrauded more than 60 victims. Robertson was previously sentenced to 40 years in prison.

Tobin Senefeld was ordered to pay almost $845,000 in connection with an alleged Ponzi scheme run through Pin Financial LLC. The order also extended to Veros Farm Loan Holding LLC relating to the scheme that defrauded 80 farm loan investors out of $15 million. Pin Financial served as a placement agency for private offerings made to Veros’ clients, who understood that their investments were being used for farm operations. Senefeld was permanently banned by FINRA from associating with any FINRA member institution.

Robert Shapiro sought the release of a freeze against the assets of Woodbridge Group of Companies LLC. A day later, the SEC sought a contempt finding, accusing Shapiro of failing to comply with an order to disclose family trust assets and accounts under his control. Shapiro also filed a motion seeking to dismiss the SEC case against him, saying that the mortgage notes he sold were not securities.

Senator Carlos Uresti, 54, was found guilty on all 11 felony charges against his involvement in the Ponzi scheme run though FourWinds Logistics. Co-defendant Gary L. Cain, 61, was also convicted on all nine of his charges. The CEO for FourWinds, Stanley P. Bates, pleaded guilty in January. Prosecutors described Uresti as a politician who used his “well-known name” to steer investor funds into the scheme while hiding the true financial status from investors. Uresti is not giving up his senate seat and plans to appeal.

Carlos Wanzeler, 49, the co-founder of TelexFree Inc., was stripped of his Brazilian citizenship. Wanzeler had fled to Brazil after the fraudulent scheme was disclosed, but this could open the door for his extradition to the U.S.

INTERNATIONAL PONZI SCHEME NEWS 

Australia

A deal was reached between India’s financial regulator, SEBI, and the former owners of the Gold Coast Sheraton Mirage hotel relating to tens of millions of dollars that had been frozen. The Pearl Group and Nirmal Singh Bhangoo had moved at least $100 million of proceeds from the scheme to Australia where it was invested in a local subsidiary known as MiiGroup. The funds were then invested into the Sheraton Mirage and almost $90 million has been frozen. The funds had been frozen by a group of 37,000 investors who had filed a class action in Australia, but SEBI intervened in the action and has now taken the funds on behalf of all of the victims in India, which is believed to be as many as 50 million.

Cambodia

About 300 people protested regarding an alleged Ponzi scheme run through Empire Big Capital Limited. The government has received complaints from 7,430 people and it is believed that they have been defrauded out of nearly $60 million. Teng Saroeum and Teng Makara were arrested last June. Four people remain at large in connection with the scheme:  Malayasian Tan Tze Chin aka Sean Tan, and Cambodians Huot Sovann, Chi Gosaly, and Long Sambath.

Germany

Picam was subject to a series of raids in Germany and Switzerland on suspicion that it has been conducting a Ponzi scheme. Picam stopped standing statements and payments to customers last month. It is believed that between 2,000 and 3,000 investors have paid €300 million to the company.

India

The Finance Minister said that the government will take all measures to stop trading of Bitcoin and other cryptocurrencies in India.

Subhranshu Singh, the managing director of Sri Bhumi Group of Companies, was sentenced to 7 years in prison in connection with a scheme that defrauded investors by promising them the doubling of their money in 25 months.

Sampad Jogania and his son, Ajitesh, were arrested for their involvement in an alleged Ponzi scheme run through Creative Express Events and Promoters. The scheme allegedly defrauded investors out of nearly Rs 3 crore.

Kamal Vishnoi was arrested on charges that he set up a fake bitcoin trading platform. Vishnoi held seminars and events to lure investors and then vanished with their money. He promised 5% daily interest and a commission for referring new investors. Investors had to register at the site “Bittradingz.” When he couldn’t pay the promised returns, investors agreed to reduced interest of 2%. Meanwhile, Vishnoi launched a new website called “Softcointradingz” and a new digital currency called “Soft Coin.

  

Malaysia

Three individuals were arrested on allegations that they were running a foreign exchange scheme involving more than 70,000 victims and NZ $350 million. Investors were promised 12% returns monthly. The scheme was run through a New Zealand registered company, United Global Holdings Ltd. The mastermind of the operation, Pandeyan Maruthamuthu, 56, is believed to be hiding in Thailand.

Singapore

Arriffin Chewing, 48, was sentenced to 13½ years in prison for running an $11.4 Ponzi scheme that defrauded 18 people out of $7.1 million. The scheme involved returns from supposedly advantageous rates for foreign currencies as a Hong Kong and Shanghai Banking Corporation (HSBC) employee. Chewing had actually been terminated from HSBC at the time he was soliciting investments. 

Thailand

A group of investors gathered to call for help in connection with their losses of 6 million Baht in the alleged Srithai Network Ponzi scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Tax Cuts and Jobs Act eliminates the “theft tax loss” provisions of the Internal Revenue Code. This was a provision relied up by Ponzi scheme victims to attempt to mitigate their losses from Ponzi schemes.

In a lawsuit brought by a feeder fund in the Bernard Madoff scheme against a financial institution and others, the Second Circuit upheld the district court’s finding that the federal court had jurisdiction because it had “related to” jurisdiction with the Madoff bankruptcy case. The court found that “The gravamen of SPV's complaint is that defendants are joint tortfeasors with Madoff and BLMIS, which, if proven, would provide defendants with a putative contribution claim, to be asserted in the bankruptcy proceedings.” SPV OSUS Ltd. v. UBS AG, 2018 U.S. App. LEXIS 3088 (2d Cir. Feb. 9, 2018).

The Trustee in the Bernard Madoff Ponzi scheme reached a settlement with Alpha Prime Fund Ltd. where the Fund will return $76.45 million to the estate to settle the Trustee’s fraudulent transfer claims.

CRYPTOCURRENCY NEWS

Bitfinex and Tether have been called a Ponzi scheme. Tether has been creating tokens to buy Bitcoin. Tether is supposedly backed by physical currency and is closely associated with Bitfinex. One analyst noted: “The idea that Tether is creating coins to buy bitcoin is straight out of satire. If bitcoin is a Ponzi scheme, then this is Ponzi squared; printing fake money to buy a different type of fake money in order to ramp up the price of the latter. If it weren’t likely to cause real-world losses for many investors it would be hilarious.”

Bitstrade was ordered to stop offering unregistered and fraudulent securities in the state of New Jersey. Bitstrade was guaranteeing returns of 10% or greater but failing to disclose “key material facts” to prospective investors, like the address of the business, the names of the executive officers, the risks to investors and how their money would be used.

DavorCoin was served with a cease and desist order by authorities in Texas. Authorities allege that DavorCoin has been engaged in fraudulent activities and tit has been using misleading and deceptive statements to lure in investors. The platform claims that users could earn as much as $513 per day by locking their funds for 120 days.

  

LoopX, a new crypto startup, vanished shortly after raising $4.5 million in its ICO token sale. 

Prodeum, a Lithuania-based company, exited the cryptocurrency scheme. 

Cryptocurrencies tracked by Coinmarketcap.com lost more than $500 billion of market value at one point in January.

JPMorgan Chase & Co, Bank of America Corp. and Citigroup Inc. stated that they will not allow purchases of Bitcoin and other cryptocurrencies on their credit cards.

  

The general manager of the Bank of International Settlements (BIS) slammed Bitcoin as “a bubble, a Ponzi scheme and an environmental disaster.” He further noted that “The volatility of Bitcoin renders it a poor means of payment and a crazy way to store value.”

THE SEC and CFTC addressed Congress in the midst of falling prices for Bitcoin. The SEC Chairman stated that he believes every initial coin offering is a securities sale and that the SEC already has the regulatory oversight needed for enforcement.

The head of Goldman Sach’s investment research warned that investors should prepare for values of cryptocurrencies to crash to zero.

Jim Yong Kim, the President of the World Bank Group, has compared cryptocurrencies to Ponzi schemes.

Cryptocurrency Poll

Let us know your feedback on the cryptocurrency fever. Click on each question, which will open a new window. Please make your selection, but you need not leave a comment in order to vote.

Poll Question No. 1

     Is Bitcoin a Ponzi scheme?


Poll Question No. 2

     Do you think cryptocurrency is a commodity, security or currency?


Poll Question No. 3

     Should cryptocurrency be regulated by the SEC, CFTC, or some other agency?


Poll Question No. 4

     Have you or will you invest in cryptocurrency?


Poll Question No. 5

     Would you use cryptocurrency to actually buy something or only as an investment?

January 2018 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for January 2018. The reported stories reflect 9 guilty pleas and convictions; at least 7 new Ponzi schemes worldwide: over 26 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 49 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.

Rodney Allen, 65, was indicted on charges that he ran a Ponzi scheme through KA Investments LLC in Idaho. Allen had disappeared after an involuntary bankruptcy was filed against him last April and 77 creditors were listed in the bankruptcy. Allen had provided monthly statements to investors stating they were earning 1.6% to 1.9% returns when they were actually losing money. Allen also paid himself 14% to 18% commissions on their supposed profits. Allen is still missing.

Stanley Bates, 45, pleaded guilty to running a Ponzi scheme through FourWinds Logistics, a fracking company that accepted millions of dollars in investor funds in connection with the scheme. Bates, who also ran Bates Oil Energy & Gas, had been indicted along with Gary L. Cain and Senator Carlos Uresti, 54. Cain allegedly took investor funds for himself, and Uresti allegedly advised investors to invest in Four Winds without disclosing he would obtain a commission for their investments.

BitConnect was shut down as an alleged Ponzi scheme. The company represented that investors could earn up to 40% per month, or 400% per year was promised to others. BitConnect solicited Bitcoin in exchange for BitConnect Coin (BCC) and claimed that BCC would be lent to others and accrue daily interest. A class action lawsuit was also filed in light of the 90% loss in value of Bitconnect tokens. In a second class action lawsuit, BitConnect International, BitConnect Ltd., BitConnect Trading Ltd. and Ryan Maasen were all named as defendants.

Randall Crater, Mark Gillispie and My Big Coin Pay, Inc. were sued by the CFTC who alleged that My Big Coin ran a cryptocurrency scheme that defrauded investors out of $6 million. Investor funds were transferred into personal bank accounts and used for personal expenses and the purchase of luxury goods. The cryptocurrency, identified as MBC, was nonexistent and was not traded on any of the multiple it exchanges it claimed to be, but instead the company misrepresented that it was actively trading at fictitious trading prices. The company also falsely claimed that the coin was backed by gold and was partnering with MasterCard.

Dillon Michael Dean of Colorado and his UK-registered company The Entrepreneurs Headquarters Ltd. were sued by the CFTC accusing them of operating a Ponzi scheme involving bitcoin. The scheme allegedly solicited $1.1 million in Bitcoin from more than 600 investors. Dean allegedly misrepresented that investors would be pooled and invested in products including binary options. After the one million-dollar mark in Bitcoin was reached, Dean stopped paying investors and closed down the company’s social media. Dean then allegedly launched a similar Ponzi scheme under the new name, Real Trade Profits. 

Justin Tyler Greer, 36, was arrested on allegations that he was running a $1.5 million cattle scheme. Greer managed cattle owned by ranchers in California, Wyoming and Colorado. The ranchers were missing hundreds of cattle, and it is believed that cattle owned by investors were illegally sold and moved to other states.

Dermis Hernandez, 41, was arrested and charged with running a Ponzi scheme  while he was working as a cop. Hernandez defrauded investors in a Costa Rican investment scheme, claiming he was making loans to property owners in Costa Rica. Hernandez targeted active and retired cops and promised 24% returns.

Jack Hogan, 78, was sentenced to 12 years in prison for a Ponzi scheme that defrauded about 80 investors out of $8.2 million. Hogan held himself out to be a financial planner and sold whole life insurance policies at exorbitant prices. He then encouraged his clients to borrow against the accrued value of their policies and invest in a promissory note program that would give them a 10% return or higher.

Patrick K. McDonnell and his company Cabbage Tech Corp. were sued by the CFTC who alleged that the company was running a digital currency trading scheme.  Cabbage Tech operated under the name “Coin Drop Markets” and promised investors returns of up to 300% return on investment in less than a week.

Joseph Meli, 43, had his sentencing delayed to give him time to prepare. Meli had pleaded guilty to one count of securities fraud in connection with the ticket-selling scheme involving shows like Hamilton and Adele. Meli had been accused of defrauding about 130 investors out of $95 million.

Yasuna Murakami, 44, pleaded guilty to charges that he ran a Ponzi-like scheme through Massachusetts-based MC2 Capital Management LLC and MC2 Canada Capital Management LLC. Murakami defrauded investors through his hedge funds, MC2 Capital Canadian Opportunities Fund, MC2 Capital Partners Fund, and MC2 Capital Value Fund.  In a related lawsuit, the SEC has said that Murakami and his partner, Avi Chiat, defrauded more than 50 investors out of $15 million.

David Perez Jr. and Bebe Ann Ramirez, 43, pleaded to guilty to a Ponzi scheme they ran through USA Now.  A third defendant, Marco Antonio Ramirez, 47, remains in custody in Nigeria where he was arrested in connection with the scheme. The scheme was run through the EB-5 visa program offered by the U.S. Citizenship and Immigration Services, which was terminated for USA Now in 2014. At least $5 million was taken from foreign investors seeking to secure resident status in the U.S.

Steven Condon Peters, 44, who was arrested and indicted in December on charges that he was running a Ponzi scheme through VisionQuest Capital LLC, has denied the charges. The SEC has also filed an action, alleging that Peters fraudulently obtained $15 million through his investment firm.

Bart Sidney Posey Sr., 50, pleaded guilty to charges that he ran a health insurance Ponzi scheme through his companies, American Trade Association and Smart Data Solutions. Posey admitted that he defrauded consumers by denying legitimate health insurance claims, selling an insurance product that was not backed by a legitimate underwriter, and embezzling millions of dollars of insurance premiums paid to his company by victims.

Benjamin Myung Sik Rose, 32, was sentenced to 4 years in prison in connection with a house-flipping Ponzi scheme. Rose had previously admitted that he was not a licensed contractor and had falsified bank statements to make it appear that he was selling houses and making profits. The scheme involved more than $450,000.

Nancy Spinks, 46, was sentenced to 10 years in prison and ordered to pay $8.6 million in restitution in connection with a Ponzi scheme that she ran through Millennium Title in Texas. Spinks referred to herself as the “Millennium Mobster” and skimmed money from the business to fund an elaborate lifestyle.

USI-Tech, a Dubai-registered company that claims to sell Bitcoin packages, has been placed on fraud alert by authorities in the U.S. and Canada. USI-Tech was the subject of an emergency cease and desist order from the Texas State Securities Board last month for “engaging in fraud.” Affiliates of the company are speaking out in support of the company in Guam.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Toni Iervasi, 53, is alleged to have defrauded investors out of $209 million in a Ponzi scheme. The scheme allegedly defrauded 780 creditors through his businesses, Courtenay House and Courtenay House Capital Trading Group. He promised investors 25% returns.

Louise Dalli and Claire Gauci Borda, the daughters of John Dalli, appeared in court along with Charles Ray Jackson and Robert Mitchell McIvor, to face charges that they ran an alleged Ponzi scheme. Two others accused in connection with the scheme, Eloise Marie Corbin Klein and Elizabeth Jackson, did not appear for the hearing. The scheme was allegedly run by Klein who solicited funds from elderly Christians posing as a missionary and convincing them to invest in a supposed African mining project. The funds instead were funneled into Tyre Ltd. and Corporate  Group, two Maltese companies owned by Louise Dali and Borda.

Bulgaria

OneCoin offices were raided and documents and servers were seized from “One Network Services,” a Bulgarian company serving as a representative and distributor of OneCoin. The company is registered officially in the United Arab Emirates as “OneCoin Ltd.,” but also allegedly operates in England, Ireland, Italy, the United States, Canada, Ukraine, Lithuania, Latvia, Estonia and other countries.

Canada

Wade Robert Closson, 47, has pleaded guilty to 17 of 83 charges that he ran a Ponzi scheme through Optam Holdings Inc. and Infinivest Mortgage Investment Company. The scheme offered second mortgages to investors and allegedly defrauded about 125 victims out of $10.8 million. Closson used about $5.6 million of the funds to pay returns to investors, $3.9 million for other projects, and about $800,000 for his personal use.

China

Huang Dingfang and Cai Keyi were convicted of running a Ponzi scheme through Longyan E-commerce Co. Ltd. Investors were promised annual returns of more than 250% if they invested 4,000 yuan. Investors were defrauded out of 15.6 billion yuan ($2.4 million). About 200,000 investors were defrauded. Ding Wenping, chief financial officer, and Sun Shijia, its president, were sentenced to 12 and 10 years, respectively.

A group of investors were arrested for organizing illegal gatherings and disturbing public order regarding the Ponzi scheme run through Qbao.com. Zhang Xiaolei, 49, who controlled Qbao.com, turned himself in to authorities in December. The website had about 1 million active users daily and unpaid principal of about $4.7 billion. The scheme had raised about $7.8 billion from 900,000 investors.

India

India’s Finance Ministry cautioned investors they are “entirely at their risk and should best avoid participating” in digital currency investments, likening them to “Ponzi schemes.”

Abhay Gandhi was convicted of running a scheme through Abhay Intraday Strategy Expert and was sentenced to 18 months in prison. Gandhi used 100 agents to attract small investors into the scheme.

Prashant Dash, the head of Seashore Group was arrested one day after his release. Dash was out on bail for just that one day before he was arrested in connection with another scheme.

An individual known under the aliases Wajid SK, Abdul Wajid and Javid Patel is accused of defrauding 200 investors out of over Rs 300 crore. He promised them 10% to 20% returns from his supposed investment firms, Capital Plus and Capital Infrastructure. The investors were told that those firms invested in share market, forex and cryptocurrency.

India has sent tax notices to tens of thousands of people who have dealt in cryptocurrency after a survey showed that more than $3.5 billion worth of transactions have been conducted over a 17- month period.

Japan

Coincheck suffered a hacking attack and lost $534,000,000 of virtual assets. Coincheck froze deposits and withdrawals for all cryptocurrencies except Bitcoin.

Thailand

The assets of Qingduan Zhang, 38, were seized as Zhang is a suspect in a major Ponzi scheme case in China. The scheme involved investing in a telecommunications business in which very high returns were promised. Four other suspects were also detained: Huang Jinke, Zewn Pu, Aim-on Chitchak, and a man identified only as Chi Tong or Atong. 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A new study of cryptocurrency scams found that between June 2011 and November 2016 there was a new scam nearly once a day. A total of 1780 scam have been reported on cryptocurrency message boards.

A group of investors filed a lawsuit against Comerica Bank in connection with the alleged $1.2 billion Ponzi scheme run by Woodbridge Group of Companies LLC. The investors have alleged that the bank ignored glaring red flags in Woodbridge’s bank accounts. In the bankruptcy case of Woodbridge, the motions of the SEC and the Creditors Committee seeking the appointment of a Chapter 11 trustee were withdrawn in light of the appointment of a new board of directors for the company. The interim Chief Restructuring Officer and management company resigned, and the new board reached a compromise with the creditors and SEC.

December 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for December 2017. The reported stories reflect at least 10 new Ponzi schemes worldwide; over 130 years of newly imposed sentences for people involved in 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.

Golan Barak, 50, was sentenced to 33 months in prison for stealing  more than $2 million in a real estate Ponzi scheme. Barak promised investors returns from 50-50 partnerships in buying houses and then selling them or managing them for rental income.

Bar Works Capital had a $1.6 million default judgment entered against it by the SEC in connection with a Bitcoin scam. Bar Works was operated by Renwick Haddow, and the court imposed a constructive trust on property owned by Bar Works. The SEC sued Bar Works and Renwick, in addition to Bitcoin Store, Inc., and Bar Works 7th Avenue, Inc.  Haddow, who is sitting in Moroccan jail, agreed to be extradited to the U.S. Haddow is accused of stealing $37 million from investors.

Frederick Darren Berg, 55, was found missing from prison where he was serving an 18-year prison sentence for defrauding more than 800 investors out of more than $100 million. Berg was the founder of Meridian Group which operated a Ponzi scheme. Berg is the third inmate to escape from Atwater prison this year.

Bitcoin dominated the news this month. Bitcoin and other cryptocurrencies have been referred to as the first decentralized Ponzi scheme. However, both fans and naysayers are speaking out for and against cryptocurrency. For those riding the bitcoin wave, be cautious and vet the investment program you are considering.

John V. Bivona, 76, and his company, Saddle River Advisors LLC, agreed to disgorge nearly $50 million to settle charges brought by the SEC. The scheme defrauded investors in a Ponzi scheme to invest in Twitter and startups before their initial public offerings.

BTC Cloud Services Ltd. was sued by an investor in a $9.1 million lawsuit alleging that the company was running a virtual currency Ponzi scheme. Investors understood that BTC was providing bitcoin mining services, but the company never mined even a single bitcoin.

William P. Carlson Jr., 54, who previously pleaded guilty to charges relating to a scheme run through RIA Forum Financial Management, was sentence to four and half years in prison. Carlson carried out the scheme by drawing checks from a client’s accounts and then intercepting them in mail when the client was not home.

Steve Down and Steve Down Companies have been accused of running a Ponzi scheme. Complaints have been made to the SEC relative to activity in Oregon and Oklahoma. Certain real estate projects are on hold amidst the investigation.

Mark Feathers, 54, pleaded guilty to one count relating to a scheme that he ran through Small Business Capital Corp. The SEC had accused him of running a $50 million Ponzi-like scheme that defrauded 250 investors.

Paul Garceau Jr., 51, was sentenced to up to 20 years in prison for running a Ponzi scheme that defrauded 12 of his clients out of more than $800,000. Garceau was an insurance agent who defrauded his mostly senior clients in this company, Apex Wealth Management, convincing investors to take money out of legitimate investments to re-invest in other opportunities that would supposedly earn them more money.

Evan Greebel, 44, was found guilty of wire fraud and securities fraud for his conduct as the former lawyer for companies run by Martin Shkreli. Shrekli was found guilty of securities fraud in August for running a Ponzi scheme involving his biotechnology company Retrophin Inc. Greebel was outside counsel for Retrophin and was found guilty of scheming with Shkreli to commit fraud.

John Zane Jeppesen, 57, was sentenced to 30 days in jail following his guilty plea to one felony count. Jeppesen raised about $8 million from 134 Utah investors to invest in Beverly Hills Development Corporation, a real estate development enterprise. Investors were told that their investment would be fully secured by a trust deed against real property and that they could pull their money out at any time. The scheme was run with Charles Fitzgerald.

Alex Reaves Lundin, 25, was charged with conspiracy to commit mail fraud for her role in the Ponzi scheme run by her husband, Jeremy Lundin, 30. Jeremy pleaded guilty to the scheme run through Big Island Capital, last year. The scheme defrauded 51 investors by promising reutrns from options trading. Although Jeremy did not guaranty an exact percent, he said he would “shoot for” returns of between 40% and 80%. Alex assisted the scheme by lying to investors, telling them that their money was safe.

Bradley C. Mascho was added as a defendant in the SEC against Dawn J. Bennett for an alleged Ponzi scheme run through DJBennett. The scheme raised more than $20 million through the sale of company notes, and Mascho targeted his brokerage customers to invest in the scheme. Bennett was previously barred by the SEC from working as an investment advisor for misstatements and omissions run through her advisory firm, Bennett Group Financial Services. Bennett entered a plea of not guilty.

Sergei Mavrodi launched a new cryptocurrency called Mavro. Mavrodi has previously been convicted in Russia and other countries for running scams, including MMM (Mavrodi Mondial Moneybox) in Russia, which launched subsidiaries in Asia, Africa and South America. Mavrodi also launched MMM Global which was a bitcoin-based High Yield Investment program. Mavrodi’s latest scheme is advertised on the MMM website which says that the Mavro will act as “a conventional unit for measurement of provided [sic] help to other participants in MMM.” The Initial Coin Offering claims that it is the “first decentralized and absolutely transparent platform for Multi-Level Marketing structures based on Blockchain Ethereum.”

Jason Todd Mogler, 49, was sentenced to 24 years in connection with a Ponzi scheme that defrauded 225 investors. The scheme involved purported investments in land deals in Mexico, recycling companies in Las Vegas and Chicago and distressed real estate in Phoenix. The SEC accused Mogler of stealing close to $10 million for strip club outings, vacations to Hawaii and Disneyland, and personal expenses such as mortgage payments.

John Bryan Murphy, 44, was arrested on charges that he ran a Ponzi-style investment scheme. Murphy solicited investments and promised the investors that their money would be professionally invested. Instead, he used the funds to support his personal lifestyle, to speculate on the stock market and to repay earlier victims some of their investments.

Steven Condon Peters, 44, was charged in connection with a scheme run through VisionQuest Weatlh Management that defrauded investors out of $15.3 million by promising them 8% to 9% returns. Peters’ assets, including a home in Costa Rica, a horse farm, jewelry, artwork and a dozen guns, have been seized.

Nathan Pyles and his company, Shiloh Management Services Inc., were accused of running a Ponzi scheme. Bankruptcy cases were filed listing about $13 million in creditor claims. Pyles was arrested on four felony count of writing checks with insufficient funds.

Merrill Robertson, 37, was sentenced to 40 years in prison for his role in a $10 million Ponzi scheme that he ran with his business partner, Sherman Carl Vaughn. Robertson and Vaughn had said that their firm, Cavalier Union Investments LLC, involved businesses such as restaurants, real estate, alternative energy and natural resource assets.

Robert H. Shapiro and the Woodbridge Group of Companies LLC first filed bankruptcy in Delaware and were then sued by the SEC on Florida in connection with an alleged real estate Ponzi scheme that defrauded more than 8,400 investors out of $1.22 billion. Investors were told that they would be “repaid from high rates of interest” that Shapiro’s companies were earning on loans to third-party borrowers. The borrowers were companies owned and operated by Shapiro. Returns of 5% to 10% were promised to investors.

Gary Truman Smith, 72, offered a plea deal to settle charges relating to an alleged Ponzi scheme that he ran through Smith Advertising. Smith’s son and business partner, Gary Todd Smith, 47, pleaded guilty earlier this year to the scheme that borrowed money from more than 150 investors. The total losses exceed $55 million.

Paul W. Smith, 63, was charged by the SEC in connection with an alleged scheme that defrauded about 30 investors out of $2.35 million. The alleged scheme was run through The Haverford Group and involved trading of securities.

Kevin Wanner pleaded guilty in connection with an investment fraud scheme that defrauded 66 investors. Woodbury Financial Services Inc. has agreed to pay nearly $600,000 to investors who were victimized by Wanner when he worked there as a registered securities agent. Questar Capital Corporation had previously agreed to pay $2.4 million to investors.

INTERNATIONAL PONZI SCHEME NEWS 

Canada

Rashida Samji, 64, had her appeal of her conviction and 6-year prison sentence dismissed. Samji was convicted on charges that she ran a $110 million Ponzi scheme. 

Joshua James Tenhove, 45, was charged in connection with a scheme run through Silvertip Energy, Inc. involving mobile light towers. The schemed defrauded investors out of $10 million by selling or renting the same equipment multiple times on paper, and by offering devices that had never been manufactured.

China

Authorities cracked down on 107 forms of knock-off altcoins in 2017, claiming they were Ponzi schemes in disguise. These include scams such as Five Elements Coin, Asia-Euro Coin, Onecoin and Ticcoin.

Zhang Xiaolei surrendered to police after Ponzi scheme allegations were made against Qbao.com aka Qianboa. Xiaolei owns 95% of the company.

India

Sashibhusan Das was arrested in connection with an alleged Ponzi scheme run through Tresty Securities Limited. Dayanidhi Mohapatra, Hari Arjun Panda and Rasmi Ranjan Mohapatra were arrested in 2015 in connection with the scheme.

A judgment was entered attaching assets for Citrus Holidays and Royal Twinkle Star Club Ltd., which are alleged to have been running a Ponzi scheme. The companies were operating out of 52 collection centers and promising returns of 13% to 15% for buying into holiday packages. 

Ayushi Aggarwal, the wife of Anubhav Mittal, was arrested in connection with the scheme run through Ablaze Info Solutions Pvt Ltd.

India’s Finance Ministry cautioned investors about the risks of trading in cryptocurrencies such as bitcoin, saying that investments in digital currencies are like Ponzi schemes. The statement said “There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes.”

Singapore

James Phang Wah, 58, was sentenced to 9 years in prison in connection with the Sunshine Empire. The scheme involved $190 million in a type of Ponzi scheme. Wah was the self-proclaimed Warrant Buffet of Singapore.

South Korea

New regulations for cryptocurrency were proposed by the government in light of the rapidly increasing number of fraudulent cryptocurrency exchanges. Several fake exchanges were exposed including BitKRX, Bithumb, and Mining Max.

Thailand

A group of investors filed a complaint with the consumer protection police against Luxury Delight and the owner, Nattapong Pohsukarn. The company allegedly tricked people into joining the business by selling collagen supplements. Nuttapong denied the allegations and said that the business had about 30,000 members and he could not control their behavior. 

Phudit Kittitradilok was sentenced to 13,275 years in prison for a scheme that defrauded 2,600 out of 574 million baht. However, he will likely only serve 20 years due to limitations in the Penal Code. The scheme was run through The System Plug and Play, and Innovision Holding. Investors were invited to invest in businesses involving beauty care, used cars, export, property development and foreign exchange. Investors were promised 1% weekly returns plus 5% of new investment money for those who recruited new members.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

LPL Financial lost a $462,000 arbitration, being found liable for failure to supervise its broker, Charles Fackrell. Fackrell was sentenced to more than 5 years in prison for running a $1.4 million Ponzi scheme that operated under the name Robin Hood. 

Ritchie Capital Management LLC’s lawsuit against JPMorgan for aiding and abetting Thomas Petters in his $3.7 billion Ponzi scheme was dismissed. The court found that Ritchie Capital had not established that the court had personal jurisdiction and that the case was barred by statute of limitations.

The receiver of Stanford International Bank was denied his request to overturn a jury decision denying his claim to recover $88 million from billionaire Gary Magness.

November 2017 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for November 2017. The reported stories reflect at least 9 new Ponzi schemes worldwide and an average age of approximately 49 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 D. Allen, 38, had a $15.7 million final judgment entered against him in the SEC case accusing him and co-defendant Susan Daub, 56, of running a Ponzi scheme through Capital Financial Partners LLC, Capital Financial Partners Enterprises LLC and Capital Financial Holdings LLC. They allegedly raised nearly $32 million from investors who were promised profits from loans to professional athletes.

Carolyn Anderson, 44, was sued by the SEC on allegations that she, along with her deceased husband, Michael F. Anderson, had operated a Ponzi scheme through End of the Rainbow Partners. The scheme allegedly defrauded victims out of $2.3 million by advertising annual returns of 12% to 48%. The investors were told that a portion of the training profits were to be donated to a charitable organization founded by Anderson, called The End of the Rainbow Foundation, Inc. The charity was supposed to raise money for abused women and children, but instead Michael and Carolyn used the Rainbow Foundation as a fraudulent device to misappropriate investor funds. A total of $5.3 million had been raised from 18 investors. Michael Anderson had admitted some of the facts relating to the scheme in a confessional affidavit he signed shortly before he died in February 2017. SEC v. The End of the Rainbow Partners LLC, 2017 U.S. Dist. LEXIS 18734 (D. Colo. Nov. 14, 2017).

Golan Barak, 50, had his motion to withdraw his guilty plea denied. Barak had previously pleaded guilty to stealing millions from Israeli investors in a real estate Ponzi scheme that he ran through Ergo Management, but he sought to withdraw his plea.  Barak is scheduled to be sentenced next month.

Pedro Fort Berbel, 55, and his companies Fort Marketing Group LLC and Fort Investment Group LLC, were sued by the SEC in a civil enforcement action alleging that they were running a “paid to click” Ponzi scheme. The scheme allegedly involved $38 million that lured in more than 150,000 investors. The scheme raised money by selling investment products called “ad packs” that supposedly would generate revenues by boosting web traffic for other sites. Investors were promised returns as high as 120% for purchasing an ad pack for as little as $1 and clicking on four banner ads per day. Investor funds instead were used for private jets, cars, and cosmetic surgery, and more than $400,000 went to a jeweler as a “business investment.”

Craig Carton, 48, pleaded not guilty and stated that he is “unequivocally not guilty” in response to charges that he was involved in a Ponzi scheme involving the buying and selling of tickets to sporting and entertainment events. Carton was indicted along with alleged co-conspirator, Michael Wright.

Louise Dalli and Claire Gauci Borda, the daughters of John Dalli, along with Eloise Marie Corbin Klein, Charles Ray Jackson, Elizabeth Jean Jackson, and Robert Mitchell McIvor, were charged with fraud and money laundering in connection with an alleged Ponzi scheme that defrauded evangelical Christians. John Dalli is the former EU Commissioner and has separately been accused of wrongdoing in the past. John has accused journalist Daphne Caruana Galizia and Giovanni Kessler of fabricating the story leading to the charges. The alleged Ponzi scheme was run by Klein who used the aliases of Mary Swan and Lady Bird, and she posed as a missionary, convincing elderly Christians to invest in an African mining project. Instead, the money was sent to two Maltese companies – Tyre Ltd. and Corporate Group – which are owned by Louise Dalli and Borda.

Mark Feathers, 54, has reached a settlement in principal on a plea deal in connection with charges that he defrauded investors through his company, Small Business Capital Corp. Feathers is an investment manager facing securities fraud charges in connection with a $42 million scheme. The scheme allegedly raised over $50 million from over 250 investors and promise them profits from membership interests in mortgage loan portfolio-backed investment funds.

Paul Garceau Jr., 51, pleaded guilty to charges that he ran a Ponzi scheme through his wealth management firm, Apex Wealth Management. Garceau stole over $800,000 from at least a dozen victims, promising them high returns when they withdrew their money from legitimate investments and invested with him instead.

Daniel Glick, 64, was charged in connection with an alleged Ponzi scheme in which Glick is accused of stealing at least $5.2 million from clients in his businesses, Financial Management Strategies Inc., Glick Accounting Services Inc., and Glick & Associates Ltd. The firms purported to provide accounting, tax, investment and financial services, and he told clients he would invest their money and pay bills on their behalf. He is accused of using some of the money to buy a Mercedes-Benz, repay business loans and make payments on his mortgage.

Wayde McKelvey, 54, lost his appeal to trim the charges against him based on a statute of limitations argument. McKelvey was accused of participating in a $54 million Ponzi scheme that promised profits from green technology that would turn trash into fuel and “carbon-negative” housing developments. The scheme was run through Mantria Corp. Troy Wragg and Amanda Knorr, both of whom previously pleaded guilty. McKelvey had raised money for the scheme through his “Speed of Wealth” seminars, telling investors that Mantria was the next Microsoft and that it was “on the cusp of a revolutionary technology that’s going to change the world, and you guys can benefit from it by putting money in and getting stinkin’ wealthy.”

Joseph Meli, 43, accepted a plea bargain in which he pleaded guilty to one count of securities fraud. Meli was a ticket broker accused of running a Ponzi scheme in which he promised investors a 10% return and a share of profits from the resale of tickets to shows like “Hamilton” and other high profile entertainment events. The scheme allegedly defrauded more than 130 investors who invested more than $95 million.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Tony Iervasi, 53, was accused of running a Ponzi scheme that defrauded investors out of $209 million. The scheme operated as Courtenay House and Courtenay House Capital Trading Group and defrauded about 780 investors. Investors were promised 25% returns from supposed investments in foreign currency exchange markets.The scheme is believed to be the largest ever in Australia.

Canada

Milowe Brost and Gary Sorenson were released from prison after spending only 2 of their 12 year prison sentences. More than 2,400 investors had lost between $100 million and $400 million in connection with their Ponzi scheme.

  

Brian Wilfred Clemens, 49, pleaded guilty and was sentenced to 3 years in prison for his role in a Ponzi scheme involving bridge financing for real estate clients. Clemens collected $1.2 million from nine investors.

A class action was file against HSBC accusing the bank of failing to investigate fraudulent activity by Virginia Tan. Tan solicited more than $30 million from investors in connection with her bridge loan company. One of the bank accounts at issue was in Tan’s name and one was in the name of a company she controlled, Letan Investments.

Lino P. Matteo, the former CEO of Mount Real Corp., was sentenced to 5 years in prison and fined $4.91 million. Matteo was found guilty in September for running a scheme that defrauded more than 1,200 investors out of $130 million. In 2016, Matteo was also sentenced to an 8 year terms for defrauding investors of Cinar Corp. by sending more than $120 million to offshore Bahamian accounts.

England

BitConnect has been given two months to prove “cause to the contrary” that it has been running a Ponzi scheme. The scheme promises up to 40% return on investment each months.  The notice does not identify the people behind the Bitcoin investment platform, but another filing reflects that BitConnect was registered by Ken Fitzsimmons, who holds 75% of the shares in the company.

India

Government agencies began investigating the alleged Pincon Ponzi scheme run by Manoranjan Roy that defrauded 25,000 investors. Roy was arrested along with Binary Singh, Raghu Shetty, and Hari Singh. They had set up multiple shall companies as part of the scheme such as: LRN Finances, ASK Financial Services, Greenage Food Products Ltd, Bengal Pincon Housing Infra Ltd, LRN Universe Private Ltd and Universal Multi-state Credit Co-operative Society. Mosumi Roy, the wife of Manoranjan Roy, was also arrested in connection with the scheme.

GainBitcoin, a cryptocurrency scheme that guaranteed 10% monthly returns, is accused of scamming investors. The scheme, run by Amit Bhardwaj, has left investors with crypto tokens called MCAP that are worth less than 20% of the value of the initial investment supposedly held in Bitcoins.  All investment contracts were terminated with a promise to issue fresh contracts by the start of next year.

Pradeep Sethy, the chief of Artha Tatwa Group, was sentenced to 5 years in prison following his guilty plea relating to the Ponzi scheme.

Charges were brought against the directors of Maitreya Pvt Ltd, including Varsha Satpalkar, Lakshmikant Navekar, Vijay Tavre, Nitin Chaudhary, Janardan Parulekar and Vijay Mistri, for allegedly running a Ponzi scheme that defrauded 7,000 investors. The scheme promised returns of 12.5%. Related companies were Maitrea Realtors, Maitreya Services, Matreya Plotters and Structures, and Maitreya Swarna Siddhi.

Narayan Karmi and his aid Munu Pradhan were arrested for allegedly running a Ponzi scheme through Go Life Trading Pvt Ltd.

Pranati Dash, 48, and her husband, Prasanna Kumar Dash, were arrested in connection with an alleged Ponzi scheme run through Flourish Development India Limited. Sriballabh Prasad Nayak was also arrested in connection with the scheme that collected over Rs crore from 40,000 investors. The scheme involved investments in real estate, production, music, tourism, and the hospitality business.

A case was file against Haldar Realty and Enterprise Ltd. and Halar Vikas Credit Cooperative Society Ltd. for operating an alleged Ponzi scheme. The complaint names, among others, Bhupatsinh Solanki, Arvindkumar Vakhtariya, Anita Vakhtariya, and Hemant Mandloi.

Nigeria

The MMM scheme has again left Nigerians stranded. Over 3 million Nigerians invested in MMM but the scheme announced a “restart” and blamed the fact that it can’t sustain operations on the government and media. MMM announced that “All transactions with old mavros (acquired before this announcement is posted) are frozen. We will gradually buy them back as the system develops. All transactions with new mavros (acquired after this announcement is posted) will be carried out on the usual terms with no restrictions.”

South Africa

Following a protest by almost 800 people demanding payment, David Cupido was given permission to distribute funds to investors that had been frozen when his offices were raided last year. The scheme, 4th Power Investment, had stopped paying investor last year, and authorities raided Cupido’s home, seizing computers and equipment, and also freezing bank accounts.

Singapore

Leong Lai Yee, 53, was charged with defrauding 60 investors out of about $60 million in a real estate Ponzi scheme. She promised investors returns of 10% to 48% from the purchase of distressed properties in Singapore.

South Korea

Police arrested 7 men accused of running a $38 million Ponzi scheme that defrauded more than 3,900 investors. The scheme targeted new investors in the cryptocurrency market and promised them 180% returns.

Taiwan

The Supreme Court upheld the guilty verdicts for Hung Pai-li and Lai Lung-ying, who operated a Ponzi scheme involving Lan Chin Technologies Co. The court also upheld the 5 year prison sentence for Hung and the 22 month sentence for Lai. They defrauded 2,320 investors out of $66.3 million by representing that sales of deep sea water would guarantee an 18.25% to 20% return. The court also upheld the convictions of Lee Ching-feng, and Chen Te-feng and their two year prison sentences for aiding and abetting fraud.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

A group of 27 Chinese investors in the Bar Works scheme sued JP Morgan Chase for $3 million for its alleged role in connection with the scheme run by Renwick Haddow. The lawsuit alleges that the bank knew Bar Works was a Ponzi scheme but still allowed the company to keep a bank account. Haddow has been accused of stealing $37 million from investors.

The Chief Information Officer, David Gledhill, at DBS Bank stated that the bank views bitcoin as a Ponzi scheme.

The Special Master appointed by the Department of Justice began distributing $772.5 million in funds to approximately 24,000 victims of the Bernard Madoff Ponzi scheme. The Department of Justice has collected more than $4 billion in forfeited funds to be distributed to victims.

A proposed class action lawsuit was filed against Chaitman LLP and Becker & Poliakoff LLP alleging misconduct by lawyers representing different classes of victims in the Bernard L. Madoff Investment Securities LLC case being administered in a SIPC proceeding. The lawsuit alleges that clients of the firms were not adequately represented in light of competing interests of the Madoff victims they represented and by allegedly lying to the victims about the trustee’s willingness to settle. In addition to “irreconcilable” conflict, the lawsuit also alleges that over billing took place for “unnecessary” and “often unproductive” work.

A federal judge dismissed a $5 billion class action lawsuit against Proskauer Rose LLP, filed by a group of investors in the $7 billion Robert Allen Stanford Ponzi scheme.

A class action was permitted to proceed against the Louisiana Office of Financial Institutions which alleges that the agency was negligent in turning a blind yet to the Robert Allen Stanford Ponzi scheme. The lawsuit also alleges that SEI Investments Co. aided Stanford Trust and Stanford Group Co. to perpetuate the fraud.

The Fifth Circuit held that American International Group Inc. is not obligated to provide coverage to a company that was a victim in the $554 million WG Trading Co. Ponzi scheme run by Paul Greenwood and Stephen Walsh. Cooper Industries Ltd. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 2017 U.S. App. LEXIS 23349 (5th Cir. Nov. 20, 2017). The court based its decision on the fact that the policyholder no longer owned the funds it had loaned the criminals.