The news stories relating to Ponzi schemes were once
again plentiful for the month of October. Here is the summary of the stories
that were reported this month. Please feel free to post
comments about 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.
Arrowood and Trinity Fund,
LLC of Oklahoma have been accused of stealing about $43 million from
investors in connection with a Ponzi scheme in which Arrowood was supposedly
buying and reselling oil and gas leases. The scheme defrauded about 30 victims,
who were promised that their investments would mature in less than 60 days with
a return rate of 90 percent.
Baccala, 71, of California, listened to stories from defrauded
investors at his criminal trial relating to his alleged $20 million Ponzi
scheme in which investor funds were to be used in connection with his Petauma
real estate company and assisted living centers. Most of the victims were
elderly and had paid their life savings to Baccala, expecting 12 percent
returns. He offered investments in a portfolio that included the southeastern
nursing homes, a Nevada car wash, and a Colusa mushroom farm.
Bonventre, 65, Annette
Bongiorno, 64, Joann Crupi, 51, Jerome O'Hara, 49, and George Perez, 46, former employees of Bernard Madoff, were the subject of a
revised indictment adding more charges against them for their activities in
connection with the Madoff Ponzi scheme. It is alleged that some of the
defendants helped Madoff carry out the fraud as far back as the early 1970s.
Each of the defendants pleaded not guilty to the new indictment, which expands
the charges against them. Other former employees have previously pleaded
guilty: Former Chief Financial Officer Frank
DiPascali; Madoff's former accountant David
Friehling; former employees Craig
Kugel, David Kugel, Enrica Cotellessa-Pitz and Eric Lipkin; and Peter Madoff, Bernard Madoff's brother. It is reported that Irwin Lipkin plans to plead guilty.
Boockvor, 67, the uncle of Scott
Rothstein and known as "Uncle Bill," was sentenced to 4 years in prison and
ordered to pay $166 million in restitution. Boockvor admitted that he played a
part in duping investors into believing that Rothstein had millions of dollars
that he didn't have. Boockvor admitted that he helped his nephew put on "investor
shows" to lure in large investors. To assure investors that he had cash in his
bank accounts, Rothstein would have Boockvor go to the Weston branch of TD Bank
with phony paperwork showing large bank balances. The investors would then go
to the bank where bank officials would hand over sealed envelopes containing
the phony paperwork and a letter on bank stationery vouching for the large bank
Jeffrey Chandler, 55, had been facing accusations of running
a foreign currency Ponzi scheme, but was found dead inside his Mercedes.
Reports are that he suffered from "self-inflicted wounds." Chandler's assets
had been frozen by the CFTC in connection with charges that he defrauded at
least 6 people of $773,100. The investors were to invest in a pooled account in
Switzerland and were to be paid 2 percent to 12.5 percent every month in a
Frank Davis, 67, pleaded guilty to charges in connection
with his $7.8 million real estate investment Ponzi scheme. Davis is a former
attorney defrauded over 20 investors over a 10 year period by claiming he was a
successful real estate investor.
DeSage saw his home detention rules tightened. DeSage has been
on home detention and ordered to stop gambling and to stay out of casinos while
he fights charges in connection with a $75 million Ponzi scheme. It is alleged
that he used his Las Vegas company, Cadeau
Express, to carry out the Ponzi scheme and that he used investor funds to
maintain a wealthy lifestyle and cover millions of dollars of gambling losses.
Driver, 54, of Las Vegas was arrested and charged in connection
with an alleged $15 million Ponzi scheme that he ran through Axcess Automation LLC and a hedge fund
called Axcess Fund LP. Driver had
been the subject of a CFTC enforcement proceeding in 2009, which alleged that
he defrauded approximately 100 investors out of $14 million by promising
above-average returns, telling them that he had developed proprietary trading
software to trade E-Mini S&P 500 futures that had achieved average weekly
trading returns of 1% to 5%.
Curtis Folkert, 42, was sentenced to 4 years in federal
prison for his role in a $1.5 million Ponzi scheme. Folkert ran a computer
consulting business called iStorm
Solutions LLC and recruited investors by telling them that they could earn
money from Google Inc. when internet users clicked on their advertisements. Folkert
spent the investor funds to pay dividends to other investors and for personal
expenses and online gambling.
Freixa, 48, and her sister, Marisela Gamez, 49, of Florida, were arrested in connection with
their alleged $1 million Ponzi scheme in connection with a foreclosure and loan
modification scam. They used companies FL
Home Holdings LLC, FL Home Loans LLC,
FL Home Realty Services, LLC, and
non-profit corporation, The H.E.R.O.
Foundation, Inc., to run their scam.
R. French Jr., 25, pleaded guilty to charges relating to
a $10 million investment fraud he ran through his company D3 Capital Management LLC, where he promised clients that he would
pay returns as high as 50 percent by investing in things such as emeralds and
solar energy. French had been detained in South Africa and then sent back to
Las Vegas to face charges that he passed $750,000 in bad checks at casinos.
Gallardo aka Celia Zagha, 42, of California, pleaded guilty to
defrauding investors in her real estate Ponzi scheme that resulted in losses of
at least $2.2 million to dozens of investors. Gallardo had told investors that
she would purchase condominiums and that those properties would yield high
rates of return of 100% in 30 days. Most of Gallardo's investors had withdrawn
funds from their 401k accounts and mortgages on their homes. Gallardo spent most of the money on personal
expenses, including her home, a Mediterranean cruise with close friends and
family, cash withdrawals, and repayments to earlier investors to perpetuate the
Greenblatt of New York pleaded guilty to charges relating to a $31
million Ponzi scheme that he ran through his company, Maywood Capital. Greenblatt had told investors that he was using
their money to purchase and renovate real estate in return for mortgages that
promised returns approaching 14 percent.
Hernandez and his companies, Midway
Trading Company and Conquest
Investment Group, agreed pay $1.4 million in civil penalties to settle CFTC
charges that they operated a commodity pool Ponzi scheme involving about $3.8
million. The defendants promised participants guaranteed annual returns of from
20 to 60 percent.
Francis Holtsinger, 52, of Iowa, pleaded guilty to charges in connection
with a $1.1 million Ponzi scheme. Holtsinger had falsely boasted about having
ties to elite financial circles and that he was an experienced investor. He
only invested a fraction of the funds given to him and kept the rest of the
money to pay his living and other expenses.
Levea and James Masat,
principals of First Americans Insurance
Service, of Nebraska, were sentenced to 8 years in prison, and Kenneth Mottin, was sentenced to 5
years in prison, in connection with a scheme they operated which promised
investors unusually high returns.
Lindsey Howell, 60, was indicted in connection with the $59
million Ponzi scheme run by Ron Wilson
that promised large rates of return on investments in a silver trading scheme.
Howell allegedly conspired with Wilson to take $3.5 million from two accounts
at Wilson's Atlantic Bullion & Coin.
Wilson pleaded guilty to charges related to the Ponzi scheme in July. Howell
refused to cooperate with authorities by declining to give his fingerprints or
a DNA sample, or to confirm his name or address, so he remains in jail.
Lopez, 63, of California pleaded guilty to tax evasion
relating to his receipt of and failure to pay taxes on $3.94 million received
from Ponzi schemers Matthew La Madrid
and Moises Pacheco of San Diego,
California. La Madrid sent $10 million in stolen investor funds to Lopez's
company, and Lopez took $3.94 million out of that amount and then failed to pay
taxes on that amount. La Madrid was sentenced to 10 years in prison last year and
ordered to pay $23.5 million in restitution.
Lopez, 70, and Mark
Kuhrt, 40, who were charged and pleaded not guilty to charges relating to
the Ponzi scheme run by Allen Stanford,
face their criminal trial. These two accountants are accused of fabricating
financial statements that enabled Stanford to lie to investors about the
investment scheme. Prosecutors have alleged the following: There are e-mails in
which the two defendants discussed Stanford's unreported loans and how to value
certain assets to disguise that debt in the months before U.S. securities
regulators seized Stanford's businesses in February 2009. The emails also show
discussions with James M. Davis, Stanford's chief financial officer, on how to
repeatedly flip a Caribbean resort property among Stanford entities so that its
value could be inflated from $63.5 million to $3.2 billion in a matter of
months - his inflated value was intended to plug the hole in the books caused
by Stanford's personal loans and bad investments.
H. Lunn, 56, Darlene A.
Bishop, 40, and Vincent G. Curry,
42, were charged by the SEC in connection with an investment fraud that
defrauded investors out of at least $6 million. Lunn created Dresdner Financial, claiming it had
connections with top world banking institutions, and Bishop and Curry served as
affiliates to market and sell investments for Dresdner. The primary investment
marketed by Dresdner was the .44 Magnum Leveraged Financing Program, and investors
who initially contributed $44,000 could expect a 100% guaranteed return of $2
million within ten to twelve banking days, or a 4,445% return. It is alleged
that at least 70 investors contributed nearly $6 million.
Qaisar Madad, 65, of California, was arrested by the FBI
and the IRS criminal investigation unit, on charges relating to an alleged $49
million Ponzi scheme that he ran through his company Technology for Telecommunication and Multimedia, Inc. Madad
represented to investors that there money was safe, that his day-trading method
would make consistent and substantial profits and that their money would be
returned to them if they requested.
Solutions, Inc., a real estate investment company that
allegedly defrauded investors of at least $200 million, saw its property put up
for auction. The furnishings of a 25,000 square foot office building in Utah
are being auctioned.
M. McGinn, 63, and David L.
Smith, 66, were indicted on charges in connection with a scheme operated
under McGinn, Smith & Co., Inc.,
a financial broker-dealer firm that had operated for nearly 30 years. It is
alleged that they raised $2.4 million from investors for Firstline Security, Inc. without disclosing that Firstline had filed
for bankruptcy and had defaulted on its loans. It is also alleged that they
diverted $4.1 million of investment dollars into their own bank accounts.
James Missitti pleaded not guilty to charges relating to an
alleged Ponzi scheme that defrauded more than $25 million from about 500
investors. Ronald Lee Brito, Bonnie Brito and Thomas Winston Moore, and Mark
J. Carpenter are also charged in connection with the scheme run through the
C. Pibilski, 54, John
T. Burns III, 53, and Mahnut Erhan
Durmaz, 42, were charged in connection with an alleged $28 million Ponzi
scheme that defrauded about 120 investors. While holding estate-planning
seminars through a company called USA
Retirement Management Services,
the men solicited investments, promising to sell promissory notes for
investments in Turkish bonds that would yield returns of 4.75 percent to 11
percent annually. The funds were allegedly used to pay other investors and
about $2.5 million to pay for their own expenses, including medical insurance,
salaries and bonuses to themselves.
Anthony Rand, who pleaded guilty last year to charges
relating to a $68 million Ponzi scheme that he ran through a Dallas oil and gas
company called Aspen Exploration,
along with his three sons, saw his rare guitars sold by the government in an
auction that took place in Beverly Hills. The guitars sold for $298,000. Rand
had told investors that they would double their money in 3 years by investing
in oil leases. Instead of drilling wells, however, the Rands bought real
estate, boats, vehicles an original Picasso, wine, jewelry, jade, and musical
Michael Shapira, 43, pleaded guilty to fraud charges in
connection with a Ponzi scheme involving about $2 million from investors.
Shapira promised investors 20% to 30% returns on their investments, which were
to be used to fund leases of medical equipment that would then be leased again
to medical organizations and government agencies.
Sigillito, 63, a lawyer and American Anglican bishop was scheduled
for a three day sentencing hearing. He was convicted by a jury last April for
running a $52 million Ponzi scheme that defrauded about 140 victims.
Thakur Singh, 43, was indicted in connection with a scheme
where he allegedly defrauded 190 members of the ethnic Indian Fijian community
of about $20 million. Singh had told investors that their money would be used
to make safe loans and that they would recover the principal plus as much as a
30 percent return in a few months. Singh had previously filed bankruptcy, and
his bankruptcy trustee is pursing about 135 victims to recover returns paid to
certain victims in the amount of at least $9.65 million. It is alleged that
Singh spent the investors dollars as follows: gambling losses totaling more
than $12 million, more than $2 million to accounts Singh controlled, an
investment of $880,000 in a film project, a down payment on commercial property
of $370,000 and the purchase of three retail franchises for $662,500.
Snelling, 48, of Cincinnati Ohio, was sentenced to 131 months and
ordered to pay $5 million in restitution to victims and $596,929 to the IRS in
connection with his Ponzi scheme that defrauded 72 investors. Snelling ran a
bogus day trading business through CityFund
Advisory and Dunill Investments
by creating fictitious trading statements and failing to do anything more than
deposit investor funds and then spend them to pay earlier investors, to pay his
mortgage, his children's private school tuition, and his credit card bills. Jerry Smith, 50, of Indiana was a
co-conspirator who is scheduled to be sentenced next January. As part of the plea
agreement, Snelling also agreed to forfeit all property he illegally obtained
with investor funds, including a boat and his interest in a Michigan vacation
A. Snyder, 76, who is serving 12 years in prison for his role in a
Ponzi scheme that cost about 800 investors $29 million, is requesting to have
his guilty plea and sentence overturned. Snyder claims he pleaded guilty only
because he got bad advice from his attorney, the late Emmanuel H. Dimitriou,
whom Snyder claims was affected by medication he was taking for cancer. Dimitriou
died of cancer in March 2008, four months before Snyder was sentenced. Snyder had
pleaded guilty to charges that he ran a mortgage scam through Personal Financial Management but now
claims he was coerced into doing so.
Stevens, 45, was arrested and held on $1 million bail in
connection with charges relating to a motorcycle Ponzi scheme which was run
through Dark Hawk Enterprises LLC
with Anthony Fregenti, 41.
Wealth Management Inc. and its president, Angelo A. Alleca and other related entities, were the subject of a
civil action brought by the SEC. Robert Terry was appointed as the receiver in
this alleged Ponzi scheme. The SEC alleges that approximately 200 investors
were defrauded of over $17 million.
Telthorst, 52, of Topeka, was charged with stealing more than
$460,000 of client trust funds in connection with an alleged Ponzi scheme in
which he took in money from new clients and used it to benefit himself and to
cover up his theft of money from other accounts.
Terzakis was sentenced to 84 months in prison for conspiring to
defraud the clients of Vesta Strategies,
based in California. Vesta was a qualified intermediary for the purpose of
conducting tax-deferred real estate exchanges pursuant to Internal Revenue Code
§1031. Terzakis, along with Robert
Estupinian and Peter Ye,
misappropriated about $25 million owed to § 1031 depositors. Peter Ye pleaded
guilty in 2010, and Estupinian pleaded guilty in 2011.
Tynon, 55, pleaded guilty to charges relating to his operation
of a scheme through Dant Corporation,
through which he promised more than 40 investors annual returns of 18 percent
from investments in tax liens. Tynon had fled to Thailand where he was arrested
and returned to the U.S.
Title LLC, a New Mexico-based title company with ties to Ponzi
schemer Doug Vaughan, filed for
bankruptcy under Chapter 7. Disgruntled investors had sued US Title for
negligence, conspiracy, and unjust enrichment. Vaughan himself had filed
bankruptcy but remained on the US Title payroll and served as chairman of the
Donald Vallet, 35, of Tennessee, was sentenced to 120
months in prison and ordered to pay $5.4 million in restitution in connection
with his Ponzi scheme that involved more than 30 victims and $5 million. Investors
deposited funds with A.D. Vallett &
Co., LLC for various financial services, including investment advice,
portfolio management, insurance, real-estate consulting, and retirement
planning. In addition, Vallett & Co. acted as Third Party Administrator for
several 401(k) plans. Instead of investing that money as promised, Vallett kept
it in his company's operating account and spent it on various personal and
Viola, 60, of Connecticut, was sentenced to 8 years in prison
in connection with his Ponzi scheme that defrauded 50 investors who lost more
than $6 million. Viola was an unlicensed investment advisor who solicited
investors through his tax business and created phony statements to persuade
them that their money was earning profits.
Winans Jr. pleaded guilty to running a Ponzi scheme that
defrauded over 1,000 investors of about $8 million. Winans was accused of
running a scheme that misrepresented that the Winans Foundation Trust was investing in crude oil bonds in Saudi
Arabia. He guaranteed the investors the bonds would yield returns of $1,000 to
$8,000 within 60 days. Winans is the son of Michael Winans Sr., a member of the
Gospel Hall of Fame quartet the Winans.
Advisors, LLC, Mark
Angelo, and Edward Schinik were
the subjects of a complaint by the SEC alleged that they defrauded investors in
hedge funds domiciled in the Cayman Islands and Delaware.
PONZI SCHEME NEWS
Brost, Gary Sorenson and Gerald
Berke were hit with fines totaling nearly $54 million for their role in a fraudulent
scheme run through Arbour Energy
which raised $45.5 million from investors. Brost led the Institute For Financial Learning, which he claimed was an "information
club," but it is alleged that it was really used to sell investors stock in
Arbour and other entities connected to Brost. Sorenson led a mining company
called Merendon that was used as a
vehicle to receive and disburse investor money. In a separate case, Brost and
Sorenson were arrested in 2009 for what police called "the largest Ponzi scheme"
in Canadian history, taking in $400 million from investors.
The hearing by the Alberta Securities Commission against Focused Life Group, run by Victor Delaet, on whether they violated
securities laws, concluded and a ruling is expected at a later date. It was
alleged that Focused Life ran an insurance investment scam that defrauded
hundreds of investors of $54 million. Focused Life promised to use investor
funds to buy life insurance policies at a discount from American policy holders
who needed cash while they were still alive and, once they died, Focused Life
would get the full policy payout.
In an alleged Ponzi scheme in the British Columbia,
dozens of defrauded investors protested in front of a Coast Capital Savings
branch in Surrey, blaming the credit union for an alleged $83 million Ponzi
scheme. Arvindbhai (Arvin) Patel was
a former investment advisor at Coast Capital, who admitted to the British
Columbia Securities Commission that he encouraged his Coast Capital clients to
invest in what he called a secure investment that guaranteed 12 percent returns
per year. The money went to Vancouver
notary public Rashida Samji, who was to keep it in a trust account that was
supposed to act as borrowing security to the Mark Anthony wine group to expand
their winery operations internationally. Mark Anthony was not actually
involved, and Samji has been accused of operating a large Ponzi scheme.
Legal Financing Fund suspended redemptions and halted new
subscriptions as a result of an investigation by OffshoreAlert, which uncovered
red flags in connection with Axiom's investment program. The report by
OffshoreAlert noted red flags including conflicting financial statements, £7.9
million loaned to a law firm owned by Axiom's principal, and insurance provided
by a firm that is currently defending a lawsuit brought by one of its clients.
Arrest warrants have been issued for three Chinese men,
one of which is known as Yun and
another as Pang, who allegedly
operated a Ponzi scheme through a website, Hootoot660,
that was based in the U.S. The scam featured an online stock known as Guquan and may have defrauded more than
200,000 Chinese citizens out of approximately 2.4 billion yuan ($384 million).
Investors were first required to pay 660 yuan to 12,540 yuan in membership fees
and were then encouraged to buy the stock, which was said to never drop in price,
and to attract more members to earn commissions.
The Autorite des Marches Financiers, France's financial
markets regulator, fined an unidentified investment company and one of its
officials a total of 200,000 euros for encouraging clients to invest in funds
that were linked to the Bernard Madoff
scheme. The regulator declined to name the firm, which was asked to pay 180,000
euros, because it was bought by another company in 2011 that wasn't at fault.
of Schwerte in Nordrhein-Westphalia (Germany) was a
Ponzi scheme as determined by Regional Court of Hagen. The court sentenced the two
masterminds of this Ponzi scheme to 3 years and 3 months, and 3 years
imprisonment. Both masterminds offered leasing agreements for new cars. The
customers had to pay only EUR 600 once. They were made believe that the
difference between their investment and the price for the cars would be covered
by ads. The total damage occurred is near EUR 8 million.
by Bernd H. Klose, www.raklose.de/
of FraudNet, www.icc-ccs.org/home/fraudnet
One of the major Ponzi schemes in Germany in the last few
years is known as Phoenix Kapitaldienst
GmbH, whichwas put into insolvency in 2005. Although the German law
provides that investors have to be reimbursed for their damages up to a maximum
of EUR 20,000 the competent body tried to delay the payments. Germany's Federal
Court has decided (file no. XI ZR 434/10) that the competent body has to review
applications for reimbursement immediately and to pay the reimbursements within
3 months time from acknowledgement.
by Bernd H. Klose, www.raklose.de/
of FraudNet, www.icc-ccs.org/home/fraudnet
At Nuernberg District Court, 13 men and one woman were
indicted for running a massive Ponzi scheme. According to the indictment, they
sold shares in non-existing thermal power units to 1,417 customers causing
damage of more than EU 62 million. It is said that the accused used substantial
parts of the money for their own lavish lifestyle.
by Bernd H. Klose, www.raklose.de/
of FraudNet, www.icc-ccs.org/home/fraudnet
of Susi Emu Farms was arrested and charged in connection with a Ponzi scheme
involving thousands of investors, tens of thousands of emus and $50 million.
The scheme involved attracting investor dollars to earn a stream of income in
exchange for raising an Emu chick. There was a VIP program in which Susi would
take on the obligation of raising the emu.
Hussain Siddique, Ayub
Siddique, and Iqbal Sheikh (the "Trio")
face criminal charges in connection with their failed attempt to kidnap Ponzi
schemer, Imtiyaz Saiyad, who is
alleged to have defrauded over 12,000 investors by promising 120% returns.
Saiyad's business was run through Imtsons
Ltd. Saiyad had been arrested by was released on the condition that he
would make restitution to investors by the end of October 2012. The three
investors kidnapped Saiyad at gunpoint and demanded repayment of their $300,000
investments. Although Saiyad was able to return about $10,000, the three are
now facing criminal charges in connection with the kidnapping.
A fraudulent scheme operated by TVI Express aka Travel Ventures International has surfaced. The
scam involved a network marketing direct selling company that sold discounted
travel memberships and scammed over 10,000 investors. As part of the scheme,
investors were promised that they would qualify for even bigger rewards by
recruiting at least two people.
Cavell, 29, was given a suspended a sentence for manufacturing
drugs in his Dublin home. Cavell is wanted in California for his role in a
mortgage Ponzi scheme. The court sentenced Cavell to 5 years in prison but
suspended the balance on the condition that he cooperate fully with his
deportation to the U.S. and that he not be released from jail until his
deportation is organized.
Kelly, who used celebrity solicitor Gerald Kean's name to lure
people into a Ponzi scheme, has been ordered to pay €450,000 to the Irish
Criminal Assets Bureau. The judgment is unusual in that the seized money is to
be returned to the victims rather than to the State. Kelly's scheme involved
promises to investors €15,000 profit on a €50,000 investment within six months.
Kelly forged Mr. Kean's name on a letter sent to potential investors to lure
them to invest, and he also forged a letter from Ulster Bank stating that Kelly
had €4.6 m on deposit at the bank. Kelly pleaded guilty and was sentenced to 6
years in prison.
by Greg Glynn of Arthur Cox, www.arthurcox.com
of FraudNet, www.icc-ccs.org/home/fraudnet
Jersey Magistrate Ian
Christmas, along with Russell Foot,
James Cameron, and John Lewis were sentenced in connection
with their convictions for a fraudulent scam run in Jersey. The four were found
guilty of defrauding investors of £5.3 million by leading those investors to
believe they were buying new properties in the U.S. Although some new
properties had been purchased, the business plan failed when the market crashed,
and they began using investors' money to pay off debts to other investors. A
disciplinary investigation into Magistrate Christmas's conduct is ongoing.
by Stephen Baker of Baker & Partners, www.bakerandpartners.com
of FraudNet, www.icc-ccs.org/home/fraudnet
Bradley was sentenced to seven years five months in jail for a
Ponzi scheme that defrauded 28 investors out of $15.5 million through her
business, B'On Financial Services. Bradley
told her clients that their funds were invested securely with Macquarie Bank in
Australia, or had been used to buy New Zealand Government stock. Instead, the
funds were used to repay other investors and fund the Bradley's lifestyle,
which included expenditures on school fees to St Cuthbert's College, clothes
shopping, payments on a BMW, and the mortgage on a home that was valued at $4.7
million in 2008.
Futures Group Philippines was the subject of a cease and desist
order issued by the SEC in connection with a P244 million Ponzi scheme in the
Philippines. It is alleged that Aman
Amalilio solicited investments by promising a rate of return from 15
percent to 40 percent for a 20 or 30 day period for investments that were to be
made in a Malaysian company engaged in commodity trading futures, such as
manganese, palm oil and nickel. Incorporators of Aman Futures include Fernando R. Luna, Lelian Lim Gan, Eduardo Lim,
William L. Fuentes, Naezzelle M. Rodriguez, and Lurix Lopez.
The Regional Public Prosecutor's Office in Gdańsk has
been replaced by the Regional Public Prosecutor's Office in Łódź, which
is now conducting two investigations related to Amber Gold, including the
investigation against the president of Amber Gold, Marcin Plichta, and the
investigation concerning the airport in Gdańsk and OLT Express. The
investigators are examining, among other things, the sources of financing
companies belonging to Amber Gold and cash flows associated with individual
transactions and investments. Amber Gold was an unregulated Polish lender and
investment which has been liquidating itself while promising to repay investors
all their funds plus interest. There were 7,000 clients who gave the company
about 80m zlotys ($24million) to invest in gold. Whether they will get any
money back remains to be seen.
by Jarosław Kruk of Kruk and Partners, www.legalkw.pl
of FraudNet, www.icc-ccs.org/home/fraudnet
Investigations are underway regarding allegations that Sharemax Investments committed fraud
and operated a Ponzi scheme involving about 40,000 people and R4.5 billion. It
is alleged that The Villa, a partially completed retail development near
Pretoria, was promoted to investors but that The Villa had no income other than
Pretorius, who took his own life earlier this year, had run a
large Ponzi scheme through the Relative
Value Arbitrage Fund (RVAF). Curators for RVAF estimate the scheme received
R2.2bn from about 3,000 investors. The curator has recently revealed that an
Anton Piller order was granted by the High Court against Pretorius' wife and
her two sons to "protect and obtain information relating to the whereabouts of
missing funds belonging to creditors/investors. The family is opposing the
The Enforcement Directorate (ED) was able to get access
from Switzerland to the accounts of an Indian company, City Limouzines, and its chairperson, Sayed Mohamed Masood, under the Prevention of Money Laundering Act
(PMLA) by demonstrating that the funds were "proceeds of crime." City
Limouzines has been accused of running Ponzi schemes in various cities and
offering very high interest rates on investments. It appears that this is the
first such attachment of bank accounts in Switzerland under PMLA.
LEGAL ISSUES IN PENDING PONZI SCHEME CASES
The U.S. Department of Justice held an investment fraud
summit at the University of Connecticut involving federal prosecutors,
enforcement attorneys, law enforcement officers, scholars, victims of investor
fraud and others.
The Internal Revenue Service issued new guidance on the
treatment of clawbacks for tax purposes. The IRS has published a new webpage at
France's prosecutor is requesting permission to question Bernard Madoff and Swiss bank UBS as
part of its investigation of investor losses from the Madoff Ponzi scheme. The
richest woman in France, L'Oreal heiress Liliane Bettencourt, was one of the
investors. France is looking for answers relating to whether UBS had "cheated"
French clients by sponsoring a Luxembourt-registered fund, Luxalpha, which had fed assets directly to Madoff but did not say
so in the prospectus.
The sentencing of Bernard
Madoff's brother, Peter Madoff,
has been delayed at the request of the defense. Peter Madoff had pleaded guilty
in June, but has asked for more time to file 11 years of amended tax returns
that are required under the terms of his plea agreement.
A $25 million settlement between the law firm Holland
& Knight and the receiver of the Arthur
Nadel Ponzi scheme was approved by the district court, which found that the
agreement was in the best interest of the 350 investors who lost $162 million
in the Nadel scheme. The agreement includes a bar order that prevents anyone
else from suing the law firm for losses in the Ponzi scheme. The receiver also
settled two other claims - The Diocese of Venice will return $521,168 and the
Sarasota Opera Association will pay $514,382 to resolve claims that donations that
they received that were defrauded investor funds. The receiver has thus far
collected about $60 million and investors have recovered about 20% of their
losses so far.
The personal collection of Thomas Petters went up for auction and included precious,
one-of-a-kind pieces of art, autographed photos of Whitey Ford and a football
with Don Meredith's personalized signature, a LeRoy Neiman painting, a red
boxing glove with a personalized signature from Sugar Ray Leonard, and a small
concrete dog that is covered in U.S. currency.
Minnesota Democratic Senator Amy Klobuchar denied
accusations that she failed to prosecute Thomas
Petters while choosing to prosecute only his early co-conspirators. The
allegations are that Klobuchar had enough evidence to investigate Petters at
the beginning stages of his criminal enterprise in the late 1990s, and
additionally that Petters and his employees contributed more than $120,000 to
Klobuchar's campaigns for County Attorney and U.S. Senate.
In the Scott
Rothstein Ponzi scheme case, the bankruptcy court approved a settlement
between Gibraltar Private Bank & Trust, the trustee of the bankruptcy
estate of Rothstein Rosenfeldt Adler (RRA) and others for $15 million. The
settlement involves payment of $8,437,500 to the RRA estate, $3,750,000 to the
bankruptcy of the Banyon feeder funds and $2,812,500 to family of the late Ed
Morse, another Rothstein investor. The court also entered a bar order
prohibiting further civil lawsuits from creditors in the bankruptcy case
against Gibraltar and its former owner, Boston Private Financial Holdings.
TD Bank's motion for a new trial in the case of Coquina
Investments v. TD Bank arising from the Scott
Rothstein Ponzi scheme was denied. Coquina had obtained a $67 million jury
verdict against TD Bank earlier this year in connection with allegations that
the bank had aided and abetted Scott Rothstein in running his Ponzi scheme. The
judge found that the damage award was supported by the evidence and that TD
Bank's net worth of $28 billion enables it to pay a $67 million judgment. TD
Bank has an appeal pending before the 11th Circuit.
In response to a motion to for summary judgment, the
trustee of Scott Rothstein's law
firm, Rothstein, Rosenfeldt Adler,
continues to push forward on his claims for $10 million against Levinson
Jewelers and its owners, Mark and Robin Levinson. The Levinsons have asked to
have the case dismissed, but the trustee contends that the credibility of the
Levinsons is an issue for trial. The trustee has alleged that Rothstein's law
firm used Ponzi scheme funds to pay for jewelry and watches.
A report by the inspector general of the U.S. Postal
service found that H. David Kotz, the former SEC's inspector general, shouldn't
have opened an investigation related to R.
Allen Stanford's Ponzi scheme because he was friends with a female attorney
who represented victims of the fraud. The review found that Kotz "appeared to
have a conflict of interest" when he opened and supervised an investigation
into the court-appointed receiver in the Stanford case because of his
relationship with Gaytri Kachroo, a Massachusetts attorney.
Trustmark National Bank has filed an interpleader
complaint asking a federal judge to decide to whom it should deliver about
$582,000 in an account at the bank in connection with the Allen Stanford Ponzi scheme. Trustmark is seeking an order
relieving it from liability, as the funds are subject to competing claims by the
U.S.-appointed receiver and the Antiguan-appointed liquidators.
The Fifth Circuit has ruled that the receiver for the Allen Stanford entities may proceed
with lawsuits against both Republican and Democratic political committees that
were paid more than $1.6 million from the Ponzi scheme funds. The court
concluded that the receiver may stand in the shoes of the creditors of the
Stanford entities and that he had timely brought claims under the Texas Uniform
Fraudulent Transfer Act.
A lawsuit brought by Ahmad Hamad Algosaibi & Brothers
Company (AHAB) against Glenn Stewart
in Los Angeles District Court withstood a motion to dismiss. It is alleged that
Stewart ran a $9 billion Ponzi scheme. AHAB alleges that Stewart helped
designed a massive international fraud and money laundering scheme that was masterminded
by Maan Al Sanea, a Saudi/Kuwaiti
national. It is alleged that Stewart and Al Sanea would incorporate shell banks
in Bahrain to leverage unauthorized borrowing, and the monies were then
siphoned off to Al Sanea. Stewart and that Al Sanea formed The International Banking Company, which was a sham entity with no
real customers or business. Stewart also formed his own companies to siphon off
tens of millions of dollars to himself through secret commissions on sham
transactions. The court held that AHAB could pursue its claims, which included
aiding and abetting fraud, aiding and abetting conversion/misappropriation, and
unjust enrichment, under Bahrain law and all but one under Saudi law. AHAB
could also proceed with claims against Stewart for bogus commission for work
not actually performed.
The receiver in the ZeekRewards
Ponzi scheme filed a preliminary liquidation plan which provided, among
other things, that the receiver has recovered approximately $293.7 million so
far for the approximately 1 million investors. The Receiver also reported that he had presented nearly 61,000
non-negotiable financial instruments (such as cashier's checks and/or money
orders) totaling approximately $100 million for deposit. The receiver
reported that he is evaluating claims against individuals and entities involved
in the operations, such as banks, law firm and accountants, and that he intends
to pursuant fraudulent transfer claims against net winners who profited from
Read additional articles at The Ponzi Scheme
Kathy Bazoian Phelps is the co-author of The
Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes (LexisNexis
2012), along with Hon. Steven Rhodes. The Ponzi Book, recently reviewed by
Commercial Crime International, is available for purchase at www.lexisnexis.com/ponzibook,
and more information about the book can be found at www.theponzibook.com.
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