November 2013 Ponzi Scheme Roundup

November 2013 Ponzi Scheme Roundup

 The volume of news stories reported in November 2013 in Ponzi scheme cases remained high. Below is a summary of the activity reported. 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.

Douglas L. Bates, 54, received permission to continue to practice law under supervision while criminal charges remain pending against him for his alleged role in the Scott Rothstein Ponzi scheme case. Bates is accused of assisting Rothstein with about $60 million of his Ponzi scheme by lying to investors and providing fraudulent legal opinions and other documents that Bates allegedly knew were untrue on his firm’s letterhead. Bates pleaded not guilty and the lower court barred Bates from practicing law as a condition of his release pending trial, saying there was evidence that he had “committed horrific breaches of his duties and responsibilities.” The district court approved an agreement between the prosecution and defense that allows Bates to practice law under the strict supervision of another attorney, who will also handle Bates’ clients’ money.

Craig Berkman, currently serving time in prison for two different Ponzi schemes, is watching his investors fighting over the few dollars that are available for distribution. Berkman was found guilty five years ago, and investors in the first Ponzi scheme were awarded $28 million. Creditors forced Berkman into bankruptcy and ultimately reached a settlement where Berkman paid $4.75 million to the trustee in his bankruptcy case, which was distributed to creditors. Investors in a new scheme in which Berkman was purportedly selling an investment in Facebook and in which they invested $13 million, claim that the $4.75 million paid to earlier investors was their money. The trustee says that the new investors’ claims are bogus because Berkman paid the earlier investors before he was raising money from the Facebook investors.

Annette Bongiorno, 64, Joann Crupi, 52, Daniel Bonventre, 66, George Perez, 47, and Jerome O’Hara, 50, continued with their trial for their respective roles in the Bernard Madoff Ponzi scheme. A former trader at Madoff’s brokerage, David Kugel, told the jury that he created fake trading data for customer accounts but made sure the fake trades looked realistic. Kugel pleaded guilty to fraud 2 years ago and is still awaiting sentencing. Other employees and witnesses have testified in the case which is expected to last several months.

Ronald Lee Brito, 62, of Michigan, was sentenced to 12 years and ordered to pay more than $12 million in restitution in connection with his Ponzi scheme that he ran through GetMoni.com. At least 250 investors lost more than $16 million. Others who pleaded guilty to the scheme are Bonnie Brito, John Missitti, and Thomas Moore, who were sentenced to 18 months, 6 years and 6 years, respectively.

Jack Brown’s son, Jason Brown, apologized to creditors for his father’s $12 million Ponzi scheme. Jason Brown has denied having any role in the Ponzi scheme but has admitted to working as a partner with his father in a number of businesses and signing checks for Brown’s Tax Service.

Jim Donnan and Gregory L. Crabtree had their criminal trial delayed until May 2014 due to what they cite as a large amount of evidence and need for more time to prepare and negotiate an alternative disposition. The two defendants are charged with running a Ponzi scheme through GLG Limited that promised investors returns of 50% to 200% on short-term investments. The indictment alleges Donnan took $8.5 million and Crabtree took $1.7 million, while investors lost $23 million. Both pleaded not guilty.

John S. Dudley, 59, was sentenced to 5 years in prison and ordered to pay back $6.8 million in connection with a $12 million Ponzi scheme that defrauded approximately 100 investors. Dudley promised investors returns of 5% to 10% from forex trading, mining speculation and a human jetpack rocket suit. Dudley held investment club meetings known as “bounce nights” or “Tashi group meetings” and told investors that their investments were protected from loss by a “senior life settlement policy.” Dudley initially pleaded not guilty but later agreed to a guilty plea on one count of wire fraud. It is expected that Dudley will be deported back to Great Britain after serving his sentence.

Ronald Jerry Fast, 70, pleaded guilty to charges in connection with a $16 million Ponzi scheme that he ran though Marathon Leasing Corp. The scheme promised investors 12% returns, but the financial prospectus bore no relationship to the actual performance of the company. Promised returns were paid from money invested by new investors or existing investors who bought even more shares in the company. Fast’s daughter, Danielle Fast-Carlson, has also been charged in connection with the scheme, and her trial has been continued until December.

Richard Freer, 67, waived his preliminary injunction hearing and will face trial in connection with his alleged $10 million Ponzi scheme. The scheme allegedly defrauded 90 victims, most of them elderly, and involved reverse mortgages and retirement and college education funds.

Charles Lawrence Kennedy, Jr., 71, pleaded guilty to a $5 million Ponzi scheme that defrauded about 100 investors. Kenney, along with co-defendants Stanley Wayne Anderson and Edwin Alexander Smith ran the scheme through Kennedy’s company, Keys to Life Corporation, which promised investors that for every $1,000 invested, the minimum return would be $1 million to be paid within 90 days. The scheme promised returns through trading of European medium-terms notes issued by European financial institutions. Keys to Life partnered with two other companies as well, Trinity International Enterprises, Inc. and CFO-5, LLC. Kennedy solicited money from fellow pastors and members of their congregations, but used most of the money for personal expenses.

Jeffrey J. Kinseth, 58, was sentenced to more than 4 years in prison and ordered to pay $1.1 million in restitution after he pleaded guilty to charges in connection with a $1 million Ponzi scheme. Kinseth solicited funds from 11 investors, promising substantial returns, but issued phony account statements showing fictitious returns instead.

Christina Kitterman may get a personal appearance by Scott Rothstein at her criminal trial. Kitterman is charged with aiding Rothstein’s Ponzi scheme. The court ordered Rothstein to appear at her upcoming criminal trial. Kitterman is an attorney who formerly worked at Rothstein’s firm, and she has been charged with posing as a Florida Bar investigator to help Rothstein fool investors.

Anthony J. Lupas, 78, a former attorney, was declared not competent to stand trial on charges in connection with an alleged $6 million Ponzi scheme that promised investors annual tax-free returns of at least 5%. The government decided not to appeal the decision. Last year, a state fund supported by attorney registration fees in Pennsylvania announced that the fund would pay $3.25 million to Lupas’ victims.

Brian Williams McKye, 49, of Oklahoma, was found guilty after less than 90 minutes of deliberation by the jury. McKye ran a $4.5 million Ponzi scheme through Global West Funding, Global West Financial, Sure Lock Financial, Sure Lock Loans, and The Wave-Goldmade Ltd., by selling investment notes and promising investors monthly returns of 6.5% and up to 20% for 6 to 60 months. McKye defrauded 83 investors by promising them that they had “100 percent total control” over their money and that their investments were secured by risk-free real estate notes.

Phil Ming, owner of WCM777, acknowledged that WCM777 was selling unregistered securities in the U.S. The Massachusetts securities division has banned WCM777 from business operations in the state of Massachusetts, and the company has been ordered to refund over $300,000 to participating investors. WCM777 announced that it is closing its US operations and relocating back to Hong Kong. However, it was reported that WCM777 is still accepting US funds for investment via Global Payout, a California-based payment processor. Columbian President Juan Manuel Santos ordered a police investigation of WCM777 last month to investigate allegations that it is a Ponzi scheme. The program guarantees returns of over 100% after 100 days.

Al Moriarty, 80, deposited almost $10 million of investor funds into his personal account, the testimony revealed at his trial. Moriarty, a Cal Poly football Hall of Famer, is facing charges in connection with a $12 million Ponzi scheme. Investors were told that their funds would be lent to educators for home purchases and that they would be repaid in monthly payments at 10% interest over 5 years. Moriarty also promised that their investments were backed by his personal gold and real investments and his personal life insurance policy should anything happen to him.

Christopher A.T. Pedras and his companies, Maxum Gold Bnk Holdings Limited and Maxum Gold Bnk Holdings, LLC, were the subject of an emergency asset freeze sought by the SEC in connection with an alleged $5.6 million Ponzi scheme that defrauded at least 50 investors. Pedras promised investors 4% to 8% monthly returns for investing in a trading platform in which Maxum Gold supposedly served as an intermediary between global banks. Sylvester M. Gray II and Alicia Bryan allegedly assisted in soliciting investors for the program. More recently, the three began soliciting investments in a New Zealand company called FMP Medical Services Limited that was to be publicly traded and operate kidney dialysis clinics in New Zealand. More than $2.4 million was used to pay fictitious returns to investors, $1.2 million was paid in sales commissions, and more than $2 million was used by Pedras for personal expenses.

Bruce Prevost, David Harrold and Michelle Palm were sentenced to 7½ years, 5 years, and 3 years of probation, respectively, for their role in misleading investors in the Tom Petters $3.65 billion Ponzi scheme through feeder funds Palm Beach Capital Management and Arrowhead Capital Management. Palm testified against James Fry, Arrowhead’s founder, who was sentenced to17½ years, and Palm’s did not profit personally from the scheme. None of the three defendants were accused of knowing about the Petters’ Ponzi scheme, but they misled investors about how their firms received payments. Prevost and Harold lost about $720 million for clients investing in the Petters’ scheme, and they collected more than $58 million in fees and commissions.

Carmelo Provenzano, 31, was sentenced to 33 months in prison and ordered to pay $4.5 million in restitution to 13 victims in connection with a $4 million Ponzi scheme run with co-conspirators George Sepero, 40, and Daniel Dragan, 43. The scheme claimed that hedge funds were run using a secret computer program could deliver high returns as much of 170% on investments in foreign currency markets.

Bebe and Marco Ramirez, the principals of USA Now Regional Center, were the subject of a civil forfeiture action in which the couple’s Mercedes and Dodge Ram were forfeited. USA Now ran a scheme that was supposed to take foreign investors’ money and invest in projects that create jobs in exchange for U.S. green cards. None of USA Now’s investors received even conditional approval for a U.S. immigration visa in exchange for their $500,000 investment. No criminal charges have yet been filed against Bebe or Marco Ramirez.

Richard Reynolds aka Richard Adkins, 52, had his request to dismiss the case against him denied. Reynolds is accused of stealing more than $5.8 million for investors. He requested that his case be dismissed because his right to a speedy trial had been violated. His trial is scheduled to begin in December.

Sorin Rivera fka Valerie D’Andrea, 39, was charged with running a $347,000 Ponzi scheme that defrauded 7 victims. Rivera changed her name after she filed bankruptcy in 2008. Between 2004 and 2008, Rivera ran an investment scheme that promised investors up to 55% returns. Rivera never worked for a securities or commodity firm. She lists “Equity Options Trader” as her occupation on her Facebook page.

Kim Rothstein, 39, wife of Ponzi schemer Scott Rothstein, filed for divorce and was sentenced to 18 months in prison for hiding jewelry worth about $1 million from authorities following Scott Rothstein’s arrest. Kim claimed that Scott Rothstein had urged Kim to stash the jewelry as insurance and was doing this even while he was supposedly cooperating with authorities in the hope of getting a downward departure from the federal sentencing guidelines. Kim’s sentencing judge cut 6 months of the 2 year sentence recommended by the U.S. Attorney’s office. Kim also agreed to pay $515,000 and turnover other jewelry and valuable items.

Ryan Edward Rude, 40, was sentenced to 26 years in prison and ordered to pay $2.9 million in restitution in connection with his $4.8 million Ponzi scheme that defrauded investors in California, Colorado and Arizona. Rude defrauded investors in his real estate scheme by promising them secured interests in property development projects, but instead used their money to pay other investors or for his personal use.

Matthew J. Ryan saw his office building in which he ran his $4.8 million Ponzi scheme sold by the local government. Ryan is serving a 10 year 1 month prison sentence for his scheme that defrauded 53 investors through his real estate business, Prime Rate & Return.

Feisal Sharif was ordered to pay more than $2.2 million to defrauded victims and was also fined $900,000 in connection with a $5.4 million Ponzi scheme run through First Financial LLC. Sharif defrauded at least 50 victims in a commodity futures trading pool.

Ronald W. Shephard, 74, pleaded guilty and was sentenced to 2 years in prison and ordered to pay about $1,825,000 in restitution in connection a $3 million Ponzi scheme run through Safety Solutions USA LLC and The Real Estate in Lee’s Summit. The scheme defrauded about 39 investors and promised them 15% to 100% annual returns from securities trading even though Shephard was not registered to sell securities in Missouri and had been issued a cease and desist order barring him from doing so. Safety Solutions had developed a trailer hitch called Tow-Safe, but Shephard did not tell anyone that his patent request had been rejected or that the state had ordered him to stop selling unregistered securities.

Wesley A. Snyder, 77, lost his third appeal seeking a new trial in connection with his conviction in connection with his $29 million Ponzi scheme run through his firm, Personal Financial Management, that defrauded about 800 investors. Snyder had pleaded guilty and was sentenced to 12 years in prison, but has repeatedly asked that his guilty plea and sentence be overturned and that he be allowed to go to trial. He claims that his guilty plea requires him to have defrauded customers, but that he never intended to defraud anyone.

Louis J. Spina, 56, was charged in connection with an alleged $18 million scheme that defrauded 28 investors through his company LJS Trading LLC. Spina promised investors monthly returns of 9% to 14% by using an algorithmic trading software to invest their funds. Spina used misleading screen shots of his trading account that showed inflated balances and gains. Spina lost about $8 million in trading and spent the balance making payments to investors and for personal expenses, including car payments, an apartment rental and a donation to a university.

Yin Nan (Michael) Wang and Wendy Ko and their company Velocity Investment Group were the subject of an asset freeze and fraud charges brought by the SEC. They are accused of raising more than $150 million from over 2,000 investors. Velocity managed unregistered investment funds known as Bio Profit Series which supposedly were making real estate loans in California. The investors received promissory notes and were promised returns from 8% to 300%. Wang is also accused of running another company, Rockwell Realty Management, in connection with the scheme.

INTERNATIONAL PONZI SCHEME NEWS

Canada

Arlan Galbraith, 66, pleaded not guilty to charges in connection with the $20 million Ponzi scheme run through Pigeon King International. Galbraith initially said he was breeding pigeons for sport but later claimed he was planning processing plants to produce pigeon meat for the consumer market. Investors were to buy pairs of breeding birds for up to $500, and Galbraith was to buy the offspring back at fixed prices over the life of 5 or 10 year contracts. At his trial, Galbraith testified that he resorted to eating his own pigeons after the company collapsed in 2008. The Ontario government has spent about $100,000 to dispose of about 175,000 pigeons that remained in the barns at the time of the bankruptcy of the company.

Rashida Samji aka Rashida Makalai, 60, of Vancouver, was charged in connection with an alleged $17 million Ponzi scheme that defrauded 14 investors. Samji had represented to investors that their funds would be placed in a “secure” investment in a winery that would yield 6% to 30% annually. It is alleged that this scheme was part of a larger scheme that defrauded about 218 investors of $83 million. Samji allegedly took the investors’ funds and put them into accounts in the names of her companies, Notary Corp. and Samji & Assoc. Holdings Inc.

China

A Chinese trading website for the virtual currency, Bitcoin, was shut down based on allegations that it was operating a Ponzi scheme. The Hong Kong-registered site, Global Bond Limited, had around 500 users, and the combined losses may total $3.28 million.

Wang Xiaoqing, 30, was sentenced to life in prison for orchestrating a $4.9 million (30 million yuan) Ponzi scheme. Xiaqing offered investors double-digit returns and told investors their funds would be used to build a hotel. Instead Xiaoqing used the money to fund an extravagant lifestyle.

Dubai

Malik Noureed Awan, 28, the CEO of MMA Forex, was sentenced to 2 years on prison in connection with charges related to an online foreign exchange Ponzi scheme.

Germany

The Frankfurt Regional Court bundled cases together that are linked to the $466 million Ponzi scheme run by Helmut Kiener and his K1 Group hedge fund. Investors filed lawsuits against Barclays Plc alleging that Barclays failed to properly investigate the X1 Global Index certificates it had issued. Kiener was convicted in 2011 and sentenced to 10 years and 8 months in prison after confessing to the scheme.

India

Gold bars and silver coins were seized from the locker of Prashant Dash held at HDFC Bank. Prashant Dash has been accused of running a Ponzi scheme through Seashore Group, which ran 9 companies. Authorities sought permission to attach properties of Seashore Group.

G Ratna Kumari and R Pandu were arrested and accused of defrauding about 100 investors, promising them higher returns and commissions for enrolling other investors in the scheme.

Shivraj Sharma was arrested in connection with a scheme run through Eve-Miracles, a multi-level marketing company that allegedly defrauded than 1.2 lakh unsuspecting investors of over Rs 141 crore.

MP Kunal Ghosh was arrested in connection with the Saradha Ponzi scheme. The Saradha group allegedly defrauded investors of over Rs. 2,300. Ghosh claims he is being made a scapegoat and that he was not involved in the scheme.

New Zealand

Convicted Ponzi schemer David Ross, 63, was sentenced to 10 years and 10 months in prison in connection with the $385 million Ponzi scheme that he ran through Ross Asset Management. Ross defrauded over 700 investors promising them guaranteed returns of up to nearly 40%. Ross had pleaded guilty to certain charges in connection with the scheme in August 2013.

Scotland

Stewart Kennedy was disqualified from acting as a company director for 12 years due to his conduct in connection with an alleged Ponzi scheme in which he invited people to invest £15,000 each in an “Easyearn Franchise,” which purportedly would pay returns from fees paid by businesses and individuals in return for advice on how to reduce their monthly bills. It is alleged that Kennedy’s company, CRS2010, collected £357,500, of which £71,000 was used for Kennedy’s personal benefit.

South Africa

Funds in the amount of R54-million were seized from the Ponzi scheme of Barry Tannenbaum, which boosted the funds held in the asset forfeiture unit of the National Prosecuting Authority to R82-million. Tannenbaum had defrauded 800 investors out of about R13-billion.

United Kingdom

Richard Pollett, 71, was ordered to pay back more than £ 90,000 as compensation to the victims of a £10 million Ponzi scheme run by Pollet and John Hirst. Pollett is a former accountant who helped Hirst defraud investors.

Ruth Kevan, 58, was sentenced to 2½ years in prison in connection with a £160,000 Christmas savings Ponzi scheme. Kevan exploited a Christmas savings club that had been running for decades with her colleagues while she was working at HM Revenue and Customs. Kevan took over the club in the 1970s and promised investors returns of 14.5%. About 40 investors lost funds.

Caryn Bates, 41, and Matthew Sullivan, 53, were sentenced to 5½ years and 7 years, respectively, in connection with a £2 million Ponzi scheme that they ran through World Trading in which they were purportedly trading stocks and bonds. About 40 victims were defrauded when they were promised guaranteed returns of between 2% and 5% per month.

Faye Gale, 31, the former wife of David Gale, 45, appealed a ruling that she pay £700,000 of liability stemming from David Gale’s operation of a Ponzi scheme. The lower court cleared her of any dishonesty or guilt, but ruled that she would still have to pay the bills.

 

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

In connection with the Creative Capital Consortium LLC Ponzi scheme, a court declined to grant summary judgment to Wells Fargo Bank in connection with claims brought by Franz Lesti, Petra Richter and others alleging that the bank knowingly or negligently assisted one of its customers in connection with the Ponzi scheme. Wells Fargo allegedly allowed a bank account to stay open long after it became aware of fraudulent conduct.

Victims of the Ponzi scheme run by Dante DeMiro, 46, will receive about $2 million in restitution payments from an asset forfeiture fund with the U.S. Attorney’s office. The bankruptcy trustee has separately recovered $2.6 million in nonforfeited assets. DeMiro was sentenced to 10 years in prison in 2011 and ordered to pay $12.9 million in restitution to his victims in connection with his scheme run through MuniVest Services.

The court presiding over the criminal trial of Stephen Merry, Timothy Durkin, David Petersen and Yaman Sencan declined to allow a government witness to testify by video. The defendants are accused of running a $5 million Ponzi-like scheme between 2009 and 2012. The witness is in poor health and cannot travel, but the government contended that the witness’s testimony is “critical to the case.” The court held that the prosecution waited too long to file the motion for live-videotaping of the witness and that there was not enough evidence to justify keeping the defendants from facing the witness in person.

Victims of the J.V. Huffman $25 million Ponzi scheme may receive between 10% and 15% on their claims. About $2.3 million is to be divided among 340 victims whose losses total $22 million. Huffman spent the victims’ funds on luxury items such as a 1939 Cadillac, memorabilia from the “I Love Lucy” show and artwork.

The district court issued a decision in the Bernard Madoff case that preserves claims of the Madoff trustee against subsequent transferees. The court held that the law does not require the trustee to obtain final judgments against initial transferees before suing subsequent transferees and also held that the trustee’s claims were timely filed against the subsequent transferees as they were filed within one year of a settlement with the initial transferee.

The Securities Investor Protection Corporation joined in the request of the Bernard Madoff trustee that the Supreme Court hear an appeal of the ruling barring the trustee from suing JPMorgan Chase and other banks for their failure to take action to report and stop suspicious activity by Madoff. SIPC is urging the Supreme Court to consider the case, arguing that allowing the lawsuits to proceed would give Madoff’s customers "the greatest and most equitable pro rata distribution of their lost investments as Congress intended."

The Special Master appointed to administer $2.35 billion in forfeited funds in the Madoff Ponzi scheme has announced his distribution plans to pay victims. Investors who were not directly invested in the Madoff scheme are not “customers” under the SIPA statute and have not received payments from the Madoff trustee or SIPA, but may receive funds as “victims” under the forfeiture statutes. The claims bar date for victims is February 28, 2014. The Special Master’s website is at www.madoffvictimfund.com. As a result of the announcement, a planned $800 million settlement between Kingate Management and the Madoff trustee broke down. Kingate, one of the largest investors in the Madoff scheme, would not be entitled to payment from the $2.35 billion victim fund according to the new announcement by the Special Master, which changed the settlement terms for Kingate.

A state appellate court reversed the lower court’s ruling in Frederick Darren Berg’s Meridian Mortgage Ponzi scheme case that the trustee should pay $74,000 to the Moss Adams accounting firm. The appellate court found that the sanctions order was not proper because the trustee had asked for dismissal of his state-court lawsuit against Moss Adams before the order. The court had instructed the trustee to identify which investor relied on which audit before proceeding with the litigation. However, while considering the trustee’s to request to withdraw the lawsuit so the trustee could refile it in federal court, the lower court imposed the $74,000 sanction. The Meridian Mortgage scheme involved about $100 million and 600 investors.

The law firm of Band Weintraub PL will pay nearly $1 million to settle claims that it was part of a conspiracy to hide money from the receiver in the Arthur Nadel Ponzi scheme. The receiver had alleged than David S. Band, who left Band Weintraub earlier in the year, helped his client Donald Rowe conceal assets from the receiver. The receiver had obtained a $4 million judgment against Rowe but was told that Rowe did not have money to satisfy the judgment. In fact, more than $2.5 million was in a trust account at Band Weintraub which was transferred back to Rowe. Band Weintraub does not admit any liability and purportedly settled at the insistence of its insurance company.

Defrauded victims in the New Age Title Co. alleged Ponzi scheme won a $21.5 million jury verdict against various parties for their involvement in the scheme. The jury awarded punitive damages of $10 million against Wells Fargo, $5 million against New Age Title Co, $6 million against New Age’s real estate attorney, David Mour, and $500,000 against Forcht Bank, in addition to about $500,000 in compensatory damages. New Age Title, owned by Ivan DeLeon and Jeana Kaufman, did a refinance of the victims’ home but failed to pay off the original mortgage. The check sent to Wells Fargo to payoff the original loan was stopped, Wells Fargo contacted New Age about the bad check, and Mour helped arrange a deal for Kaufman and DeLeon to pay the victims’ monthly mortgage payments. A check to Wells Fargo bounced and instead of reporting fraud, Wells Fargo reported the victims as delinquent to credit agencies.

A district court declined to dismiss a lawsuit filed against U.S. Bank related to the Peregrine Financial scheme brought by the CFTC. The CFTC alleges that U.S. Bank allowed Peregrine founder Russell Wasendorf to raid what should have been a segregated customer account and that Wasendorf stole more than $215 million from that account. U.S. Bank disputes many of the allegations in the complaint.

The bankruptcy court presiding over the Tom Petters case agreed to consolidate nine bankruptcy cases, finding in part that consolidation would save benefit money and benefit creditors. The trustee administering the Petters corporate bankruptcy case stated that the consolidation “solidifies my ability to pursue the large hedge funds. The hedge funds argued that they were “special purpose entities” that were established to secure their investments with Petters.

Victims of Ponzi schemer Thomas Redmond Jr. are receiving $46,000 in restitution payments from the Indiana Securities Restitution Fund to help recover some of their losses. Redmond defrauded 10 victims out of more than $580,000. The fund can pay up to $15,000 or 25% of unrecovered losses, whichever is less.

The ZeekRewards receiver filed a quarterly reporting indicating that he intends to pursue claims against about 700 financial institutions who he alleges improperly stopped payment on more than 7,500 cashier’s checks and money orders in violation of an asset freeze. The receiver also identified that he is evaluating pursuit of about 77,000 net winner investors for recovery of fraudulent transfers in the amount of about $283 million, including many of them who reside outside of the United States. The receiver also disclosed that he had settled with nearly 155 net winners for $2.235 million on false profits of $3.94 million. An auction of buildings and personal property of ZeekRewards is scheduled for mid-December.

Sen. David Vitter, Sen Charles Schumer, Rep. Scott Garrett and Rep. Carolyn Maloney introduced legislation called the Restoring Main Street Investor Protection and Confidence Act to assist defrauded investors in filing claims against brokers, giving the SEC greater power to oversee the process of determining whether customers of failed brokerages qualify for compensation. The legislation appears to arise from the ongoing battle in the Stanford Financial case between SIPC and the SEC over whether defrauded Stanford victims are entitled to payment from SIPC. SIPC has refused to pay Stanford victims, contending that Stanford investors do not meet the legal definition of “customers” that would entitled them to payment. The bill would, among other things, amend the definition of “customer” so that investors who deposit cash to buy securities can still be covered by SIPC protection even if the money is initially given to a firm that is not a SIPC member.

Read additional articles at The Ponzi Scheme Blog

 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 the ABI Journal and 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

Kathy is also the author of is Ponzi-Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams. For more information, or to purchase the book, click here.

Watch Kathy’s interview on The Not So Legal Show.

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