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An Ohio husband and wife face criminal and civil actions on charges that they operated a massive Ponzi and pyramid scheme that is believed to have taken in at least $70 million from nearly 500 victims. An indictment returned by an Ohio federal grand jury charges William M. Apostelos and his wife Connie M. Apostelosa/k/a Connie Coleman, with dozens of fraud charges. Each was charged with 1 count of conspiracy to commit mail and wire fraud, eight counts of mail fraud, 13 counts of wire fraud, two counts of money laundering, and one count of theft or embezzlement from employee benefit plan. In a parallel action, the Securities and Exchange Commission filed a civil enforcement action accusing William Apostelos - but not his wife - of multiple violations of federal securities laws. The SEC complaint did name Connie Apostelos as a relief defendant and alleged that she had received over $7 million in ill-gotten gains from the scheme. The charges come almost exactly one year after a FBI agent submitted an affidavit in support of a civil forfeiture action against the couple detailing the alleged Ponzi scheme.
The allegations first surfaced after several doctors submitted an involuntary bankruptcy petition against William Apostelos. According to declarations submitted by the doctors, each was solicited to invest with Apostelos as far back as 2011 with the promise of high returns in a short period of time. While one investor was told that Apostelos could offer such lucrative rates of return through short-term loans and success in daytrading stocks, Apostelos also held himself out as a successful real estate investor and securities investor. Investors were solicited through several companies operated by Apostelos, including:
According to the doctors that filed the involuntary bankruptcy petition, Apostelos would execute a promissory note in their favor that memorialized their investment. These promissory notes carried varying rates of return, with one doctor submitting a declaration indicating that they held five promissory notes totaling nearly $1.5 million with annual rates of return ranging from 7% to 50%. In total, the three doctors alone stated that they had invested more than $5 million with Apostelos.
Federal Forfeiture Action and FBI Affidavit Make Similar Allegations
Several weeks after the involuntary bankruptcy was filed against William Apostelos, the United States filed an action seeking civil forfeiture of two Ohio properties on the basis that they are traceable to money laundering and wire fraud offenses. One of the properties is owned by Coleman Capital, while the other is titled in the name of Steven C. Scudder, Trustee of the WMA Trust - a trust believed to be owned by William Apostelos.
In support of the United States's forfeiture allegations, the affidavit of FBI Special Agent Michael Bush (the "Bush Affidavit") was submitted. Concluding that the accused individuals and their business operations have been involved in operating a pyramid scheme over the past few years, the Bush Affidavit makes a detailed set of findings.
The Bush Affidavit stated that Apostelos's entities have "reported very little income and more often significant losses" since 2010, and also that Apostelos and his wife have "had no legitimate source of income since 2010." Rather, the "sole source of income has been stolen from the funds investor unknowingly placed into the pyramid scheme." Apostelos and his wife allegedly diverted investor funds to support a lavish lifestyle that included the purchase of luxury automobiles and spending of as much as $35,000 per month towards a horse racing hobby. According to Bush's forensic analysis, more than $32 million was deposited into accounts controlled by Apostelos from November 2012 to May 2014, while an estimated $28 million was paid as returns to earlier investors.
The Bush Affidavit also detailed the pitches that were made to various investors. For example, one investor was told that his $395,000 investment would be used to purchase an Ohio farm that would be quickly resold at a tidy profit. While the investment came due in late 2013, the victim did not receive his investment back and instead received various excuses including that the bank made errors negotiating the funds. In another example, a victim was told that his $100,000 investment would be used to invest in stocks through a TD Ameritrade account. The victim was told that his account had incurred more than $150,000 in gains through timely investments in several stocks, and was provided a TD Ameritrade website where he could track his investment under the name "Mountaineer." However, the Bush Affidavit indicated that the TD Ameritrade website provided to the victim was not a real trading account, but instead a training account program that did not trade real money.
On October 29, 2014, agents from multiple federal and state agencies executed federal search warrants at multiple locations tied to Apostelos and his entities. Authorities seized a number of bank accounts, cash, jewelry, and vehicles that included a 2008 BMW M3 Convertible, a 2012 Lincoln Navigator, a 2012 Ford F350 Pickup, and a 2012 Lexus LS 460. Additionally, officers seized a race horse named Baryshnikov owned by William and Connie Apostelos.
If convicted of all charges, the Aposteloses could potentially face decades in prison.
The Bush Affidavit
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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