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Below is a summary of the activity reported for July 2015. The reported stories reflect: 10 guilty pleas or convictions in pending cases; over 166 years of newly imposed sentences for people involved in Ponzi schemes; at least 11 new Ponzi schemes involving over $112 million; 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.
Alisa Adler, 54, was charged with running a Ponzi scheme the involved a real estate development business run through ASG Real Estate Services Group. She solicited investor funds to supposedly purchase and develop real estate but instead used the money to make Ponzi scheme payments and for her personal expenses.
Will Allen, 36, was indicted for his involvement with a Ponzi scheme run with Susan Daub, 55, through Capital Financial Partners LLC. The scheme involved $31 million and supposedly provided high interest short term loans to athletes. More than 40 people invested in the scheme and were promised 18% returns.
John Steven Blount, 54, pleaded guilty to charges relating to a $5.8 million Ponzi scheme that he ran through his company, Professional Consultants LLC. Blount offered investments in fictitious companies, bonds and IRAs. The scheme defrauded at least 73 investors to which he sent false account statements.
Michael M. Burke had his law license suspended for 18 month by the New Hampshire Supreme Court for his role in the FRM Ponzi scheme
Hernan Del Valle, 61, was charged in connection with an alleged meat exporting Ponzi scheme that involved $750,000. Del Valle ran a firm called Lion Trading Corp. in which it supposedly shipped meat products to 9 businesses in the Dominican Republic. Valle submitted false invoices to banks to obtain loans and then used the cash to pay off earlier loans.
Todd Dyer, 51, already facing charges that he ran a $1.5 million Ponzi scheme through Midwest Farmland Properties and American Farmland Properties, was indicted in connection with a particular transaction in which he stole funds from an investor promising that he had other investors and universities ready to fund an additional $25 million. Dyer had previously received a 70 month sentence in 1999 for a Ponzi scheme.
Michael R. Enea, 60, was sentenced to 2 years in prison for his $2.1 million Ponzi scheme that defrauded at least 10 people. Enea had promised investors annual returns between 20% and 35%. The scheme was run through his business, Credit Card Equipment Plus Inc. Enea had spent $1.35 million of the $2.1 million to pay false returns to investors and spent the rest on himself.
Daniel Fernandes Rojo Filho, 47, and his company, DFRF Enterprises, were charged by the SEC with operating a combined pyramid and Ponzi scheme. The alleged scheme targeted Spanish and Portuguese-speaking communities, and investors were told that DFRF’s gold mines in Brazil and Africa would realize a return of 100% on each kilogram produced. The scheme allegedly raised more than $15 million from at least 1,400 investors. The SEC complaint ties Filho to Sannderley Rodrigues de Vasconcelos, who has been tied to the TelexFree scheme. Others charged in connection with the scheme were Wanderley M. Dalman, 49, Gaspar C. Jesus, Eduardo N. Da Silva, 40, Heriberto C. Perez Valdes, 46, Jeffrey A. Feldman, 56, and Romildo Da Cunha. Filho was then arrested after he was captured outside of a Boca Raton restaurant.
Edwin Fujinaga, 68, Junzo Suzuki, 66, and Paul Suzuki, 36, were criminally charged with their roles in the MRI International Inc. Ponzi scheme that defrauded thousands of Japanese victims. The scheme involved $1.5 billion, and investors were told that their investments would be held by a third party escrow agent in Nevada. Investors were promised that their money would be used to purchase medical accounts receivable. Meanwhile, the SEC obtained a judgment against June Fujinaga and the Yunjo Trust to return $2.4 million in ill-gotten gains.
Dorian Garcia, 30, pleaded guilty to running a $7 million Ponzi scheme. Garcia was accused of defrauded 80 victims out of $4.7 million through his businesses, DG Wealth Management, Macroquantum Capital LLC and UKUSA Currency Fund LP.
Kelly Gearhart, 54, was sentenced to 14 years in prison following his guilty plea that he misrepresented information about his Vista Del Hombre real estate project through Hurst Financial Corp. Gearhart was accused of defrauding more than 250 investors out of $15 million. James Hurst Miller Jr. is scheduled to be sentenced in October.
Stephen Bruce Gordon, 62, was sentenced to 4 years and 2 months in prison for running a $4 million Ponzi scheme. Gordon was once a high profile basketball trainer who worked for the Seattle Supersonics. He admitted to running schemes that defrauded about 30 investors.
Neal Goyal, 34, was sentenced to 6 years in prison and ordered to pay $9.2 million in restitution in connection with a $9 million Ponzi scheme that he ran through his companies, Blue Horizon Asset Management LLC and Caldera Investment Group. Goyal created false statements to give to investors to support his supposed trading business, in which he promised returns of at least 17% per year. He stole money from his family and friends in his Hindu community. He raised more than $11 million from at least 35 investors.
Jenifer E. Hoffman pleaded guilty to charges in connection with the $11 million Ponzi scheme that defrauded 100 investors. Hoffman had been charged along with John Boschert and Bryan T. Zuzga for their involvement with the scheme run through Assured Capital Consultants, LLC. They had represented that the investments would provide weekly returns of up to 50% and would be invested in Assured Capital’s offshore, confidential trading program.
Charles D. Jones, 61, was sentenced to 6 years in prison for stealing more than $9 million from his clients in a Ponzi-like scheme. Jones ran the scheme through his company, Charles D. Jones Capital Management Inc.
Phillip A. Kramer and Timothy C. Constantine were found guilty of defrauding NHL players and other investors. The two defendants ran at last four separate schemes: Hawaii Real Estate Investment, Eufora LLC, Global Settlement Fund, and Sag Harbor.
Paul Konigsberg, 79, was spared prison time following his guilty plea last year to conspiracy charges and falsifying books and records in connection with the Bernard Madoff Ponzi scheme. Konigsberg has said that he “had no knowledge that Bernard Madoff was a diabolical monster masking himself in the clothing of a self-made billionaire.” Konigsberg, an accountant, was accused of looking the other way as Madoff employees amended information on some of his clients’ transactions. The judge agreed that what Konigsberg did was "seriously wrong" but that he did not know that Madoff was defrauding investors out of $20 billion. The judge found that he had earned leniency through his cooperation.
Shaine Joseph LaVoie, 46, was sentenced to 20 years in prison and ordered to pay more than $820,000 in restitution for a Ponzi scheme involving close out clothing and a fictitious apparel company. LaVoie had turned down a 5 year plea deal. There were 12 victims who were promised 100% returns in 3 months.
Charles Maguire, 33, is the subject of many civil complaints, at least one of which alleges that Maguire was running a $13.4 million Ponzi scheme that defrauded individuals associated with Christian churches and organizations. Maguire represented that he ran a financial company, Vivid Funding LLC that provided "proof of funds" letters for corporations. Corporations would supposedly use his bank accounts to show they had assets when applying for bank loans. Maguire also had another company, M-Development Inc. that was supposedly involved in mobile application software. William Peterseim has been identified by the U.S. Attorney's office has being a financial advisor involved with the scheme. Maguire has not yet been criminally charged.
Claude Darrell McDougal, 56, was sentenced to 6½ years and ordered to pay about $2 million in restitution for running a Ponzi scheme that defrauded over 25 investors out of more than $2.5 million. He promised investors returns of 6% to 15% and that their money would be invested in securities in the form of promissory notes offered by US Financial Alliance Consultants, LLC.
Sean M. Meadows, 42, was sentenced to 25 years in prison for running a Ponzi scheme that defrauded about 55 victims out of more than $10 million. Meadows solicited funds through his investment adviser business, Meadows Financial Group, and he promised he would invest funds in bonds, real estate or other investments and pay 10% returns.
Stavroula Mendez, 68, Lazaro Mendez, 42, and Marie Mendez, 49, were sentenced to 135 months, 108 months, and 57 months, respectively, in connection with a $27.8 million mortgage fraud Ponzi scheme. The defendants owned condominium developments and would locate straw buyers. They would then submit falsified mortgage applications to secure home loans to purchase condo units in the development that they owned. When they units sold, they would retain both the profits on the sale and control over the units.
Paul Lee Moore IV, 51, pleaded guilty to charges relating to a Ponzi scheme that defrauded investors out of about $2 million. Moore ran his securities scheme through Coast Capital Management LLC. The SEC also charged Moore in connection with the scheme.
Eric Nicholas Morgan was charged in connection with an alleged Ponzi scheme that he ran through his company, Liquid Ninja. Neither Morgan nor Liquid Ninja are licensed in the state of Indiana. Liquid Ninja marketed a new energy drink and investors were promised 7.5% returns for two years for investing in the company. At the end of two years, investors were told they could either redeem their principal or receive a 15% interest in the company. The money was used by Morgan for his own personal expenses, and Liquid Ninja has closed its business.
Leigh Morse, 59, was denied her request to have her restitution obligation of $1.7 million reduced or eliminated. Morse was involved as the dealer in the Salander-O’Reilly Galleries Ponzi scheme. Morse had been found guilty in 2011 of defrauding artist estates and foundations by misleading them about the status of works that the gallery sold or traded away. Morse has proclaimed her innocence and claims that she cannot pay the restitution.
Dee Allen Randall, 64, was ordered to stand trial in connection with an alleged Ponzi scheme that defrauded about 700 people out of $72 million. Randall was the owner of Horizon Mortgage & Investment, Horizon Financial & Insurance Group and Horizon Auto Funding, and his agents sold “Horizon Notes” that promised 9% to 17% returns for the supposed use of investor funds to finance car loans and real estate.
Keith Everts Rode, 48, was sentenced to 70 months in prison in connection with the Ponzi scheme run through GLR Growth Fund, which Rode ran with John Geringer and Christopher Luck, 58. The scheme promised returns of 17% to 25%. Geringer and Luck were already sentenced to 12 years and one month and 10 years and 8 months, respectively.
Guillermo M. Sanchez, 60, his daughter Isabel C. Sanchez, 36, and son-in-law Gustavo Giral, 38, were indicted in connection with an alleged $10 million Ponzi scheme that involved fake merchandise sales and a factoring scheme.
Michael Szafranski, 37, pleaded guilty to charges relating to the Scott Rothstein $1.2 billion Ponzi scheme. Szafranski was accused of deceiving his clients in encouraging them to invest in Rothstein’s scheme.
Perry Sawano, 51, was sentenced to 28 years in prison in in connection with a Ponzi scheme that defrauded 28 investors out of $4.4 million. Sawano operated his scheme through Integrity Financial Consulting.
Malcolm Segal, 69, was accused by the SEC of conducting a Ponzi scheme that defrauded at least 6 people out of $3 million. Segal is a financial advisor that is accused of using investor money to pay for a Florida condominium, vacations and other personal expenses. He ran his own branch office of Aegis Capital Corp., operating under the name of J& M Financial. Before that he was a financial adviser at Cumberland Brokerage Corporation. Segal purchased CDs but did not put them in his clients’ names; rather, he maintained control over them and redeemed at least 76 of the 134 CDs purchased, using $5 million proceeds for Ponzi-like payments and for his own expenses.
Justin T. Spearman, 27, was arrested on charges that he ran a multi-million dollar oil and gas Ponzi scheme. Spearman operated his company, Justin T. Spearman Petroleum Land Services LLC, in Texas.
Bogdan K. Stepien, 34, was indicted on charges that he ran a Ponzi scheme through his day trading business. The indictment alleges that Stepien defrauded 8 people and that he sent them bogus trading account statements and spreadsheets.
Richard L. Thompson, 60, was charged with defrauding investors in his $2 million real estate Ponzi scheme. The scheme was run through Latten Management LLC. Thompson represented that his company owned three properties in Tennessee and that he would develop them into vacation destinations. Thompson never put properties in the name of the business.
Marcello Trebitsch aka Yair Trebitsch, 37, pleaded guilty to operating a Ponzi scheme that defrauded investors out of about $6 million through his company, Allese Capital LLC. Trebitsch is the son-in-law of the former New York Assembly Speaker Sheldon Silver. Trebitsch promised investors annual return of 14% to 16% from day trading large cap stocks
Charles S. Wang and Francis Y. Yuen pleaded guilty to charges relating to the eAdGear Ponzi scheme. The SEC had charged eAdGear on September 2014 alleging a $129 million scheme.
Carl David Wright was fined $1 million by the CFTC for defrauding 16 customers in a commodities Ponzi scheme. Wright was previously sentenced to 4 years in prison for the scheme.
Bingqing Yang, and her company Lucia International Group LLC, were charged by the SEC for running a $68 million Ponzi scheme that targeted Chinese Americans in California. Her other companies, Luca Resource Group LLC and Luca Energy Fund LLC, were also charged. The scheme used the E-B 5 Immigrant Investor Program to solicit funds. The SEC’s complaint also names Lei (Lily) Lei, Luca’s former vice president of business development; Anthony V. Pollace, former CFO; and Yong (Michael) Chen, owner of Entholpy EMC aba Mastermind College Funding Group. Lucia was represented to be a successful oil and gas company and returns of 20% to 30% were promised to investors. It is believed that George W Bush was paid $200,000 by Lucia to speak at a 2012 “energy summit.”
INTERNATIONAL PONZI SCHEME NEWS
Tsvetan Vasilev denied charges that he ran Corporate Commercial Bank as a Ponzi scheme.
The Alberta Securities Commission has started publishing the names of individuals and entities that have been fined for financial-related crimes but have not paid the fines and penalties. The list current contains over 100 names that have failed to pay over $100 million in the aggregate.
Gary Sorenson, 71, and Milowe Brost, 61, were sentenced to 12 years in prison following their conviction for operating a Ponzi scheme which that defrauded up to 2400 international investors of between $100-400 million. The two promised investors of $99,000 they would receive annual returns of 34% and that the $99,000 would turn into $1 million within eight years.
Regulators warned that Nix Investment is not licensed to carry out business in Ontario. The company’s website shows signs of being a Ponzi scheme, stating, “We invest in Stock, Index, Commodities, Bitcoins and Forex. We aim for a 10-15% return per month which is 300% per year. So investment of $100 with us for 5 years can yield you more than $20000-25000. Recommend investment ($100-500).”
Douglas Warren Welder was disbarred for his role as a lawyer representing a corporation that was operating a Ponzi scheme. Welder was not the perpetrator of the scheme but failed in his duties as a lawyer by not advising investors that he was not protecting their interests.
Three directors of Bishal Group, which is accused of running a Ponzi scheme, were taken into custody. The directors are Ratan Chowdhury, Sujit Krishnapada Acharjee and Kanta Dubey.
A check-cashing scheme that affected the ultra-Orthodox community in Bnei Brak was disclosed. The alleged scheme was run by Yaakov Domb, who defrauded individuals and businesses out of tens of millions of shekels that they had invested with him. Domb has disappeared without a trace.
David John Hobbs agreed to never again direct a New Zealand company and to not provide financial advice or brokering services in the country. Hobbs was previously found to have breached laws in operating 14 schemes that involved over AUD $50 million.
Hamish McIntosh, a lawyer who was ordered to repay $454,000 in profits that he received from the Ross Asset Management Ponzi scheme, has filed an appeal to the ruling. The liquidator of the scheme is considering cross-appealing.
The Securities and Exchange Commission is investigating Arnel Gacer and his company, Flag Prosperity Marketing Inc. aka Freedom Life Advanced Global Prosperity Marketing Inc. The SEC believes that the company recruits investors to invest in one to 15 slots, where one slot amounts to P1,500 and has a promised return of P2,200.
Twenty people were arrested in connection with an alleged Ponzi scheme run by Unetenet. The scheme reportedly defrauded 50,000 investors out of 50 million euros.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES
A court approved a settlement between the SEC and the receiver for Diversified Lending Group under which DLG will disgorge $163 million to end the SEC's civil suit.
The trustee of the Deepal Wannakuwatte and IMG Inc. Ponzi scheme sued two real estate developers, Jack Sweigart and Larry Carter, alleging that they knew or at least should have known about the fraud that caused more than 100 investors to lose $150 million. The trustee alleges that the scheme could not have grown to its size without the letters of credit supplied by Sweigert, Carter and their companies, JTS Communities and Bristol Insurance Co. The trustee also sued two of Wannakuwatte’s lenders, Bridge Bank of Santa Clara and General Electric Capital Corp. Wannakuwatte was sentenced to 20 years in prison last year
The estate of Gladys C. Luria is seeking a $7.4 million refund from the IRS in connection with a false tax return filed by Bernard Madoff at Lurie's death claiming that she was worth $32 million. Luria's estate says that $7.4 million of the estate tax paid should be refunded because the balance of her Madoff accounts at the time of her death were actually zero. Madoff and his brother, Peter Madoff, were the co-executors of her estate. The estate argued that Madoff knowingly filed a false tax return to cover up his fraud.
More than 100 investors from around the world have filed a class action lawsuit against Pearce & Durick, a law firm which was the escrow agent for North Dakota Developments LLC. The alleged Ponzi scheme defrauded people out of $62 million. The lawsuit alleges malpractice in that the law firm failed to advise investors that they were investing in unlawful securities. The scheme involved 980 investors from 66 countries.
BMO Harris Bank agreed to pay $16 million to settle litigation arising from the Thomas Petters Ponzi scheme. The lawsuit, filed by the major feeder funds in the scheme, Palm Beach Finance II LP and Palm Beach Finance Partners LP, alleged that M&I Marshall & Ilsley Bank, which BMO acquired, was complicit in the fraud.
TD Bank agreed to pay $20 million to settle a class action lawsuit in relation to a Ponzi scheme that defrauded over 1,000 European investors out of more than $223 million. The investors had bought life settlements marketed through Quality Investments, a Dutch company. It was alleged that the bank had failed to report suspicious activity in connection with the scheme.
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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