It's springtime, and Ponzi schemes are in full bloom. Here
is a summary of stories that were reported this month. 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
Ansill was arrested in connection with an alleged $1.1 million Ponzi
scheme in which he offered investments to six investors that were supposedly
funded with mortgages that he never actually held.
Bonventre, Jerome O'Hara,
and George Perez, former employees
of Bernard L. Madoff Investment
Securities LLC, had their request for separate trials rejected by the
court. The three were indicted together, along with Annette Bongiorno and Joann
"Jodi" Crupi, for their conduct in the Madoff Ponzi scheme. The three
sought to have their cases heard separately from the others to avoid being
tainted with the conduct of the other defendants. The court stated, "Bonventre,
O'Hara and Perez have not shown that a joint trial with the other Defendants
will prejudice them to a degree amounting to a miscarriage of justice."
The court also ordered the early turnover by the government of the government's
exhibit copies and list.
Brandolino, 44, pleaded guilty and was sentenced to almost 9 years
in prison and ordered to pay more than $3.8 million in restitution for a $5
million Ponzi scheme that defrauded 60 investors. Brandolino had futures
trading losses of $850,000, and he misappropriated more than $2 million, using
the money to purchase a BMW, Rolex watch and a piano.
Franklin Brown, son of Ponzi schemer Jack E. Brown, was the subject of an involuntary bankruptcy
petition. Jason Brown owes about $1.5 million for his part in what has been
called a family Ponzi scheme. It is alleged that Jason Brown received about
$542,000 in "bonuses" over the course of the last three years, none of which he
reported to the Internal Revenue Service. He also allegedly received a $52,000
yearly salary and a $26,400 yearly housing allowance for "preparing $40 tax
returns and doing some light bookkeeping."
A. Christy, of Georgia, and his company, Crabapple Capital Group LLC, had their CFTC registration revoked.
The order of the CFTC found that Christy and Crabapple violated CFTC
regulations in connection with their operation of a Ponzi scheme. Christy was
ordered to pay $2.6 million in sanctions for his Forex fraud.
F. Ellis, 70, was sentenced to about 3 years for his role in the
Wilton Manors Ponzi scheme run by George
Elia. Ellis helped bring more than $6 million to Elia's Ponzi scheme, and
he pocketed about $3 million from the scheme, paying for 3 homes, two BMWs and
expensive cruises. Ellis pleaded guilty midway through his trial.
A. Ellison, David D. Swenson
and Jeremy Snow Swenson pleaded not
guilty to fraud charges connection with an alleged real estate investment
scheme run through DBSI, Inc., which
was supposedly a profitable real estate investment company. Ellison was general
counsel for DBSI, which ran an $80 million Ponzi scheme.
Fitzgerald, 60, was arrested in Florida and is expected to be
brought back to Southern California to face charges relating to an alleged $16
million Ponzi scheme. Fitzgerald is a former yacht broker and is accused of
buying and selling boats with other people's money.
G. Flesher, 65, Wayne D.
Flesher, 62, and Nancy Carol-Khalial,
65, were sentenced to 17½ years, 6 years and 4 years, respectively, and ordered
to pay $27.4 million in restitution for their role in a $41 million Ponzi
scheme which defrauded 790 investors. They pleaded guilty to running a scheme
through their companies, Unlimited Cash
Inc. and Douglas Network Enterprises
Inc. They sold ATMs and Ad Toppers, which were advertisement-displaying
video screens mounted on top of ATMS and vending machines. Victims were told
they would earn income from ATM transaction fees and advertisement revenue
generated by Ad Toppers, which would show ads for companies such as Coca-Cola,
Gold's Gym, and Paramount Pictures. Victims lost about $27 million in the
59, an investment manager who raised millions of dollars for the Thomas Petters $3.65 billion Ponzi
scheme, went on trial. Fry is the only person charged in connection with the
Petters case who did not plead guilty and says that he was duped along with the
investors. Fry is charged with lying to investors about the Petters' investment
program and lies of omission by keeping information from investors about the
criminal background of Frank Vennes,
who has pleaded guilty to participating in the Petters scheme. Fry operated Arrowhead Capital Management, the
investment firm that he used to lure in investors, and also set up a hedge fund
in Bermuda. Fry received more than $30 million throughout the course of the
scheme, and Vennes had received about $48 million in total commissions.
Harris, Keelan Harris,
Karen Starr, Complete Developments LLC and Investment
International Inc. were prosecuted by the CFTC and ordered to pay
restitution and penalties of over $23 million in connection with their $23
million foreign currency Ponzi scheme.
Lynn Helms, 48, pleaded guilty to running a Ponzi scheme in which
he advised investors he would buy heavy equipment at auctions and then resell
it to companies that would pay higher values. Helms defrauded local North
Carolina investors out of several hundred thousand dollars.
Jackson Jr., 47, was arrested and accused of taking $1.7 million
from 17 victims in a Ponzi scheme targeting elderly investors. Jackson
allegedly ran the scheme through his companies, American Senior Advisory Group and Covenant Planning Group. Jackson told investors that their money
was going to a company called AFG,
but in fact their money was never invested. Jackson forged the signatures of
local lawyers on what he called "deposit agreements" provided to the
"Mike" Karkehabadi, 55, was sentenced to 27 years for his
B-move producer Ponzi scheme which he ran through his company, Alliance Group Entertainment.
Prosecutors alleged that it was a $9 million Ponzi scheme, but the jurors found
the loss was between $500,000 and $3 million for 21 investors. Karkehadbadi
promised investors returns of 18% to 35% no matter how well a movie did.
Kelly, 45, pleaded guilty to charges relating to $1.5 million
Ponzi scheme. Kelly had misrepresented that he was investing money in an
assortment of financial products including annuities, stocks and real estate
investment trusts, but he was spending the money on personal and business
Stanley Koenig, 61, was found guilty of running a Ponzi
scheme after a trial that lasted 3 months. Koenig defrauded about 2,000
investors out of $250 million in a real estate and securities investment Ponzi
scheme which he ran through Asset &
Real Estate Investment Co. Koenig's co-conspirators, Gary Armitage, 62, and Jeffrey
A. Guidi, each previously entered into plea agreements. Koenig represented
that his companies specialized in assisted-living centers and that they were
profitable for tax-sheltered property exchanges. Koenig and his co-conspirators
used investor funds to pay returns to existing investors and to pay personal
expenses, including the purchase of an 80-acre castle, a Lear jet and expensive
cars. Koenig had failed to disclose a prior conviction and prison terms to
investors relating to a gold-selling scam.
Lindell, 65, and Holly
Hoaeae, 39, of Hawaii were indicted on charges relating to the operation of
an $8.6 million Ponzi scheme. Lindell and Hoaeae had induced investors to
invest in "The Parking Lot," which
was to generate between 6% and 8% returns. Instead of investing funds into safe
holdings such as bonds, they used the funds for personal expenditures, such as the
construction of a residence in Lahaina, Maui, the purchase of a Lexis
automobile, payment of a $27,967 debt on a truck loan, and payment of $28,500
for a New Zealand safari.
Link, 66, was sentenced to 5½ years and ordered to pay $500,000
in restitution in connection with a $1.7 million Ponzi scheme that he ran
though his company, Tri-Link Consultants
Ltd., which defrauded about 20 investors. Link used investor funds to fund
his own lavish lifestyle, including renovations to his home, luxury vehicles
and tailored suits.
B. Madoff's house was put up for sale by the U.S.
Marshalls at an asking price of $4.495 million. Peter Madoff is currently
serving a 10 year sentence for his role in the Bernard Madoff Ponzi scheme, and he was ordered to forfeit all of
his and his family's assets.
E. Maiden, 40, pleaded guilty to charges in connection with an
$8.9 million Ponzi scheme that he ran through his hedge fund, Maiden Capital Opportunity Fund, based
in Charlotte, North Carolina. Maiden touted his past educational and
professional experience as an investment banker to attract investors. Maiden
delivered false account statements rather than profits to his victims.
Mason, 66, of North Carolina, was charged with operating a
foreign currency Ponzi scheme that defrauded at least 500 investors out of
about $5 million. Mason operated JHM
Forex Only Pool and Forex Trading at
Home Association. It is alleged that Mason did not engage in much Forex
trading, but that he directed investors to an online account portal where they
could track their account balances, which were false.
76, asked to be released from prison because he has virtually lost all of his
eyesight and the prison is not equipped to handle his disability. May, of
Detroit, was convicted of running a $200 million Ponzi scheme and is only 17
months into a 16 year sentence. May had pleaded guilty to fraud but wants to be
released from prison while he pursues appeals. May's fraud involved
representations to investors that he had telecommunications deals with Las
Vegas hotels which would generate double-digit returns.
Medhus, 65, agreed to plead guilty to charges that he defrauded
investors out of more than $900,000 in a securities Ponzi scheme. Medhus
allegedly used investors' funds for his own personal use rather than investing
it in securities.
Milton and Trade LLC
of Florida were the subject of consent orders obtained by the CFTC requiring
them to pay restitution and penalties in connection with their $28.4 million
commodity pool Ponzi scheme. The order also required relief defendants BD, LLC, CMJ Capital, LLC, Center
Richmond, LLC, and TWTT, LLC, to
disgorge $545,200, $2,826,981.37, $1,253,862.62, and $100,000, respectively.
The CFTC also named William Center
and Gregory Center in its complaint,
which alleges that the parties defrauded at least 2,000 customers and
misappropriated at least $9.6 million of the pool funds for personal use.
Litigation continues against William Center and Gregory Center.
Morawski, 56, and Frank
Constant, 59, were sentenced to 10 years and 7½ years in prison,
respectively, for their role in a $21 million Ponzi scheme that defrauded 267
investors. The defendants used a real estate investing company, Michael Franks LLC, to run the scheme
that promised victims between 7% and 9% interest annually over 3 to 5 years for
investments in apartment buildings in Illinois, Texas and Alabama.
Moriarty, 79, was arrested in connection with an alleged $20
million Ponzi scheme in which he promised investors 10% returns. Moriarty
targeted the elderly with little investment experience.
Melvin Murphy, 70, former commander of the Joint Forces
Training Base, was sentenced to 8 years in prison and ordered to pay $2.95
million in restitution for running a Ponzi scheme that defrauded 26 investors
out of about $3 million. Murphy ran his scheme through his California business,
Capital Investors Inc., promising
investors returns of 12% from investments in truck-leasing companies. Rather
than investing the victims' money, he used it for personal expenses, including
refurbishing and maintaining a classic car collection and for treatments at a
Palladino, 55, was the subject of an emergency enforcement action
brought by the SEC in Massachusetts, in which a temporary restraining order and
asset freeze were imposed against Palladino and his company, Viking Financial Group, Inc. The SEC
alleges that about 30 investors were defrauded in a $5.5 million Ponzi scheme
run by Palladino and his wife, Lori
Palladino, 52. Palladino and his wife are currently free on $250,000 bail
following their indictment. The SEC contends that Palladino spent about $30,000
at the high end department store Hermes and that he pocketed tens of thousands
of dollars in insurance proceeds and a 401k check.
Parrilli, 62, John Lauer,
48, and Christopher Anderson, 57,
were sentenced in connection with a $3.5 million Ponzi scheme involving a
scheme to distribute comic books, movies and collectibles through Sundown Entertainment Incorporated. The
trio, who had met in prison, raised $7 million from 150 investors, promising up
to 150% to investors in a short period of time. The revenues from the
distribution business were insufficient to pay the promised returns so they
kept raising more money to pay off earlier investors. The three pleaded guilty.
Parrilli was sentenced to 70 months and ordered to pay about $3.65 million in
restitution, Lauer was sentenced to 31 years and ordered to pay about $457,000,
and Anderson was sentenced to 95 months and ordered to pay more than $3.7
million in restitution.
Michael Parrish, 49, pleaded guilty to a Ponzi scheme that
defrauded about 70 investors of $9.2 million. Parrish ran his scheme through IV Capital, which he represented was an
investment and trading company that traded in international exchanges. He told
investors that he could generate a minimum gross monthly profit margin of 5%
and 2% on smaller investments. Parrish invested a small portion of the funds,
but lost that money in trading activity and bad investments, he spent about
$5.2 million to make payments to investors, and he used the rest for personal
expenses, including rent, electronics, a golf outing for friends, and a
Pascua pleaded guilty to charges relating to a Ponzi scheme that
he ran though J2 Marketing in which
he defrauded 31 families in Hawaii of $1.5 million. Pascua ran a company that
purported to be in the concert and nightclub promotions industry, and promised
investors short-term investment opportunities that promised returns of 25% to
Petters, 56, is trying to get his 50 year prison sentence thrown
out. Petters was convicted of running a $3.7 billion Ponzi scheme, but is now
claiming that his defense attorney never told him that prosecutors had offered
a 30 year prison sentence in exchange for a guilty plea. Petters is scheduled
to be released in 2052, just before his 95th birthday.
Reynolds aka Richard F. Adkins, 52, is the subject of a
motion to revoke his temporary release from custody. Reynolds is accused of
running a $5.38 million Ponzi scheme and has been allowed to go home four days
a week to work on his own defense, despite a $10 million bail. The prosecutor contends that Reynolds
violated the conditions of release when he went to a building next door to his
wife's apartment. Reynolds is alleged to have stolen from at least 140
investors, using his relationships with various ministers, pastors and
evangelists to solicit investors.
Sekaran, 44, was sentenced to 2.5 years in prison for his role
in a $2.3 million Ponzi scheme run by Wasson
Capital Ltd. Sekaran formed Wasson as an asset management firm in New York
that was to invest funds in the U.S. options market. About 10 investors lost
about $2 million. Sekaran sent fabricated statements to investors showing
inflated values of their investments.
Sichler, 60, who had pleaded guilty to a $2.3 million Ponzi
scheme, did not get her 55 month prison sentence vacated. Sichler had been
seeking a new sentence on the grounds that her attorney did not properly inform
her of her appeal rights prior to the deadline. The court denied the request,
finding that Sichler "did not specifically instruct counsel to file an appeal,
nor did she tell him that she wanted to file an appeal." Sichler had run a Ponzi
scheme in which she misappropriated funds from a trust account maintained to
temporarily hold taxes, fees and other costs in real estate deals and used
money from new clients to cover the earlier thefts.
Skaltsis of New Hampshire was cited by the N.H. Bureau of
Securities Regulation for securities fraud, the sale of unregistered securities
and failure to be licensed. Skaltsis failed to respond to a cease-and-desist
order and was ordered to pay restitution to 15 victims of $304,000 and
penalties of $82,500. Skaltsis had issued at least 21 unsecured promissory
notes in the name of Liberty Realty
Trust to 15 investors who were told that their money would be used to
acquire and renovate distressed real estate. Instead, Skaltsis used the money
for personal expenses.
Jeffrey J. Sykes,
54, was sentenced to 10 years in prison and ordered to pay almost $17 million
in restitution for operating a $40 million Ponzi scheme through his company, Gemstar Capital Group, based in
California. The investors thought they were trading in U.S. Treasury Bills
when, instead, Sykes used their money for personal expenses and other ventures
not approved by the investors.
Quantum Title was indicted by a grand
jury on charges relating to running $3 million Ponzi scheme. The money was
missing from the company's escrow account for 14 transactions where the payoff
was not sent to the original mortgagor. It is alleged that principals of
Quantum Title, Michael Martinez, 52,
and Kathy Norman, 52, took the money
and used it for other purposes and to pay off older transactions.
Peck Eu Unitt, 48, was found guilty of charges relating to
a Ponzi scheme that she operated with her husband, Peter Unitt III. Unitt used her clients' money to pay other clients
and to support an extravagant lifestyle that included family vacations to Malaysia,
Cancun and Aruba, expensive cars and other personal expenses. Peter Unitt has
also been charged in connection with activities run through his law firm, the Crest Group LLC, in which Lee was a
secretary, business manager and paralegal.
Varlesi, 54, was sentenced to 5 years after pleading guilty to
charges in connection with a $1.5 million Ponzi scheme which defrauded 18
investors, including his family and friends. The scheme was run through Gold Coast Futures and Forex, which was
an investment trading pool. Varlesi falsely reported to investors that he was
trading gold, commodity futures and foreign currency when, in fact, he was
using most of the investor funds for his own benefit, including $120,000 to pay
for a year's rent for an apartment in the Trump International Hotel and Towers
in Chicago. Varlesi created false account statements and he provided promissory
notes to some investors, promising the return of the principal amount plus
guaranteed interest ranging from 5% to 7½% per month.
Vassallo sought to withdraw his guilty plea relating to his $45
million Ponzi scheme which he had run through his money management firm, Equity Investment Management and Trading,
Inc. On the day that Vassallo was scheduled to be sentenced, his lawyer asked
to withdraw Vassallo's guilty plea, stating that Vassallo pleaded guilty only
because he couldn't prepare a defense while stuck in jail. Prosecutors say that
the motion is "without any legal or factual basis."
63, was sentenced to 17 years in connection with a gold and rare coins Ponzi
scheme that he operated through A.L.
Waters Capital LLC and Moneta
Management, LLC, which he operated with his wife Janet Waters. Waters pitched two investment funds, Port Huron Partners, LP and Port Huron Partners II, LP, in which he
raised about $1 million from investors. Waters also operated two rare coin
dealerships which sold coins to investors at inflated prices. Waters used the
investors' funds for luxury travel and personal expenses. Waters was also
charged with obstruction of justice for making misrepresentations to the SEC
during an investigation and for concealing a bank account. Waters ultimately
Michael Winans Jr.,
who was convicted of running a Ponzi scheme and sentenced to 14 years in prison
after pleading guilty, is now asking the public for donations to pay for his
legal representation. Winans request to delay his imprisonment was denied.
Winans had admitted in court to stealing millions of dollars, but now has
released a video stating that "there are numerous stories out there that claim
I stole millions of dollars from innocent people. That is not true."
INTERNATIONAL PONZI SCHEME NEWS
Marlon Gary Hibbert, 49, and Verna Hibbert,
48, were accused of running an $8.6 million Ponzi scheme that defrauded
parishioners in Pastor Hibbert's church, called The Life Centre Word of
Faith Ministries, and non-profit organizations, called Dominion World
Outreach Ministries and Fight for Justice. In connection with his
investment fund, Hibbert required that investors invest a minimum of $10,000
and promised them monthly returns of up to 8.5% through foreign exchange
trading. It is alleged that a lot of the investors' money went to Panama. Police
also charged Lorraine Bahlmann, 47, with fraud, alleging she was an
administrative clerk responsible for mailing or e-mailing inaccurate account
statements to victims showing they were earning healthy returns on their
investments while they were in reality facing large losses.
The Alberta Securities Commission ruled that Dale St.
Jean and Gregory Tindall of Calgary were running a Ponzi scheme that
had raised $52 million from investors. Investors were promised returns ranging
from 15% to 22%. The Commission reported that a panel had also found that TransCap
Corp. and Strata-Trade Corp. were involved in the Ponzi scheme. St.
Jean and Tindal have also been accused by the U.S. SEC in connection with a
hedge fund investment fraud that allegedly defrauded U.S. investors of $34
Lin Haiyan, 39, was sentenced to death by a
Chinese court for running a $70 million Ponzi scheme since 2007. Haiyan, a
Chinese woman, promised friends, family, former classmates and others high
returns with little risk. Although she appears to have started her business as
a legitimate investment program, her investments in futures and speculative
stocks suffered losses but she kept on soliciting new investments anyway. China
permits the imposition of the death penalty for about 55 types of crimes,
including economic crimes. However, the death penalty sentence of Wu Ying,
another Chinese woman found guilty of running a Ponzi scheme, was commuted to a
life sentence in 2012. Wu Ying had turned a nail salon into a $60 million Ponzi
scheme. China does not publicly report execution figures; however, it has been
estimated that 4,000 prisoners were executed in China in 2011.
Finanzgericht Köln, the Financial
Court Cologne, handed down a decision relating to the tax treatment of profits
derived from a Ponzi scheme. Victims of Ponzi schemes may suffer dramatic
damages not only in losing their money to the fraudsters or by avoidance
actions of trustees and liquidators once they received payments from the
scheme. The German tax authority argued that payments received from Ponzi
schemes are subject to taxation at least until such time that the Ponzi scheme
has been discovered. In a decision that benefits victims and tax payers, the
Fiscal Court of Cologne held that profits derived from Ponzi schemes are not
subject to taxation. However, it is expected that the German equivalent to the
Internal Revenue Service will appeal this judgment to the Federal Financial
Court. The decision can be accessed (in German) at http://www.justiz.nrw.de/nrwe/fgs/koeln/j2013/10_V_216_13_Beschluss_20130410.html.
Reported by Bernd H. Klose, www.raklose.de
Member of FraudNet, www.icc-ccs.org/home/fraudnet
The repercussions from the
recently disclosed alleged Ponzi scheme of Sudipta Sen, run under the
name Saradha Group, continue to be disclosed. There have been a number
of suicides by defrauded investors from the Ponzi scheme which had offered
investors the opportunity to invest in a range of ventures, including real
estate and motor vehicles. Saradha had utilized about 300,000 agents on a
commission basis to recruit new investors. It is estimated that hundreds of
thousands of Indian investors may have invested billions of dollars into the
Saradha Group ventures.
Bail was denied for Sudipta Sen
and Debjani Mukherjee despite Sen's plea that he be released on bail so
he could return depositors' money by selling his property.
The government in West Bengal
set up a Rs relief fund to compensate victims of the Saradha Group. A
portion of the relief fund will be funded by a 10% tax on cigarettes. The
question is being asked why people who smoke should fund the victims' losses.
Investigators learned that more
than 100 former police officers were on the Saradha Group payroll.
Police raided the offices of The Rose Valley Company
in a Ponzi scheme that is similar to the recently busted Saradha Group.
The Securities and Exchange Board of India passed an
order against Basil International, another alleged Ponzi scheme,
directing the company and its directors not to collect any more funds from
investors or to dispose of any assets. Basil had taken as much as Rs 92 crore
from investors, promising returns of 11% to 14%.
Quintin Earl Sponagle, 48, was arrested in Panama and extradition
proceedings are underway so that Sponagle may face charges in connection with a
$4 million Ponzi scheme in Canada. Sponagle allegedly defrauded 179 investors
in his company, Jabez Financial Services Inc., a company registered in
Panama but not authorized to trade securities in Nova Scotia, by promising them
up to 214% returns per year. Sponagle had fled to Nova Scotia in 2006.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI
A class action was filed
against The Entrust Group in connection with a $27.5 million
self-directed IRA Ponzi scheme. The lawsuit was filed against Entrust
Arizona LLC nka Vantage Retirement Plans, the Entrust Group Inc., Entrust
Administration Inc. and Hugh Bromma. Investors were allegedly lured
into the scheme by self-described "real estate investing guru" Mike Watson, who
was not named in the complaint. Watson charged attendees thousands of dollars
to attend his real estate investment seminars and would then entice investors
A 12 foot, 8,000 pound section
of the Berlin Wall was auctioned off for $24,000 to pay back the victims of the
Ponzi scheme of Ben DeHaan. DeHaan had been convicted of running a $7.3
million Ponzi scheme.
The receiver for the $80
million Ponzi scheme of First United Funding LLC and Corey N.
Johnston sued Security Financial Bank for the return of fraudulent transfers.
Johnson allegedly ran his scheme "by overselling participations, selling loan
participations in loans that did not exist, and by engaging in other fraudulent
conduct." The receiver alleges that Security Financial Bank profited as a
result of the wrongful conduct.
Bernard Madoff spoke with CNNMoney to reflect on the consequences
of his actions. Madoff had to make a collect call because he only now makes $40
a month doing menial prison labor. Madoff acknowledged, "I was responsible for
my son Mark's death and that's very, very difficult." He also said, "I live
with the remorse, the pain I caused everybody. Madoff also spoke to FOX
Business Network, stating that his bank, JPMorgan Chase willfully ignored his
illegal activity and that "there is no question that JPMorgan is guilty. They
would have to be idiots to not realize what was going on. They should have
reported me to the SEC or Treasury."
A bankruptcy judge ordered the
Moss Adams accounting firm to pay $180,000 in legal fees as sanctions for a
contempt finding for not complying with a bankruptcy trustee's subpoena for
documents related to Frederick Darren Berg's Meridian Mortgage $100
million real estate investment Ponzi scheme. Although the court found that
there was not intentional withholding of documents, the court found that Moss
Adams did not fully comply with a 2010 subpoena. Moss Adams had audited some of
the Meridian Mortgage funds, and the trustee had sued Moss Adams for negligence
in the preparation of the audits of six Meridian funds between 2001 and 2007.
Sedgwick LLP moved to dismiss
claims against it by the receiver of the Medical Capital Holdings Inc.
$1 billion Ponzi scheme. The claims are for malpractice and the receiver is
seeking $200 million in damages. Sedgwick, bringing its third motion to dismiss,
argues that it cannot be responsible for work performed by other law firms. The
receiver alleges that Sedgwick assisted Medical Capital in making unauthorized
Repet Group and America TBS, companies based in California, were sued along
with their principals, Sheng Xu, Hairong Cao, and Shubin Zhao,
by lender Wuxi City Runyuan Keji Xiaoe DakKuan Co. for damages in connection
with Ponzi scheme activity where the defendants would allegedly payoff old
loans with newer loans. Wuxi City is claiming millions of dollars in damages
for RICO violations, breach of contract, fraud, conversion, unjust enrichment
and vicarious liability. The complaint states, "Reminiscent of the recent spate
of mortgage fraud scandals to have plagued this country, defendants knowingly
utilized materially false and forged audit reports and other documents to
inflate the collateral of business entities they controlled in China in order
to obtain loans ostensibly for the capital requirements of those same
enterprises. Rather than use these loans for their intended purposes, however,
defendants conspired with others known and unknown to transfer said funds out
of the People's Republic of China and into the United States for their personal
The court in the bankruptcy case
of Scott Rothstein's law firm, Rothstein, Rosenfeldt & Adler,
approved the disclosure statement and set a confirmation hearing for July. Many
of the law firm's investors are opposed to the proposed repayment plan and a
proposed settlement with TD Bank that the investors argue would cause investors
to lose direct claims against TD Bank.
Convicted Ponzi schemer Nevin
Shapiro filed a complaint with the Florida Bar relating to his lawyer's
conduct at the trial of Juan Rene Caro. Shapiro told the district court that he
committed perjury on witness stand when testifying at the trial of Caro, who is
currently serving an 18-year sentence for his $132 million check-cashing
scheme. Shapiro stated that his lawyers, Guy Lewis and Michael Tein knowingly
allowed him to lie. Shapiro also admitted, among other things, that he lied
when he was asked about his investment company. He had testified that he
operated a grocery brokerage business, but in reality the operation was a front
for his Ponzi scheme.
Victims of Ponzi schemer David
Smith are eligible to file a petition for remission with the U.S.
Department of Justice for compensation. Those who invested during the period
February 3, 2005 through to July 15, 2008 will be eligible.
The court in the Ponzi scheme
case of R. Allen Stanford approved an interim distribution to victims of
$55 million to about 17,000 claimants. The distribution constitutes about a 1
cent distribution on the $5.1 billion of claims in the case.
A bankruptcy court denied a
motion to convert the Chapter 11 bankruptcy case of Vaughan Company Realtors
to Chapter 7. The motion would have likely removed the trustee, who has filed
about 100 fraudulent transfer actions seeking repayment from investors who had
profited from the scheme.
The court approved the claims
process in the ZeekRewards receivership case, which established a claims
bar date of September 5, 2013, and approved a centralized claims website. The
receiver estimates that there are nearly 1 million claimants, so additional
procedures were established for noticing purposes, including email and
publication. One mailing to all claimants would cost about $500,000. The court
also approved the Receiver's request that "Retail Profit Points" that had
accumulated would not serve as a basis for a claim against the estate. These
were points that had accumulated from alleged daily profits.
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 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.
Watch Kathy's interview on the The Not So Legal Show.
For more information about LexisNexis
products and solutions connect with us through our corporate site.