Below is a summary of the activity reported for May 2014. The reported stories reflect: 9 guilty pleas or convictions in pending cases; over 95 years of newly imposed sentences for Ponzi schemers; at least 9 newly discovered schemes allegedly involving over $96 million; and an average age of 51 for the alleged Ponzi schemers in the stories 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.
Stanley W. Anderson, 70, was sentenced to 51 months in prison in connection with his solicitation and collection of $5 million from investors through his two companies, CFO-5 LLC and Trinity International Enterprises Inc., in what was a Ponzi scheme with no legitimate business operations. Charles Lawrence Kennedy Jr. and Edwin Alexander Smith were previously sentenced to 12 months and 30 months, respectively, in connection with the scheme.
Douglas Bates, 55, was sentenced to 5 years in prison for his role in assisting Scott Rothstein in defrauding certain clients of Rothstein’s law firm, Rothstein Rosenfeldt Adler. Bates drafted fraudulent opinion letters which falsely claimed that he represented an investment group that would invest in confidential settlements involving sexual harassment or whistle blower cases. Bates was ordered directly to prison from the courtroom.
Barry Bekkedam was charged with inducing his clients to invest approximately $100 million into the Scott Rothstein Ponzi scheme. Bekkedam founded Ballamor Capital Management LLC, an investment advisory firm that allegedly assisted Rothstein to raise funds from clients for Rothstein’s settlements. Bekkedam, along with George Levin, formed Banyon Income Fund LP to collect those investments and forward them to Rothstein.
David Benjamin, 48, a former Broward Sheriff’s Office lieutenant, pleaded guilty to charges that he received $185,000 for assisting Ponzi schemer Scott Rothstein in various ways. Jeff Poole, 47, also pleaded guilty to charges that he made an illegal arrest at the request of Rothstein. Rothstein is currently serving 50 years in prison.
Bitcoin remains in the news as a Ponzi scheme risk. The SEC issued a warning entitled “Ponzi Schemes Using Virtual Currencies” to warn the public that Bitcoin is vulnerable to Ponzi schemes. The North America Securities Administrators Association issued a warning to investors last year about digital currencies, and the Financial Industry Regulatory Authority (FINRA) also issued its own warning, stating: “Digital currency such as Bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, Bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.” Bitcoin was also the subject of a new report that the spike in the price of bitcoin last year from $200 to $1,200 was the result of bots creating fake accounts in an effort to drive up the price. The report notes that the two bots, called Willy and Markus, created fake accounts and purchased bitcoins that were “suspiciously close” in value to the 650,000 bitcoins that Mt. Gox Ceo Mark Karpeles claimed had mysteriously vanished.
Arvin Lee Black II aka Lee Black, 34, was sentenced to 5 years in prison and ordered to pay about $13.8 million in restitution in connection with a $21 million Ponzi scheme that he ran through his day trading company, Sole Group LLC. The scheme defrauded more than 50 people, promising them 5% monthly returns and assuring them that the investment was low risk.
Brandon Benson was charged in connection with an alleged Ponzi scheme that promised “oil deals” in Nigeria. Benson promised returns of between 40% and 120% in a “Guaranteed Oil Fund” that would be used to purchase oil at locations in Africa and then sold at higher prices in other locations in Africa. Benson attempted to obtain about $1.4 million from 7 investors.
Michael Ralph Casey, 67, became the subject of an FBI wanted poster and is considered “armed and dangerous.” Casey, a Florida attorney, failed to appear for a court hearing after he was charged for his alleged role in Commodities Online, an alleged Ponzi-like investment scheme. The SEC described Commodities Online as a securities scheme led by two convicted felons, James C. Howard III and Louis N. Gallo III.
Ronald Coles, 66, was sentenced to 8 years in jail in connection with his $6 million Ponzi-like scheme. Coles was an art dealer that defrauded clients who were mostly retirees. They invested in the artwork which was to be stored at Coles facility because they were advised that tax laws prohibit super-funded investment art from being stored at the buyer’s home. Coles would sell the artwork without permission and sometimes created multiple owners for the same work.
Cay Clubs Resort and Marinas is off the hook in connection with allegations made by the SEC that it was running a Ponzi scheme. A district court dismissed the SEC’s lawsuit, finding that it was filed after the 5 year statute of limitations. SEC v. Graham, 2014 U.S. Dist. LEXIS 64953 (S.D. Fla. May 12, 2014) [an enhanced version of this opinion is available to lexis.com subscribers]. The court stated, “"This is a case in which the SEC - the agency whose principal mission is to 'protect investors and the markets by investigating potential violations of the federal securities laws - failed to meet its serious duty to timely bring this enforcement action." The case was also dismissed against former officers Fred David Clark, David Schwarz and sales executives, Cristal Coleman, Barry Graham and Ricky Lynn Stokes. It had been alleged that Cay Clubs ran a $300 million Ponzi scheme that defrauded more than 1,400 victims.
Rabbi David Cynnamon was sued by lead plaintiff Zap Cellular Inc. in a class action against Cynnamon, his son Aaron Cynnamon, and the rabbi’s company, DC Realty. Cynnamon had promised investors returns of 10% to 17% on their investments, but the plaintiffs alleged that their money was in fact never used to invest in real estate. The lawsuit claims that Cynnamon and his son defrauded victims of at least $5 million.
Anthony D’Agostino, 79, was sentenced to 7½ years in prison and ordered to pay $49.4 million in restitution in connection with a Ponzi scheme he ran through Commercial Mortgage & Finance. About 1,400 victims lost money in the scheme.
Jim Donnan, 69, former University of Georgia football coach, was found not guilty by a jury following his criminal trial in connection with charges that he ran a $80 million alleged Ponzi scheme through Global Liquidation Center aka GLC Ltd. that promised returns ranging between 50% and 200% for investments to buy inventory for resale. Donnan claimed at trial that he was a victim of his partner, Greg Crabtree. Crabtree previously pleaded guilty and testified at Donnan’s trial.
Armand R. Franquelin, 57, and Martin A. Pool, 44, pleaded guilty to charges relating to a $9 million Ponzi scheme. They admitted to persuading investors to convert their traditional IRAs to self-directed IRA accounts and to invest their funds in a residential real estate project known as Haven Estates through their company, The Elva Group. The Elva Group issued promissory notes promising monthly interest payments at annual rates of between 8% and 20%.
Richard A. Freer, 68, pleaded guilty to charges in connection with a $10.13 million that defrauded 90 families. He was sentenced to 12 to 30 years in prison. Freer agreed with the prosecutor to a $7.75 million restitution order since about $2.3 million had already been paid back to investors. Freer had promised investors that their money would go into a real estate investment trust managed by Aviva, an insurance company that Freer used to work for. Instead, Freer deposited the money into his own bank account.
Glen Galemmo, 48, had has sentencing hearing continued to August. Galemmo had pleaded guilty to charges that he ran a Ponzi scheme through Queen City Investments that defrauded 160 investors. Galemmo admitted to defrauding investors out of $7 million, but the amount is believed to be as much as $300 million.
Neal V. Goyal, 33, was charged by the SEC with allegations that he defrauded at least 35 investors out of more than $11.4 million in a Ponzi scheme. Goyal allegedly ran the scheme through his companies, Blue Horizon Asset Management LLC and Caldera Advisors LLC. The SEC also obtained an asset freeze against Goyal’s assets. Goyal allegedly engaged in a “long-short” trading strategy and represented that his funds consistently outperformed the stock market, returning at least 17% per year. The SEC alleged that Goyal used some of the investor money to fund his wife’s Lincoln Park baby boutique. Criminal charges were also filed against Goyal.
Henry Thomas Hammond, 57, was indicted in connection with an alleged $6.2 million Ponzi scheme. Hammond allegedly solicited investors for his scheme which involved his businesses, including Longhorn Construction Inc. and Longhorn Development Group, Inc. The investors’ funds were largely used for Hammond’s personal expenses such as a lake house, hunting excursions and vehicles.
Randall Kent Hansen, aka Randy Hansen, 66, was sentenced to 9 years in prison in connection with a $20 million Ponzi scheme that he ran through RAHFCO Funds and RAHFCO Growth Fund. Hansen, working with Anthony Johnson, who was previously convicted in connection with the scheme, promised investors that only 5% of their money was at risk and that the remaining funds were safely invested in government securities. The scheme defrauded over 100 investors.
Eli Heckscher was sentenced to 5 years in prison for his assistance in the $28 million Ponzi scheme run by John and Marian Morgan through their company, Morgan European Holdings. Heckscher is a Danish lawyer who assisted by serving as the middleman and who handled most of the $28 million that was funneled to Europe. The Morgans’ scheme in Florida promised more than 100 investors returns of 30% to 70%. John Morgan, 55, had previously pleaded guilty and received a 10 year sentence. Marian Morgan, 59, faced a jury trial, was convicted, and was sentenced to 35 years which was later reduced to 33 years and 9 months.
Jerry Lynn Helms, 49, sought to have his prison sentence shortened from the 2½ years he received after he had pleaded guilty last year. The request was denied.
Christina Kitterman, 39, was sentenced to 5 years in prison after a jury found her guilty for impersonating a Florida Bar official during a conference call for the purpose of inducing additional investors to invest in the Scott Rothstein Ponzi scheme.
Jason Konior, 39, was sentenced to about 3 years, 10 months in prison and ordered to forfeit $2.9 million in connection with a Ponzi scheme in which he stole $2.9 million from hedge fund investors. Konior ran the scheme through his company, Absolute Fund LP.
Robert E. Lee, Jr., 50, was charged in connection with an alleged Ponzi scheme that defrauded several investors out of millions of dollars. Lee had been employed by various investment firms, most recently Rockwell Global Capital LLC, and claimed he would invest client funds in certain investment vehicles when he was actually maintaining custody of the funds in his personal bank account. FINRA permanently barred Lee from the securities industry last year.
Shamika Luciano, 31, pleaded guilty to charges in connection with the Nicholas Cosmo Ponzi scheme run through Agape World, Inc. Luciano was Cosmo’s executive assistant during the scheme that took in more than $400 million from 5,000 investors, promising returns of up to 80%.
Bernard Madoff’s former Upper East Side penthouse is on the market again. Madoff’s former residence was sold for $8 million in 2010. The purchasers renovated the property and listed it for $17.25 million. The price was recently dropped by $2.4 million down to $14.85 million.
Adam Manson, 42, pleaded guilty to charges relating to a $96 million Ponzi scheme in which he assisted his brother-in-law, Brian Callahan. Callahan had pleaded guilty and admitted to raising more than $118 million from at least 40 investors who were told their money would be invested in mutual funds, hedge funds and securities. Callahan took about $96 million of the funds to finance a beachfront resort and residence development. Manson then got married a few weeks after pleading guilty.
Matthew Marino, the brother of former Bayou Group LLC executive Daniel Marino, was disbarred by the Supreme Court of New Jersey. Marino had been convicted for helping Bayou conceal its $500 million Ponzi scheme.
David W. McQueen, 43, was found guilty in connection with a $46 million Ponzi scheme that affected more than 800 families in Michigan. McQueen had invested with a company called Multiple Return Transactions run by Jim Clements, which promised returns of 10% per month. McQueen started his own business, Accelerated Income Group, through which he promised returns of between 5% to 6% per month. His promised returns were based upon the 10% returns he was receiving from Multiple Return. When Multiple Return failed and stopped making payments, McQueen continued to solicit new investors into his own business to pay promised returns to earlier investors. McQueen also created three other funds to run his Ponzi scheme – International Opportunity Consultants, Diversified Liquid Asset Holdings, and Diversified Global Finance.
Sean Meadows of Minnesota is being investigated in connection with accusations that he is running an $11 million Ponzi scheme through his financial planning business, Meadows Financial Group. The scheme allegedly defrauded more than 50 victims. Search warrants describe an alleged “scheme perpetrated by Meadows to fraudulent induce victims to surrendering retirement accounts.”
Stephen Merry, David Petersen, and Yaman Sencan were each sentenced to 5 years in prison in connection with a $3 million Ponzi scheme. A fourth defendant in connection with the scheme is Timothy Durkin, who left the country before he was indicted and was not tried with the other three defendants. The scheme promised high returns based on a computer program that purportedly took advantage of temporary price differences among different stock markets.
Shervin Neman aka Shervin Davatgarzadeh, 32, was found guilty at trial on charges relating to a $7.5 million Ponzi scheme that he ran claiming that investors’ funds would be used to purchase foreclosed real estate and stocks. The SEC filed a civil complaint against Neman and his company, Neman Financial Inc., two years ago. After the SEC action was filed, Neman solicited $2 million more from another victim with false promises that he could obtain pre-IPO shares in Facebook. The scheme primarily targeted members of the Persian-Jewish community in Los Angeles. Neman spent investor funds on personal expenses such as jewelry, high-end cars, and Neman’s wedding and honeymoon.
Gaeton “Guy” Della Penna, 61, was indicted on charges relating to an alleged $3.8 million Ponzi scheme. Penna allegedly lied to investor about his trading track record and created false account statements showing positive returns. He promised them guaranteed returns of 5% per year and then later increased that to 10%. Penna did business through Gaeton Capital Advisors LLC, A-G Hedge Fund Group LLC, The Contrarian Fund LLC, and The New Economy Fund LLC. The SEC also brought charges against Penna
Randy Poulson’s, 42, criminal complaint was unsealed. The complaint charges him in connection with an alleged $3 million Ponzi scheme that defrauded at least 25 homeowners and other investors. In an alleged “two-pronged scheme” run through his company, Equity Capital Investments LLC, Poulson caused homeowners facing foreclosure to sell their homes to Poulson for the promise that Poulson would pay their mortgage. Then Poulson solicited more than 50 investors to invest in Poulson’s real estate companies that would buy and sell real estate.
Stuart Rosenfeldt was charged with conspiracy to commit campaign finance fraud and bank fraud, among other things, in connection with the Scott Rothstein Ponzi scheme. Rosenfeldt made large campaign contributions to high profile candidates like John McCain and Charlie Crist and was reimbursed with money from their law firm, Rothstein Rosenfeldt Adler. Rosenfeldt also allegedly conspired to have law enforcement officers intimidate an escort who Rosenfeldt was allegedly having an affair with, along with her boyfriend, after they had threatened to expose Rosenfeldt’s conduct. Rosenfeldt maintains that he was not aware of Rothstein’s Ponzi scheme.
Kim Rothstein, the wife of jailed Ponzi schemer Scott Rothstein, was hit with a $2 million judgment. Kim Rothstein is currently serving an 18 month prison sentence after pleading guilty to conspiracy for trying to hide more than $1 million worth of jewelry from investigators. The judgment is related to the hidden jewelry. Meanwhile, Kim Rothstein has been unable to complete her divorce from Scott Rothstein because she has been unable to serve him in his unknown location in prison.
Jeffrey Shalhoub, 38, was sentenced to 3 years in prison and ordered to pay $240,000 in restitution in connection with a $300,000 Ponzi scheme that defrauded at least 12 investors. Shalhoub had represented himself as a commodities pool operator for The 9 Group Ltd. and promised weekly returns of up to 10%.
Irene Shannon pleaded guilty to a conspiracy charge in connection with the Scott Rothstein Ponzi scheme. Shannon oversaw the accounting and banking at Rothstein’s law firm, Rothstein Rosenfeldt Adler, and was aware of the Ponzi scheme. About 20 people have now been convicted in connection with the scheme.
Joseph Signore, 49, and Paul Schumack, 56, were indicted along with Signore’s wife, Laura Grande-Signore and Craig Allen Hipp, 53, in connection with the Virtual Concierge machines Ponzi scheme run through JCS Enterprises and Schumack’s company, TBTI. The scheme allegedly involved about 1,500 investors and $70 million. Investors paid between $3,000 and $4,500 for each virtual concierge machine and were to receive $300 per month per machine. They sold approximately 26,000 “machines” to investors, but there were allegedly never more than 500 actual machines placed in locations. The Montana Securities Commission filed a cease and desist order against TBTI and Schumack.
Shirley Sooy, 63, surrendered after being charged in connection with an alleged $42 million Ponzi scheme run through a group of businesses run under the umbrella of “TransVantage Group.” Sooy allegedly entered into contracts with corporate clients to audit freight bills generated by common carriers and freight forwarders and to pay the carriers with funds provided by the companies. The companies also made separate payments to TransVantage for auditing services. Instead of paying the money to the carriers, Sooy misused the funds to pay expenses of TransVantage and for personal expenditures such as an interest in a yacht, a Maserati, and a home remodel.
TelexFree LLC, TelexFree Inc. and TelexFree Financial Inc. had their Chapter 11 bankruptcy cases transferred from Nevada to Massachusetts. Meanwhile, the government commenced civil and criminal forfeiture actions in the U.S., and prosecutors in the Dominican Republic seized cash, two weapons and computer tablets and smart phones during raids of the offices there. James Merrill, 53, and Carlos Wanzeler, 45, have been charged criminally in connection with the TelexFree operations. Merrill was arrested, and Wanzeler is believed to have fled to Brazil. Wanzeler’s wife, Katia Wanzeler, was arrested at JFK airport as she prepared to board an international flight. Katia’s name appeared on some of the $38 million in checks that were found when Merrill was arrested, and she was arrested as a material witness. Katia has been linked to Acceris Realty Estate LLC, which was formed by Joe H. Craft, the former CFO of TelexFree, who has been accused by the SEC of securities fraud in connection with the TelexFree operations. The FBI and the U.S. Department of Homeland Security have established a website for people who believe they were defrauded and have asked victims to file out a questionnaire available at https://forms.fbi.gov/telexfree-inc-customer-questionnaire.
Anthony Vassallo of California was ordered to pay the SEC more than $44 million in disgorgement order including prejudgment interest. Vassalo had pleaded guilty last year to charges that he ran an $80 million Ponzi scheme, and he was then sentenced to 16 years in prison.
Viking Financial Group filed a Chapter 7 bankruptcy petition, estimating between $10 and $50 million in liabilities. Viking Financial is owned by Steven and Lori Palladino, who have been accused of running a Ponzi scheme through their company.
Eliyahu Weinstein, 38, pleaded not guilty to new fraud charges relating to $8 million of funds in addition to the $200 million Ponzi scheme for which he is currently serving a 22 year prison term. It is alleged that Weinstein collected more than $8 million on false pretenses that he had special access to large blocks of Facebook shares prior to the company’s initial public offering. Alex Schleider, 48, and Aaron Glucksman, 41, both pleaded guilty to the new charges, and Glucksman was sentenced to 4 years, 4 months in prison.
WCM777 received an amended complaint from the SEC increasing the amount of the scheme from $65 million to more than $80 million, and Vincent Messina, an “inactive” Florida attorney, was named as a relief defendant. Messina was the general counsel of World Capital Market, a company associated with WCM777 and its principal, Ming Xu.
Joel Wilson, 31, was extradited from Germany. Wilson faces charges in connection with an alleged $8.5 million Ponzi scheme run through The Diversified Group Advisory Fund LLC. Wilson had promised investors he would use their money to purchase distressed properties that would be refurbished and sold for a profit. Shawn Dicken, 40, was convicted in March 2014 for her role as a salesperson for Diversified Group, and her sentencing was adjourned this month.
INTERNATIONAL PONZI SCHEME NEWS
Hong Nara, 46, was sentenced to 20 years in prison in connection with a Ponzi scheme in which Nara charged up to $50,000 in import cars from the United States but then failed to deliver the cars.
Vincent Ciccone, 64, and Karen Thomson-Ciccone, 60, were arrested on charges that they allegedly defrauded at least 160 investors out of $21 million. The couple promised investors 20% to 30% returns on investments in resort properties, development property, and day-trading.
David Regnier, 35, pleaded guilty to charges that he ran a fraudulent investment program which was alleged to be a Ponzi scheme. Regnier was a filmmaker, and he was said to show “reckless mismanagement” with investors’ funds for two films he was making. Instead, he spent the money on trips to Las Vegas and a Porsche.
Garth Stanley Bailey, 61, was convicted in connection with the HMS Financial alleged Ponzi scheme that promised returns of 8% to 12% per month. Bailey was the lawyer for HMS Financial, which was established by Harold Murray Stark, 77, and Robert “Colonel” Fyn, 67. In 2011, Fyn and Stark both pleaded guilty to fraud over $5,000, with evidence showing more than $37 million in losses.
The Supreme Court in New Dehli asked the Central Bureau of Investigation to investigate the Rs 2,460 crore Saradha Ponzi scheme after determining that the police had failed to uncover the larger conspiracy and to interrogate politicians and other influential people. There are 44 companies to be investigated, and a list of influential people to be questioned has been created. The Supreme Court in its order said that "a huge gap between the amount collected and the investments made in real estate itself calls for effective investigation as to the trail of money collected by the group of companies."
More than 150 investors lodged a complaint with regulators seeking action against Chief Managing Director of Subhasatya Investment Solution, Ltd., Hemanta Samantaray. The investors claim they have been defrauded out of more than Rs 15 crore. The company had collected more than Rs crore from investors promising high returns, and then suddenly closed all of its offices in 2012.
Breifne O’Brien, 51, lost an appeal to stop his upcoming criminal trial on charges that he ran a scheme that defrauded 5 victims of €13 million. O’Brien had claimed that he would not be able to receive a fair trial due to adverse media attention arising from a judge’s comments in a civil proceeding that occurred years earlier.
Sushila Devi Mosese admitted to stealing $4.4 million from her employer Mainfreight in connection with a fraud run partly with her brother, Vincent Thakur Singh, who is a debtor in his own bankruptcy proceeding pending in California. Singh was accused of running a $23 million Ponzi scheme in California through his company, Perfect Financial, and recently pleaded guilty. About $1 million of the investor funds from Singh’s scheme were spent on a film project with his sister’s involvement.
Reynaldo Lu, 50, was arrested on charges that he ran a Ponzi scheme that promised unusually high returns. The scheme was run though Minerva Co. Elvy Lu, one the heads of Minverva, was arrested earlier this year.
Nicholas Peter Ford, 39, was jailed in connection with a £1.3 million Ponzi scheme that he operated. Ford had a spread betting syndicate, but then lost most of the money gambling.
Rienzie “Joe” Silva, 73, was sentenced to more than 5 years in connection with a Ponzi scheme that defrauded mostly elderly investors out of £4.5 million. Silva persuaded at least 30 investors to take out new home loans and invest the cash into an offshore account. The losses of £4.5 million does not include the ongoing liabilities and debts associated with the mortgage repayments.
Authorities issued a warning that a potential Ponzi scheme might be operating under the name of Forex Traders Consortium FX Garant co-Traders, Inc. The company uses the website domain www.traders-co.ru and offers investors returns of 1% to 1.5% per day.
Evidence was submitted by the National Prosecuting Authority that Cornelius Van der Merwe, director of SuraPure Drinks, may have been siphoning investors’ funds from SuraPure’s bank accounts in connection with an allegedly Ponzi-like scheme. Deposits in the scheme exceed $170 million and there does not appear to be any link between profits on the sale of water and profits paid out to earlier investors. Van der Merwe denies that SuraPure is a Ponzi scheme.
A settlement was reached between an investor, Leonard Abel, and the man who brought him into a scheme, Richard Goudvis, to resolve claims arising from the Barry Tannenbaum Ponzi scheme. Abel had invested $1 million with Tannenbaum, expecting to receive his money back with a 15% profit in 90 days. The settlement is confidential. Tannenbaum is a fugitive, but it is believed that he fled to Australia with his wife after being accused of defrauding investors out of more than $12 billion in what is known as the Frankel Scheme. The scheme offered returns up to 216% and represented that funds were used to buy active pharmaceutical ingredients from foreign countries which were then sold to generic makers to make antiretroviral drugs.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES
The receiver over Ponzi schemer Trevor Cook’s estate reached a settlement with the trustee over the Peregrine Financial Group Inc.’s bankruptcy case. The Peregrine trustee asked the court to approve a $10 million settlement which would release the Peregrine estate from all by one of the Cook receiver’s claims, including allegations that Peregrine managers ignored red flag.
The trustee of Bernard Madoff’s firm distributed another $351.6 million for former customers of Madoff, bring the total distributed close to about $5.95 billion. This was the fourth interim payout, and the payments ranged from $500 to $77.8 million.
The fourth distribution made by the Madoff trustee served to reduce the amount owed by the Wilpons in connection with their settlement with the trustee. The Wilpons owed $162 million, less 46.049% of $178 million that they lost, which reduces the amount they owe to about $80 million. The obligation will further decrease as the trustee recovers more funds.
The special master appointed to disburse the Madoff forfeited funds issued a press release identifying more than 50,000 claims filed on behalf of victims in an amount around $40 billion. However, the special master has not yet reviewed the filed claims to eliminate duplicates or inflated amounts.
A court permitted the estate of decedent Bernard Kessel to seek a refund of taxes paid on fictitious profits from the Madoff scheme in Tax Court. Kessel’s estate is seeking a refund of $1.9 million for death taxes paid for the year 2006 on his $4.8 million Madoff account which, in fact was worthless at that time. The IRS rejected the bid for a refund, contending that when Kessel died in 2006, his Madoff account was worth the $4.8 million that was reported at that time and subject to federal estate tax. Estate of Bernard Kessel v. IRS, 2014 Tax Ct. Memo LEXIS 98 (May 21, 2014) [enhanced version].
The Obama administration filed a brief with the United States Supreme Court urging the Court to let stand lower court rulings that bar the Madoff Trustee from pursuing billions of dollars of claims against large financial institutions such as HSBC, UBS and JPMorgan. The lower courts found that the Madoff trustee did not have standing to sue the banks on behalf of Madoff’s customers.
A poll showed that of 985 college-educated investors polled, 27% were not able to identify Madoff as the perpetrator of a stock market fraud.
The corporate monitor for OM Global Investment Fund LLC and OM Global LP filed a lawsuit against Fahrenheit Venture LLC to recover $841,000 that was allegedly wrongfully returned to an investor.
Opposing groups of creditors in the bankruptcy case of alleged Ponzi schemer Malcolm Parker are fighting over ownership of an unfinished move, “Birth of Innocence.” One group are aligned with Malcolm Parker and contend that they need control of the film so that Parker’s other creative endeavors will not be undermined. Another group seeks to make payments to the estate, finish the film and then release it. Parker and his silent partner, Louis Soteriou, owe $7.4 million to more than 400 investors in what has been called a Ponzi scheme that raised $30 million to make a $1 million movie.
The trustee for Scott Rothstein’s law firm, Rothstein Rosenfeldt Adler won a $7.02 million judgment against Banyon Capital LLC one of the investment firm’s that sent investor money to Scott Rothstein.
A FINRA arbitration claim was filed against Charles Schwab & Co., Inc. in connection with the Perry Sawano Ponzi scheme. The claim alleges that Schwab failed to reasonably adhere to its duties related to business activities relating to the disbursement of customer assets from accounts management by non-employee investment advisors and carried by Schwab.
The receiver in the R. Allen Stanford case sued the Tiger Woods Foundation and Tiger Woods Charity Event Corp. for recovery of $502,000 as alleged fraudulent transfers. The receiver contends that the donations were made pursuant to “illegal contracts”
A class action was filed against TelexFree, Inc. and related entities,, several insiders and banks, and TelexFree’s lawyer, Gerald Nehra, alleging fraud, aiding and abetting, and RICO violations. Named defendants included TelexFree LLC, TelexFree Inc., “Paralegal Doe [who] served as TelexFree, LLC’s agent, servant or employee,” TelexFree Financial Inc., TelexElectric LLLP, Telex Mobile Holdings Inc., James M. Merrill, Carlos N. Wanzeler, Steven M. Labriola, Joseph H. Craft, Craft Financial Solutions LLC, Carlos Costa, Gerald P. Nehra, Gerald P. Nehra, Attorney at Law PLLC, Richard W. Waak (Nehra law partner), Law Offices of Nehra and Waak, Richard W. Waak Attorney at Law PLLC, TD Bank NA, Citizens Financial Group Inc., Citizens Bank of Massachusetts, Fidelity Co-Operative Bank, Middlesex Savings Bank, Global Payroll Gateway Inc., International Payout Systems Inc. (I-Payout), ProPay Inc.. “Banks Doe,” “Doe Inside Promoters” and “Credit Processors Doe.”
A class action was filed against Joseph Signore and Paul Schumack to recover damages in connection with the alleged $70 million Virtual Concierge machine Ponzi scheme. Signore and Schumack were charged last month in connection with the alleged scheme. The scheme took in money from investors to purchase a purported 26,000 machines, promising 300% to 500% returns but in reality, fewer than 100 machines ever existed and actual revenue generated from advertising was less than $100,000. The lawsuit also names Signore’s wife, Laura Signore, and Schumack’s wife, Christine Schumack, although the two wives have not been criminally charged.
The Eleventh Circuit allowed the receiver of the George L. Theodule Ponzi scheme another chance to plead his claims against Wells Fargo Bank in connection with the $30 million Ponzi scheme. The receiver will be permitted to amend his complaint to provide more detailed allegations that Wells Fargo knew that its client, Theodule, was running a Ponzi scheme. Perlman v. Wells Fargo Bank, 2014 U.S. App. LEXIS 8497 (11th Cir. May 6, 2014) [enhanced version].
The ZeekRewards receiver announced that he plans to make distributions equaling 40% on reconciled claims using the rising tide method of calculation. The receiver reported that nearly half of the claimants have accepted the settlement amount presented to them. About 400 have objected so far. More than 800,000 claims have been considered allowed claims. The receiver has promised a date of September 30, 2014 for the first interim distribution to distribute the approximately $320 million in funds that he is holding.
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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