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September was another busy month for Ponzi scheme news. Here
is the summary of the stories that were reported this month. Please feel free
to post comments about 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.
A. Alleca, 42, and Summit
Wealth Management Inc., based in Atlanta, were the subject of a complaint
filed by the SEC seeking an asset freeze in connection with their sale of
interests in Summit Fund. It is alleged that Alleca and Summit Wealth
Management sold interests in Summit Fund, which they told their clients was
operating as a "fund-of-funds" - meaning they were investing their money in
other funds and investment products rather than directly in stocks and other
securities. Alleca instead allegedly engaged in active securities trading with
his clients' money, and he incurred substantial losses. He concealed the Summit
Fund trading losses from investors and provided them false account statements.
Aller and Bonnie Aller
have pleaded no contest to charges in connection with a Ponzi scheme they had
allegedly operated through their company, Malibu
East Motor Cars. Under the terms of the plea agreement, Will and Bonnie
Aller will serve 10 years of supervised probation and pay at least $234,000 to
victims who said they never got the money they invested in what they thought
were high-interest car loans for people with poor credit.
Battoo and his companies BC
Capital Group SA (based in Panama) and BC
Capital Group Ltd. (based in Hong Kong) were the subject of an emergency
action by the SEC to obtain a freeze of the U.S.-based assets belong to Battoo
and his companies. Battoo and his companies operated feeder funds for Bernard
Madoff's Ponzi scheme, and it is alleged that Battoo raised at least $100
million from U.S. investors by overstating the value of his investments, among
other things. Battoo blamed the collapse of MF Global for his inability to pay
redemptions requested by investors. In a separate complaint, the CFTC is also
seeking an asset freeze and appointment of a receiver. Tracy Lee Sunderlage, who allegedly helped Battoo raise money, was
B. Blankenship, 63, pleaded guilty to a $600,000 Ponzi
scheme that he operated through his company, Deer Hill Investment Group. He defrauded about a dozen investors,
many of whom were elderly members of his church, by taking their money to
supposedly invest at higher rates of return than they had been receiving. He
prepared false statements showing that his clients' accounts were increasing in
Bogar, Bernerd Young,
and Jason Green, were charged in
administrative proceedings brought by the SEC in connection with their role in
the Ponzi scheme of Allen Stanford. The SEC alleged that they knew or should
have known that offering documents in connection with the certificates of
deposits sold by Stanford International Bank were false or misleading. Jay Comeaux settled with the SEC's
administrative proceedings against him without admitting or denying the SEC's
allegation. Comeaux had been responsible for supervising financial consultants
and had received commissions of at least $1.3 million.
Lee Brito, 61, Bonnie Brito,
66, and Thomas Winston Moore, 68, of
California were arrested on charges relating to an alleged $25 million
investment scheme. The case will be prosecuted in Michigan since most of the
approximately 500 victims were from Michigan, recruited by John James Missitti of Michigan. Missitti and Mark Carpenter were also named in the indictment. The five
defendants promised investors large returns on their investments in, among
other things, valuable minerals extracted from a gold mine in Arizona. They used
various corporate names to run the scheme, including Infinity Trading, LLC, GetMoni.com,
and PJM Kingman Mine.
Casolo, 55, a former stockbroker for McGinn, Smith & Co,
was arraigned on allegations that he stole about $2.2 million from 16 victims
in a 3 year Ponzi scheme. Casolo pleaded not guilty to charges that he duped
clients into investing their life savings with him. Casolo used the companies Escalation Capital Group, LTD, Wilderness Partners, LLC, Wilderness Capital Group, and NCH Partners, LLC to run his scam.
Cosmo saw his 25 year prison sentence upheld on appeal. Cosmo
ran a $413 million Ponzi scheme through Agape
World Inc. and Agape Merchant Advance
LLC in which he told investors he would use their money to make short term
loans. He claimed that the loans would be secured by borrowers' assets and
promised returns as high as 80 percent.
Cladek, 68, of Florida was sentenced to 30 years in prison for
her role in a $50 to $100 million Ponzi scheme that she operated through her
company, Lydia Cladek Inc. Cladek bought
sub-prime automobile finance contracts from dealers at discounted prices and
then promised investors a large slice of the income from the notes' interest
rates, which often exceeded 20 percent. Cladek used the investors' funds on a
variety of luxuries, including 12 houses, most of which were used for
investment purposes. Cladek had three vacation homes, lived in a gated community
in St. Augustine Beach and had $2,000-sheets on her bed. Cladek also made
substantial donations to various animal shelters or rescue operations. The
court noted that Cladek showed no remorse, and the 30 year sentence may be the
largest ever given to a female accused of operating a Ponzi scheme.
Todd Crosswhite, 42, received a 2 year, 9 month sentence and
agreed to pay more than $940,000 in restitution to his victims. Crosswhite
victimized 9 people and one business working under the name of Allianz Life
Insurance Company of North America. Crosswhite was an independent agent of
Allianz, held himself out as a financial consultant, and was selling insurance
products for other companies.
DeSage, a businessman in Las Vegas, is accused of using his
companies, including Cadeau Express to defraud investors of millions of
dollars. Tara Mazzeo, 36, of Las
Vegas, is accused of lying to IRS agents about her financial ties to DeSage,
including of lying about receiving almost $500,000 from DeSage in 2009 to help
buy a home and a luxury vehicle, and about the transfer of $350,000 from DeSage's
bank accounts to Mazzeo's business, Tarabella
De Silva, 51, a Los Angeles-based and U.K. born guitarist, is
facing up to 8 years in jail after pleading guilty to charges relating to his taking
millions of dollars from investors, using his company Angels on Earth Foundation as a front for raising money for causes
such as wounded American troops and kids with autism. De Silva allegedly
operated the company in a Ponzi scheme fashion but never gave the money to the
charities he was supposedly helping. DeSilva claimed to own rights to rare
recordings and interviews by iconic bands such as the Rolling Stones, the
Beatles, and Carlos Santana. Investors were solicited to assist in the digital
re-mastering of the recordings which, once released, would supposedly be in
high demand and produce lucrative returns. However, when the purported "re-mastered"
albums were released, they turned out to be nothing more than poor quality
cover versions of already-released songs, most performed by DeSilva himself.
was charged with 8 additional counts relating to his alleged Ponzi scheme that
he ran through International Consultants
& Investment Group Limited Corp. that defrauded investors out of more
than $11 million. Elia was going to enter into a plea deal as to the one count
of wire fraud, but changed his mind and was then indicted on 8 additional
charges. Elia targeted the Wilton Manors gay community through word of mouth
Geidel and his companies Georgetown
Capital Group and Royal Alliance
Associates have been sued by plaintiffs claiming that they lost more than
$132,000 in "bogus securities" that Geidel sold them. Geidel pleaded guilty in
2011 to charges relating to his Ponzi scheme where he defrauded more than 40
investors of $1.3 million. Most of his investors were active or retired members
of a school district and he told investors that they could make investments in
certificates of deposit with 6% returns. The CDS were "fictitious and
nonexistent." He was sentenced to 3½ years in prison and ordered to make
Harder, 47, of Oregon pleaded not guilty to charges that he
defrauded more than 1,000 investors of $130 million, and then surrendered
himself to Oregon law enforcement officials. It is alleged that Harder operated
a Ponzi scheme through Sunwest
Management, raising money from investors to operate more than 300
assisted-living centers. The indictment alleges that Sunwest had started to
lose money in 2006, but Harder brought in more money to buy more than 100
assisted-living centers at the rate of one a week to hide the losses. The
indictment seeks a money judgment of $130 million. Harder filed for personal
bankruptcy protection, and in 2010, he agreed to pay $4.2 million in fines to
the Oregon Division of Finance and Corporate Securities. Harder and his wife
spent the misappropriated funds on a lavish lifestyle which included the
acquisition of 18 pieces of property and the purchase of numerous luxury cars,
including a Mercedes, a Land Rover, two BMWs, a Cadillac Escalade and a Lexus.
Jawed and Lyman Bruhn
were charged by the SEC with running a Ponzi scheme investing in blue-chip
stocks, or public stocks of well-established companies. Charges were also
brought against Jawed's attorney, Robert
Custis. They raised more than $37 million from more than 100 investors in
the Pacific Northwest. They used false marketing materials and promised
double-digit returns. Jawed controlled Griphon
Asset Management, LLC, and Griphon
Holdings, LLC, which served as advisers to numerous hedge funds created and
managed by Jawed, including Gripfhon
Alpha Fund, L.P. and Grifphon Iota
Fund, L.P. Bruhn operated Pearl
Investment Management LLC and Sasquatch
Capital Management LLC in Portland and raised more than $600,000 from ten
investors on the West Coast for a hedge fund, the Blue Chip Focus Fund. Investors were told through private placement
memoranda that the funds experienced annual returns ranging from 12.8% to
132.5%. Jawed misappropriated millions of dollars in investor funds for his
personal use, which included luxury vacations, lavish meals, and the payment of
nearly $60,000 to settle a sexual harassment lawsuit.
Koerber of Utah saw 18 of 20 charges against him allowed to go
forward in connection with allegations that he ran a $100 million Ponzi scheme.
Koerber had been contesting the charges and denied that he operated his
company, FranklinSquires Cos., as a
Ponzi scheme. Koerber allegedly promoted "Equity Milling" as a form of real
estate investment, and advertised on billboards and magazines, and through
seminars that people paid several thousands of dollars to attend.
Kovac, 61, and Robert
Congdon, 61, both of Montana, were sentenced to 2½ and 2 years,
respectively, and must pay almost $1.2 million in restitution for their role in
a Ponzi scheme operated under the name Cornerstone
Financial. Kovick and Congdon illegally arranged for loans, but were not
properly registered with the state.
Harrison Lane, 59, a former Reno financial advisor, was
indicted on charges relating to an alleged Ponzi scheme where is accused of
taking at least $2.1 million from elderly and inexperienced investors. It is
alleged that Lane deposited investor funds into E-trade accounts that were not
affiliated with his employer, Bank of America Investment Services, while
investors understood that he was purchasing U.S. Treasury Bonds on their behalf
at a rate of 6%.
Lester, 65, real estate broker in Nevada, was charged with
securities fraud, elder abuse and conspiracy and arrested in connection with a Ponzi
scheme he ran through Gold Country
Lenders with his sister, Susan
Laferte, 58, along with Lester's wife, Ellen
Lester, 65, who is an attorney and business partner, and their business
associate Jonathan Blinder, 58. Lester
would take investor funds to purportedly invest in real estate projects, but he
would use the money to pay investors on other projects. He promised investors
security in the form of deeds of trust owned by the entity in which the
investor thought the investment was being made but, in fact no security was
provided. Investors are owed more than $2.3 million.
Lipkin, 74, the former controller of Bernard L. Madoff Investment Securities, was to plead guilty to
charges related to falsifying documents that were provided to Madoff's
investors. The expected guilty plea was delayed after Lipkin suffered "an
emergency medical condition." Lipkin's son, Eric S. Lipkin, pleaded guilty in 2011 to charges that he reported
that people were Madoff employees so they could receive retirement benefits. It
has been alleged that Lipkin continued to draw a salary from BLMIS even after
retiring in 1999. Lipkin is the ninth former Madoff employee to plead guilty to
Lippman, a lawyer who formerly worked at Ponzi schemer Scott
Rothstein's law firm, pleaded guilty to conspiring to violate federal election
laws and to commit bank fraud. It is alleged that Lippman made sizable
contributions to John McCain's 2008 presidential campaign and then was
illegally reimbursed by Rothstein. Additionally, it is alleged that Lippman
used a bank account that he controlled to artificially inflate the value of the
Rothstein firm's accounts and fraudulently obtain additional financing. Lippman
saw his pay go from $400,000 to over $1.3 million when he worked for Rothstein.
Longchamps, was given a conditional sentence for two years less a
day for her role in a $1.6 million Ponzi scheme so she will not need to go to
prison. Longchamps is undergoing ongoing cancer treatment which was factored
into her sentencing. Longchamps used fraudulent entities such as "Integrity Financial Management."
Perhaps the license plates of her and her husband should have tipped off
investors: "no job for me" and "live for free." Her husband, Jeffrey Longchamps, received an 18
month conditional sentence in August.
Leland Loomis, 55, of California, was indicted along with
6 others, for their role in a multistate Ponzi scheme and related mortgage
fraud scams that defrauded investors of $17 million. Loomis and his
father-in-law, John Hagener, 76,
were charged with operating a California-based investment fund called Loomis Wealth Solutions that defrauded
more than 100 investors of more than $7 million. Loomis and Hagener pleaded not
guilty. Loomis was ordered held, and Hagener was freed on $1 million bond. The
others charged in connection with the schemes are Darren Fehst, 44, Michael
Llamas, 27, Peter Woodard, 54, Joseph A. Gekko, 43, and Dawn C. Powers, 42.
Murphy, 48, of Connecticut, pleaded guilty to charges related
to a mortgage fraud Ponzi scheme in which she refinanced homes for 5 people but
failed to repay the original mortgages. Murphy operated the scheme with Scott
Forcino, 46, who is a real estate lawyer that oversaw some of the transactions.
Murphy defrauded two banks through her company, Settle One Corporation.
Pantazelos, 63, pleaded guilty to charges related to his operation
of a Ponzi-type scheme through his company, Destiny Partners, Inc., where he took in $4,294,930 from investors
and promised them 200% returns. Pantazelos told investors that their funds
would be placed in "Private Investment Trading Platforms" that traded bank
notes in foreign markets and that funds would be donated to charitable
Pendergest-Holt, 39, the former chief investment officer of
Allen Stanford's companies, was sentenced to 3 years after she pleaded guilty
to obstructing an investigation by the SEC. Pendergest-Holt gave testimony to
the SEC which omitted crucial details about the finances of Stanford International Bank, Ltd., and
was intended to impede the SEC's investigation and to help the bank to continue
Plato 64, of Texas, was convicted by a jury in connection with
a scheme run through his company, Momentum
Production Corp., in which he sold promissory notes that he claimed were
secured by South Texas oil and gas interests. Plato had previously been
convicted of fraud in Texas, Florida and Louisiana. He sold about $6.2 million
worth of notes and never disclosed his previous convictions. About $2 million
of the funds were diverted to Plato's benefit.
Rhodes of Missouri was
the subject of a civil enforcement action brought by the CFTC for fraud in
connection with his operations of a multi-million commodity pool Ponzi scheme.
It is alleged that Rhodes took at least $2.1 million from at least 12
individuals to trade commodity futures in a pooled investment account. Rhodes
was never registered with the CFTC and allegedly solicited prospective pool
participants by pretending to be a successful, but cautious, trader who earned
annual rates ranging between 20 and 50 percent trading E-mini S&P futures
Ritter, 69, of New York, pleaded guilty to charges in
connection with his 11 year operation of a $6 million Ponzi scheme. Ritter
initiated the scheme in 2001 after the failure of a debt collection business he
started with a partner. To cover the losses, he solicited hundreds of thousands
of dollars from investors, promising to invest the funds in real estate
ventures. Instead, Ritter used the funds to pay interest payments on the
previous loans and to pay personal expenses.
Carlos Rodriquez, 41, pleaded guilty to charges relating to
his stealing $1.9 million from 63 investors and he was sentenced to 7 years in
prison and ordered to pay about $2 million in restitution. Rodriquez was an
accountant with an investment business, MDN
Financial Group into which he lured clients, family and friends to invest,
guaranteeing returns of 20 to 50 percent in each month. He was purportedly
investing in stocks, bonds, and gold, but instead stole the money to pay for
homes, cars and a nice lifestyle. It is alleged that Rodriguez took a total of
about $5 million for 116 investors who signed investment management agreements
Rothstein, 38, Scott Rothstein's wife, was charged in connection
with allegations that she concealed more than $1 million in jewelry from
federal investigators and then later attempted to sell some of it through Eddy Marin, 50, and Patrick Daoud, 54. At the time that
investigators seized property from the Rothsteins' residence, Kim Rothstein
assured them that they had everything, but it is alleged that she and two
others "knowingly took action to conceal certain items of jewelry." It is also
alleged that Kim Rothstein and her co-conspirators, Stacie Weisman, 49, and Scott
F. Saidel, 45, tried to persuade Scott Rothstein to testify falsely about
the location of jewelry. Kim has plead not guilty to the charges, but it is
expected that she will enter into a plea agreement with prosecutors. Marin has
been charged with obstruction of justice and perjury.
X. Sanchez, 52, was sentenced to more than 11 years in prison and
ordered to pay more than $7.8 million in restitution for his role in a $7.2
million Ponzi scheme operated through InvestForForeclosures
with his partner, James D. Bourassa,
55. Sanchez represented that he bought distressed houses, rehabilitated them,
and sold them for profit. He pleaded guilty to fraud in May and admitted in his
plea agreement that that he solicited people to invest in InvestForClosures by
making various misrepresentations, including: (1) that their investments would
be safe because they would be backed by real estate; (2) that InvestForClosures
used the majority of its investors' funds to purchase real estate; and (3) that
because of the business's efficient cash flow from buying and selling houses,
InvestForClosures had never failed to make an interest payment on time or to
return an investor's principal when requested. Sanchez also represented that he
was developing an exclusive residential community in Mexico known as The Sands of Gold. Bourassa was
sentenced to 51 months in prison.
Schmickle, 37, and his company Q Wealth Management Inc. were charged by the CFTC in connection
with allegations that they were operating a commodity futures Ponzi scheme that
took in at least $5.3 million from at least 10 customers. It is alleged that
Schmickle made misrepresentations to induce investments and then created and
sent false account statements. Scmickle has already pleaded guilty in a related
Sharif, 42, of Connecticut has been charged, arrested, and
released on $150,000 bail, in connection with operating a Ponzi scheme through
his company, First Financial LLC,
that defrauded investors of hundreds of thousands of dollars. It is alleged
that Sharif created and emailed bogus account statements to convince the victim
that his $400,000 investment had appreciated to more than $2.2 million and that
the funds were secure.
Angelo Sivigliano, 80, was sentenced to 8 years in prison and
ordered to pay more than $2.21 million in restitution for his role in $3.8
million Ponzi scheme in which he sold "investment opportunities" in Helping Hearts and Hands Inc. (HHH) based
in Oklahoma. Sivigliano took in $3.8 million from 67 investors and paid some of
that money out to earlier investors and some to his businesses Celebrity Limo
Valet Corp., MC Productions Inc., and Lansbrook Worship & Event Center. He
held out as a charitable organization that benefits philanthropic ventures such
as a Christian childcare facility called "Teaching Little Hearts and Hands." Co-conspirator
Dwight Pimson, 57, of Louisiana, and
Marie Pimson, 43, or Oklahoma,
pleaded guilty and were sentenced to 5 years and 30 months, respectively, and were
ordered to pay restitution of more than $2.7 million each.
Turnock, 68, and William
P. Sullivan II, of Colorado, were unsuccessful in their attempt to be
relieved from a freeze order of their assets obtained by the SEC in connection
with allegations that they operated a $15.7 million Ponzi scheme through Bridge Premium Finance LLC. They had sought
a release of their assets on the basis that they are suffering economic
hardship and health issues.
Edgardo Urrea, 55, a youth baseball coach, pleaded guilty
to charges in connection with a Ponzi scheme that defrauded about two dozen
victims of $419,000. Urea promised that he would invest the money or provide
investment advice, but instead kept the money to use it to pay his mortgage and
his son's university tuition. Urrea was sentenced to 20 years, with 15 of those
years suspended, and ordered to pay $247,000 in restitution.
Vaughan, 64, who pleaded guilty to charges relating to his Ponzi
scheme in December 2011, was sentenced to 12 years in prison in connection with
his Ponzi scheme that stole $75 million from more than 600 investors. Vaughan
then filed a Chapter 7 bankruptcy petition. Vaughan ran his scheme through his
New Mexico residential brokerage firm called Vaughan Company Realtors. Vaughan had spent investor funds on his "Ponzi
Palace," which was a four bedroom, seven bath mansion with a poolside cabana
and wine cellar on a golf course, along with almost $800,000 for luxuries
including $252,653.38 for domestic and international travel, $146,263.64 on
clothes and jewelry, $153,710.58 on home furnishings. Vaughan's bookkeeper, Martha Runkle, was sentenced as well,
but the terms of her sentencing agreement have been sealed.
Vourliotis, 52, of Alabama, pleaded guilty to and agreed to repay
$5.3 million as restitution in connection with his Ponzi scheme-like operation
which he ran through Capston Group, Cornerstone Investment Group and Tristone Investment Group. Vourliotis
took in about $7.5 million from about 36 investors in these investment clubs. Carey Michael Billingsley also pleaded
guilty today to one count of selling an unregistered security in the scheme.
Billingsley was an associate with Vourliotis who recruited some investors.
Winans Jr. has waived his right to be indicted by a grand jury and
was charged in connection with charges that he operated a Ponzi scheme in which
he represented that the Winans
Foundation Trust was investing in crude oil bonds in Saudi Arabia. Winans
is the son of Michael Winans Sr., a member of the Gospel Hall of Fame quartet
the Winans. He is alleged to have taken at least $8 million from 1,000 victims,
guaranteeing the victims that the bonds would yield returns of $1,000 to $8,000
within 60 days.
J. Wise, 62, pleaded guilty to counts in connection with his $130
million Ponzi scheme run through Millennium
Bank, its Geneva-based parent United
Trust of Switzerland S.A. and Sterling
Bank and Trust, all of which were all controlled by Wise. The scheme
defrauded about 1,200 investors by selling them bogus certificates of deposit.
B. Wragg, Amanda E. Knorr,
Speed of Wealth, LLC, Wayde M. McKelvy, Donna McKelvy, and Mantria
Corporation, had a final judgment entered against them, ordering them to disgorge
millions of dollars in connection with a scheme that raised funds for Mantria "green"
initiatives such as "carbon negative" housing community and "biochar" charcoal
substitute made from organic waste. Investors were promised returns from 17
percent to "hundreds of percent" annually.
PONZI SCHEME NEWS
Hobbs was hit with a reserved judgment in connection with an
alleged $50 million Ponzi scheme involving 14 unlicensed investment funds.
Hobbs is one of 19 defendants originally named in a lawsuit brought by the
Australian Securities and Investment Commission. Hobbs, though Vanuatu company, Future Trading Corporation Ltd., took in more than $42 million
(NZ$50 million) from more than 700 Australians where investors were promised
access to offshore investment opportunities and the wholesale financial market
generating returns of about 3 to 4 percent or more per month with no risk of
losing the invested money.
Brost and Gary Sorenson
were ordered to pay millions in penalties by the Alberta Securities Commission in
connection with a Ponzi scheme in which it is alleged that 4,000 investors were
bilked out of at least $100 million. The Alberta Securities Commission has
imposed sanctions about $54 million against Brost and Sorenson, along with Dennis Morice, the Institute for Financial Learning, Group of Companies Inc. and Merendon
Mining Corporation Ltd.
Berke lost his bid to have his extradition case in Canada
thrown out. Berke is wanted by the FBI in connection with a Ponzi scheme that
he operated in California that defrauded about 70 investors out of $81 million.
Bowerman, 35, pleaded guilty to 33 fraud charges relating to a
Ponzi scheme in which he took up to £5 million from about 200 investors. Bowerman
was a mortgage advisor and defrauded 200 investors, including his own mother.
Levene, 48, has admitted to running a £32m Ponzi scheme. Known
as "Beano," Levene promised investors he was buying shares, but in fact stole
some of the money. Levene would falsify documents to make it look like he had
bought them shares or made them profits when in fact they were being stolen
from. His victims allegedly include property developers the Tchenguiz brothers,
music mogul Simon Cowell and Sir Philip Green.
A group of investors in Shams Investment has sued Abdul
Mubin Shaikh, Imran Qazi Painter,
Feroz Ali Najmushani, and Shakun Patel in connection with an
investment scheme run through Shams Investment and its two subsidiaries, Akshar Colour Limited and Green Nest Infratech Ltd. Investors
were promised 10% returns every month on their principal and were promised that
they could win a flat in the real estate project of the company if they took
part in a monthly lucky draw. About 50 investors who had lost their money in
the scheme sat on a one-day fast to draw the attention of the police. The
alleged perpetrators have not yet been charged and many cannot presently be
An international bench warrant was issued for Francois de Dietrich in connection with
an alleged scam he ran from Etic
Solutions. De Dietrich has previously been convicted of fraud and served a
two-year jail term in France. Now it is alleged that 187 investors have been
defrauded in connection with a scheme where he told investors they could make
large returns when he used their money to buy second-hand planes, Rolls Royces
and other big ticket items at auctions and then sell them to Middle East
investors. De Dietrich has been on the run, and he was sentenced to 18 months
in prison in his absence after refusing to reveal information about his
The investment firm of Custom House Capital collapsed after being run like a Ponzi scheme
which promised prominent investors attractive returns. More than 1,500
investors invested as much as €500m.
Hirst, 61, Richard
Pollett, 70, and Linda Hirst,
62, were sentenced in connection with their £10 million Ponzi scheme. Hirst was
sentenced to nine years in prison for his role in the Ponzi scheme that targeted
ex-pats in Mallorca. Financial advisor Pollett was sentenced for six and a half
years. Linda Hirst was sentenced to two and a half years. John Hirst and
Pollett promised investors returns of 20 % per annum. Of the £10 million of
investor deposits, less than £5 million was paid out to investors to give the
impression the scheme was working. The rest of the money was used to fund Hirst's
extravagant lifestyle which included spending £90,000 on his Las Vegas wedding
and at least £270,000 spent renovating Hirst's villa in Mallorca. Additionally, approximately £160,000 was
spent on hotels, holidays, and flights with more than £25,000 spent on jewelry.
Bradley, who ran a Ponzi scheme with her late husband, Mike,
though B'On Financial Services, was
found guilty. Bradley owed more than $15 million to 28 investors.
Sergei Mavrodi, the creator of the 1990s MMM Ponzi
scheme, has created a political party with the same name. The goal of this new
party is supposedly to bring about "world financial apocalypse." Mavrodi served
4½ years for his scheme that defrauded 10 to 15 million Russians of $110
LEGAL ISSUES IN PENDING PONZI SCHEME CASES
Singer John Mayer has been sued for $465,000 by the
trustee administering the Darren Berg
$100 million Ponzi scheme. Berg had paid a booking agency Grabow & Associates
the funds and Mayer was paid by Grabow for his appearance at a corporate event
in 2008. Berg was sentenced to 18 months for his role in the Ponzi scheme.
Investors who lost more than $2.5 million in the Ponzi
scheme of Blue Mountain Consumer
Discount Co. have served a subpoena on the FBI for documents that the FBI
seized from the home and offices of Francis
Cinelli in connection with a lawsuit against Cinelli and the CEO of the
company, Walter "Buddy" Lambert. The
FBI seized about 20 boxes of documents in 2011, and the investors need the
documents to move their civil case forward. The FBI said it had copied about
half of the items. The court overseeing the manner suggested that the victims
serve a subpoena to force the FBI to release the documents.
The trustee of the Ponzi scheme of Dante DeMiro in Michigan has obtained the voluntary turnover of
funds from various entities. He received the return of $22,500 from the city of
Muskegon Heights, $500,000 from Comstock Township, a Kalamazoo area township,
and nearly $1.5 million from other entities.
Irving Picard, the trustee of the Bernard L. Madoff Ponzi scheme case, made a distribution of about
$2.5 billion to victims, which is the second pro rata distribution he has made. The victims have previously
received disbursements from Picard and they have received advances from the
Securities Investor Protection Corporation, which brings the amounts paid to
victims for their losses to over 50%.
Fielding, the CEO of HSBC (Luxembourg), is being sued in the
Cayman Islands for breach of duty, willful neglect and willful default in his
capacity as a director of Primeo Fund,
whose entire assets of more than $786 million were invested in Bernard Madoff's fraudulent enterprise.
Investors and the receiver in the Ponzi scheme case of Management Solutions, Inc. are battling
over disclosure of records and the receiver's proposed auction of the remaining
assets. The investors want the receiver to turnover over marketing reports and
property appraisals relating to property that the receiver might include in the
auction, and the receiver has expressed concern over how much input the
investors should have in the running of the receivership. The receiver hopes
that one big auction will reduce the ongoing costs of the receivership.
Management Solutions took in over $200 million from investors in operating one
of the largest ever Utah Ponzi schemes.
The former finance' of Thomas Petters, Tracy Mixon,
39, saw her support payments end this month. Mixon had been receiving support
payments for her and her two children with Petters for many years. The receiver
of the Petters case filed a motion to stop the support payments, noting that
Mixon has had "ample time" to find a job or make other arrangements to support
The Trustee in the Scott
Rothstein bankruptcy case has settled with the Razorback investors in which
it is proposed that the Razorback group would be allowed a special payment of
$8 million as a "substantial contribution" claim because of the resources
expended by the Razorback group in pursuing TD Bank and others in court. The
Razorback investors alleged that they lost about $200 million in the Rothstein
Ponzi scheme. They have already reached a settlement with TD bank for $170
million and a smaller settlement with Gibraltar Private Bank and Trust.
TD Bank settled a lawsuit brought by Emess Capital, which
had sued for $33.8 million in connection with the Scott Rothstein Ponzi scheme case. Emess had amended its complaint
to allege that the bank had violated the federal Racketeer Influenced and
Corrupt Organizations Act (RICO), which permits victims of racketeering to
recover treble damages. The terms of the settlement are confidential. The
lawsuits against TD have alleged that it aided Rothstein's $1.2 billion Ponzi
scheme by ignoring fraud alerts and by issuing phony "lock letters" to
Rothstein's victims that promised their money was only to be released to them.
A former TD executive allegedly signed the letters.
SPD Group, operating as J.R. Dunn Jewelers, agreed to a
$325,000 settlement with the trustee administering the Ponzi scheme case of Scott Rothstein's law firm, Rothstein Rosenfeldt Alder. Rothstein
reportedly bought more than $2 million in jewelry from J.R. Dunn between
November 2005 and October 2009, including many items for Rothstein's wife, Kim.
TD Bank's motion for a new trial in the case in
connection with the Scott Rothstein
case, where it was hit with a $67 million jury verdict in favor of Coquina
Investments, was denied. The court found, "The jury was entitled to find... that
it was particularly reprehensible...that a bank, which people entrust with
their money, would aid and abet a Ponzi scheme such as the one Rothstein was
A claim for negligence against the SEC by investors in
the Stanford Financial Ponzi scheme
withstood a motion to dismiss. The claim is that, despite knowledge of the
Ponzi scheme as early as 1997, the SEC failed to notify the Securities Investor
Protection Corp. The lawsuit alleges that the SEC has a nondiscretionary
obligation to report a broker/dealer to SIPC when the SEC believes that the
broker or dealer is in or approaching financial difficulty.
The liquidators in the Allen Stanford case have filed a lawsuit against Canadian TD Bank,
alleging collusion in the Stanford Ponzi scheme. The complaint alleges, "But
for TD Bank's conduct... the [fraud] would have been discovered and prevented,
the fraudulent transactions... would not have been completed and damages would
not have been suffered by SIB and its customers." Although the complaint
alleges $20 million in damages, the plaintiffs have said that their claims may
exceed $3 billion. TD Bank has filed a motion to dismiss the complaint.
Greenwich Insurance Co. has filed a lawsuit claiming that
it has no duty to defend or indemnify Dallas law firm Carter Holmes PLLC or
Steve Holmes in connection with lawsuits that have sprung from the $57 million Striker Petroleum Ponzi scheme.
Greenwich contends that the defendant have no coverage because the claims were
not made and reported during any single policy period. The allegations of the
Ponzi scheme which was revealed in 2009 were that Striker, Mark Roberts, 58,
and Christopher Pippin, 35, had defrauded investors of $57 million, promising
debentures collateralized by oil and gas properties.
Dustin Diamond, who played the character Screech on "Saved
by the Bell," has been sued by the receiver of the estate of Robert Stinson. Stinson is serving 33
years in prison for his Ponzi scheme operated through his company, Life's Good, Inc., that defrauded 263
investors of more than $17 million. Diamond was named in the complaint along
with Rogue International Talent Group dba Rogue Entertainment dba Rogue Talent
Agency; Roger Paul Inc.; Roger Paul; High Idea Corp. dba High Ideas Inc. who
had received money out of the Ponzi scheme, some of which had been lent to
Diamond and has not yet been repaid.
The receiver of the estate of Ronnie Wilson and his company, Atlantic
Bullion and Coin, Inc., was authorized to sell silver bars that were seized
by authorities and to use the proceeds for an eventual distribution to
defrauded investors. The silver bars were sold for $675,000. Wilson pleaded
guilty to charges in connection with his $90 million Ponzi scheme.
The state of California has sued movie producers Windsor Pictures, Skyline Pictures, Michelle Kenen Seward, Dror Soref, and others,
alleging that they were operating a Ponzi scheme and committing fraud in
raising more than $23 million to supposedly make and distribute movies. The
victims were mostly seniors who were invited to seminars and were offered a "no
risk" investment in movies that would have "high rates of return." The
complaint alleges that Seward told prospective investors that she was tired of
seeing seniors being taken advantage of by the financial industry" and that
this was not a Ponzi scheme. The complaint also names Protege Financial & Insurance Service dba Senior Retirement
Specialists and Teacher Retirement Specialists, Saxe-Coburg Insurance Solutions LLC, Not Forgotten LLC, and Scott
More than 33,000 customers of Zeek Rewards have signed a petition to keep the company in
operation, standing behind the company and contesting the receiver's
appointment and administration of the company. The petition states that the
shutdown of Zeek has "devastated them and that they are "behind Zeek Rewards,
Zeekler, Rex Venture, and Paul Burks one hundred percent." Once of the
individuals leading this group, Robert Craddock, who has been openly critical
of the SEC for shutting down the business, has been subpoenaed by the SEC. A
lawyer for Fun Club USA, Inc., a company owned by Craddock, has filed a motion
for permission to appear in the Zeek case. The receiver has so far recovered
almost $300 million in assets but is still looking for more. It is estimated
that this was a $600 million Ponzi scheme that involved approximately 1 million
investors. Burks has agreed to pay $4 million in a penalty and give up his
interest in the firm without admitting or denying guilt.
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 is available for purchase at www.lexisnexis.com/ponzibook,
and more information about the book can be found at www.theponzibook.com.
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