Tuesday, September 30, 2014

September 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for September 2014. The reported stories reflect: 4 guilty pleas or convictions in pending cases; over 239 years of newly imposed sentences for people involved in Ponzi schemes; at least 11 newly discovered schemes involving over 135,000 victims and more than $328 million; and an average age of approximately 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.

    Eric Aronson, 46, pleaded guilty to defrauding investors of $30 million in a Ponzi scheme that he ran through Permapave Industries and Permapave USA Corp. The scheme defrauded more than 200 investors by promising returns as high as 400% for financing the importation of ecologically friendly paving stones from Australia.

    David Boden, 52, and Richard L. Pearson, 57, were both charged in connection with the Scott Rothstein Ponzi scheme. Boden was the general counsel for the Rothstein Rosenfeldt Adler law firm and was charged relating to his failure to disclose a second sales commission in several transactions. Pearson was a broker who worked in the same building and who sold legal settlements to investors. It is believed that both Boden and Pearson intend to plead guilty.

    John R. Bullar, 52, pleaded guilty to running an $8.7 million foreign exchange Ponzi scheme that defrauded 46 investors. The CFTC also charged Bullar with violations of commodities laws. Bullar ran his scheme through Executive Management Advisors and convinced investors that he had a computerized algorithm system that monitored the market for patterns and alerted him to potential losses. Bullar created an investment log for his clients to follow and put several computer monitors in his home office to give his business the appearance of legitimacy. He misappropriated approximately $6 million for his own use.

    Robin Kyo Cho, 50, was sentenced to 105 years in prison without the possibility of parole in connection with a triple homicide that was discovered because of his prior conviction in connection with a $2 million Ponzi scheme. Cho had pleaded guilty to a Ponzi scheme in 2008 and was required to submit a DNA sample as part of his sentence. His DNA was linked to the murder of a Korean woman, her 2 year old son, and a live-in nanny in 2003. Cho had admitted to defrauding at least 11 investors by promising them returns of 4% to 6% per year and that their principal was guaranteed. Cho had faced 60 years in prison in connection with the scheme but had negotiated just 5 years of probation as part of his plea agreement.

    Fred Davis Clark Jr., 56, and Cristal R. Clark aka Cristal R Coleman, 41, were the subject of a new indictment in connection with the investment scheme run through Cay Club Resorts and Marinas. It is alleged that they used Cay Club to sell vacation rentals with the promise of an upfront “leaseback” payment of 15% to 29% of the purchase price. Cay Club had raised more than $300 million from about 1,400 investors. An earlier civil enforcement action by the SEC was dismissed on statute of limitations grounds.

    John Williams Cranney, 73, was indicted on charges related to an alleged Ponzi scheme that defrauded at least 15 investors out of more than $6 million. Cranney solicited money from investors through his companies Cranney Capital I and Cranney Capital II.

    Tim Durham, 52, Jim Cochran, 58, and Rick Snow, 50, had all almost all of their 25 felony convictions upheld on appeal in connection with their $200 million Ponzi scheme run through Fair Finance Co. that defrauded 5,000 victims. U.S. v. Durham, 2014 U.S. App. LEXIS 17267 (7th Cir. Sept. 4, 2014). The three defendants are serving sentences of 50 years, 25 years, and 10 years, respectively, and will now be resentenced. All of the challenges to the conviction but one were rejected by the appellate court. As for the one, the court stated, “The government failed to enter into the trial record key documentary evidence supporting two counts of wire fraud against Durham. It was clearly an oversight, but the mistake leaves a crucial gap in the evidence on those counts.”

    eAdGear was the subject of an SEC action in which the SEC alleged that the eAdGear program is a $129 million Ponzi and pyramid scheme. The SEC identified the operators of the scheme as Charles S. Wang, 52, and Qian Cathy Zhang, 52, and Francis Y. Yuen, 53. eAdGear held itself out as a profitable Internet marketing company and targeted investors in Chinese communities. The program involved 66,000 accounts held by tens of thousands of investors. The company supposedly used search engine optimization to help clients increase their website rankings on search engines and then claimed to share 70% of the revenue generated with investors. Investors were also promised 5% to 15% commissions for the recruitment of new investors.

    Derek Elliot, 43, pleaded guilty to charges that he had masterminded a $91.3 million Ponzi scheme along with James Catledge. The two defrauded hundreds of investors in connection with a scheme to renovate a luxury hotel in the Dominican Republic. Catledge has denied wrongdoing and a trial is pending.

    Glen Galemmo, 48, is the subject of a new complaint brought by the CFTC alleging that Galemmo’s Ponzi scheme involved about $116 million. Galemmo previously pleaded guilty and was sentenced to 15 years and 8 months in prison. The complaint alleges that Galemmo falsely promised investors returns ranging from 17% to 40% and that his firm, QFC LLC, suffered trading losses of $1.2 million.

    Jennifer E. Hoffman, 37, John C. Boschert, 43, and Brian Zuzga, 37, were charged with running a $25 million Ponzi scheme. The scheme allegedly defrauded 100 investors by promising them returns of up to 50% per week through their company, Assured Capital Consultants. Zuzga was charged with impersonating a lawyer and assuring investors that their money was safe in an escrow account.

    Christopher Jackson, 46, Michael Bolden, 60, and Victor Alvarado, 53, were sentenced to 30 years, 20 years, and 10 years, respectively, in prison in connection with a Ponzi scheme involving more than $20 million and as many as 250 investors. The scheme was run through Diversified Management Consultants, which ran investment clubs in which people purportedly invested in the purchase and development of land. Bolden and Alvardo pleaded guilty, and Jackson went to trial and was found guilty.

    James Jackson Jr., 48, was sentenced to 90 years in prison in connection with a $2.7 million Ponzi scheme in which Jackson held investment seminars to lure investors into his company, AFG. Jackson was sentenced to three consecutive 30 year terms, which is believed to be the third longest prison sentence in a Ponzi scheme case, coming after only Bernard Madoff and Allen Stanford. Jackson used his companies, American Senior Advisory Group and Covenant Planning Group, to solicit elderly investors to invest in AFG. About 33 victims were defrauded.

    Walter P. Lambert, 73, pleaded guilty to charges that he ran a $10 million Ponzi scheme through Blue Mountain Consumer Discount Company. Lambert promised returns around 9% or 10% and he told investors that he would use their funds to issue high-interest loans to consumers at rates of 23% to 26%.

    Joseph Laurer aka Dr. Josef V. Laurer, now deceased, is the subject of a civil complaint in which his widow, Brenda M. Davis, is named as a relief defendant. The complaint alleges that Laurer ran a $4.6 million Ponzi scheme that defrauded 50 investors through his company, Abatement Corp. Holding Co. Laurer told investors he would put their money into AAA-rated corporate and government bonds with guaranteed returns and no risk to the principal balance.

    Andrew Madoff, the son of Bernard Madoff, died after a battle with cancer. Andrew Madoff’s brother, Mark Madoff, had committed suicide in 2008. The two brothers had turned their father in to criminal authorities in 2008. Both have been sued by the trustee of the Madoff scheme who is seeking the return of tens of millions of dollars that was transferred to them. Neither was charged with any criminal wrongdoing.

    Bernie Madoff’s penthouse sold for $14.5 million to Lawrence Benenson who runs a real estate investment and development firm.

    Erik Laszlo Mathe and Ashif Jiwa were indicted in connection with alleged securities fraud relating to their start up television company, Vision Broadcast Network. The SEC also filed a civil lawsuit alleging that they raised $5.7 million from approximately 100 investors but spent most of the money themselves. The SEC complaint alleges that Mathe and Jiwa misled investors into believes that Vision Broadcast owned TV stations and 70 broadcast licenses. The SEC complaint also names a company affiliated with Jiwa, Bluemark Asset Management LLC, as a relief defendant.

    William Charlton Mays IV was sentenced to 30 years in prison in connection with a $225,000 Ponzi scheme. Mays promised investors 6% to 18% per year from gold, silver and commodities investments.

    Sean Michael Meadows, 41, was charged with a new count for scheming a landlord and a renter. Meanwhile, charges remaining pending against Meadows for running a $10 million Ponzi scheme through Meadows Financial Group that defrauded 50 investors. In the latest charges, Meadows sought to have a renter circumvent the owner of a property and pay rents directly to Meadows even after Meadows had failed to fulfill a contract to purchase the property.

    James Ashby Moncure, 41, was charged with an alleged Ponzi scheme in which he promised investors returns of 10% to 25% in a program to acquire and develop the Quantico Corporate Center in Virginia. The scheme allegedly involved at least $35 million in investor deposits.

    James Nicholson, 48, was unsuccessful in his attempt to shorten his 40 year prison sentence for running a $140 million Ponzi scheme through his hedge fund firm, Westgate Capital Management LLC. The court rejected Nicholson’s claims of ineffective counsel. Nicholson v. U.S., 2014 U.S. Dist. LEXIS 132695 (S.D.N.Y. Sept. 22, 2014).

    Gina Palasini, 52, was charged with running a massive Ponzi scheme that defrauded seniors by promising them assistance in obtaining Medicaid or veterans benefits.

    Lananh Thi Phan, 54, and Diane H. Do Bui, 49, were charged with running an $8 million Ponzi scheme that targeted the Vietnamese-American community. At least 18 victims were involved, but there may be more. Phan, a licensed realtor, worked with Bui, who was a notary public, to persuade investors to invest in different investments, including a “secret” venture. The scheme effectively promised investors returns of 70% per year and that their money was safe.

    Marlon M. Quan and his companies, Acorn Capital Group LLC, Stewardship Investment Advisors LLC and ACG II LLC, were the subject of an $80 million sanction award and permanent injunctions for their role in the Tom Petters Ponzi scheme. SEC v. Quan, 2014 U.S. Dist. LEXIS 131618 (D. Minn. Sept. 19, 2014). The SEC had alleged that Quan helped facilitate the Petters fraud by funneling several hundred million dollars of investor money into the scheme and assuring investors that their money was protected by various safeguards.

    Stuart Rosenfeldt, 59, pleaded for mercy in connection with his sentencing on charges relating to the Scott Rothstein, 52, Ponzi scheme. Rosenfeldt, one of Rothstein’s former law partners in their firm Rothstein Rosenfeldt Adler, had pleaded guilty to charges in connection with the Ponzi scheme. Rosenfeldt contends that his drug-addicted son would suffer “irreparable damage” if his father is sent to prison. Rothstein is serving a 50 year sentence, and Russell Adler, 52, surrendered this month to serve his 2½ year sentence for illegally funneling campaign donations on Rothstein’s behalf.

    Trenton T. Shavers, 31, the founder of Bitcoin Savings and Trust, was found liable for securities violations and ordered to pay a $40.7 million fine in an action commenced by the SEC. Bitcoin Savings and Trust was accused of running a Ponzi scheme that promised investors returns of 7% interest weekly based on the purported Bitcoin market arbitrage activity.

    T. LeMont Silver, one of the promoters of the ZeekRewards scheme, is now promoting a new program called “BitClub Network.” Silver has also been linked to a program called Gold Crowdfunding. Silver has been sued by the receiver of ZeekRewards for gains received in the scheme. BitClub Network purportedly pays out a daily dividend for 1,000 days and has three “mining pools” with tiered buy-in rates: $500, $1,000 and $2,000. Early birds — described as “Leaders” — are being encouraged to send in $3,599 to qualify for a “Founder’s” position.

    Jason Snelling, 50, had his 11 year prison sentence vacated when the court found that the loss amount used in calculating sentence guidelines had not accounted for money returned to victims in the form of fictitious interest payments. See U.S. v. Snelling, 2014 U.S. App. LEXIS 19857 (6th Cir. Sept. 22, 2014 ). Snelling still must deal with two other prison sentences however, including a 40 year prison sentence, relating to his Ponzi scheme run through Dunhill Investment Advisers and CityFund Advisory. Snelling operated out of Cincinnati and promised rates of return of 10% to 15%.

    Joel Steinger, 64, was sentenced to 20 years in prison for masterminding an $800 million Ponzi scheme through Mutual Benefits Corp. that defrauded more than 30,000 investors. The company bought life insurance policies from people with AIDS, cancer and other chronic illnesses and sold them to investors. Safe and high returns were promised to investors. The company was shut down by the SEC in 2004.

    Jeffrey M. Toft, 51, Chad A. Sloat, 36, and Michael J. Murphy, 54, were sentenced to 66 months, 70 months, and 48 months in prison, respectively, in North Carolina in connection with the Black Diamond Capital Solutions Ponzi scheme. The three defendants had operated a $40 million hedge fund Ponzi scheme that defrauded hundreds of elderly victims by promising returns of up to 137% from a foreign currency trading program. The mastermind of the scheme, Keith Simmons, was sentenced in 2012 to 50 years in prison and ordered to pay $35 million in restitution. Simmons promised investors that no more than 20% of their funds would be at risk at any time, and he quoted Bible verses to convince about 240 investors to invest. Another defendant, Jonathan Davey, 50, is awaiting sentencing.

    Gary Richard Vibbard, 59, was sentenced to 63 months in prison in connection with a $3 million Ponzi-like scheme that defrauded dozens of investors. Vibbard had told investors that he was a proven financial manager, but he had actually filed bankruptcy in 2000, owed more than $1.5 million in back taxes, and had lost more than $1 million in investor funds in a prior failed company. Vibbard used investor funds to pay personal expenses such as his gym membership and an internet dating service, and he had instructed his bookkeeper to purchase cashier’s checks with the funds in the corporate bank accounts so as to prevent creditors from seizing his accounts.

    Oscar Villarreal, 27, was indicted in connection with a $9.6 million Ponzi-like scheme that is believed to have defrauded about 46 investors. Villareal was selling limited partnership interests and promising returns of as much as 45%.

    Eliyahu Weinstein, 39, pleaded guilty to charges that he defrauded investors out of $8 million by promising them high returns because he supposedly had the inside track on Facebook shares in advance of the company’s public offering. Weinstein is already serving 22 years in prison for masterminding a $200 million Ponzi scheme in New Jersey.

    Zhunrize was the subject of an SEC action filed to shut down a fraudulent program that was allegedly operating across state and national borders. It is alleged that the Zhunrize program, run by Jeff Pan, 52, involved $105 million and defrauded 77,000 investors.

INTERNATIONAL PONZI SCHEME NEWS

Canada

    The trial of Gary Sorenson and Milowe Brost began in Calgary. The two defendants face charges in what is being called the largest Ponzi-type scheme in Canadian history. At least 2,000 investors around the world allegedly lost about $400 million. The scheme involved the companies Syndicated Gold Depository SA, Base Metals Corporation LLC, Bahama Resource Alliance Ltd., Merendon Mining Corporation Ltd., and Strategic Metals Corp

    Garth Bailey, 61, sat through his sentencing hearing where prosecutors argued that Bailey’s role in a multi-million Ponzi scheme warranted between 8 and 9 years. Bailey was convicted in May on charges for his role in the HMS Financial Ponzi scheme that collected about $37 million from investors. Bailey was the lawyer for HMS Financial, which was established by Harold Murray Stark and Robert (Colonel) Fyn. The scheme offered investors 8% to 12% returns per month and claimed that their money was protected by a $30 million bond that could cover any losses. Stark was previously sentenced to 6 years and Fyn was sentenced to 8 years after they had pleaded guilty. Bailey’s services added a “veneer” of credibility to the company as its lawyer.

England

    Eleven women were convicted for their roles in a cash-gifting pyramid scheme known as “Give and Take” and “Key to a Fortune.” The scheme targeted brides and young couples, encouraging them to get a great start to wedded life by putting their cash in a gifting scheme that would supposedly turn £3,000 into more than £20,000. The scheme involved £21 million.

    Geoffrey Langdale, 63, was sentenced to 6 years in prison for running a £2.3 million Ponzi scheme that defrauded 28 victims. Langdale ran his scheme through Langdale Accountants.

    David Gerald Dixon, 49, was arraigned on charges that he ran a multi-million Ponzi scheme through Arboretum Sports (U.K.) Ltd., which was a sports betting company.

Hungary

    A fine of Ft 1.25 billion was levied against Zsolt Szabo-Forrai and his companies, Fortress Holding, Flow Money and Flow Money Int. The companies promised 9% returns to investors.

India

    Bikash Swain, the proprietor of Suryaprava, and Ranjan Das, former chief of Swastik India Multi-Purpose Credit Cooperative Society, were arrested.

    Debasis Mohanta, the director of Happy Life Realty India, was sentenced to 5 years in jail. Two other agents, Pranab Behera and Jiban Das, were sentenced to 4 years each.

    Sadananda Gogoi was arrested in connection with the Saradha Ponzi scheme.

    Half-burnt documents were recovered from the riverbank in connection with the Ponzi scheme of SLB Invest India Ltd. Local fisherman observed two people setting papers on fire near the riverbank. The men fled after they were spotted, and the documents reflect records of SLB’s business and the names and addresses of investors.

    The Calcutta high court admitted a petition seeking investigations into the activities of Progress Cultivation Ltd. It is alleged that Progress Cultivation was a Ponzi scheme in which funds from investors were used to purchase property.

    Cases were filed against MPS Greenery Developers Ltd. and Akash Deep Projects LtdPramatha Nth Manna, the founder and managing director of MPS Greenery, and another director, PK Chanda, were also arrested.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    The liquidator of Fairfield Sentry Ltd., an offshore Bernard L. Madoff feeder fund, was permitted by the Second Circuit to try to undo an imprudent sale of its $230 million claim against Madoff’s firm. Krys v. Farnum Place LLC (In re Fairfield Sentry Ltd.), 2014 U.S. App. LEXIS 18427 (2d Cir. Sept. 26, 2014).

    Investor Brad Markowitz filed an appeal asking to revive his lawsuit against LPL Financial LLC relating to an $8 million Ponzi scheme run by Michael E. McCready, 46. McCready had worked at LPL while running his scheme that targeted entertainment industry professionals. Markowitz alleges that LPL should have detected suspicious activity.

    Cal Poly San Luis Obispo filed a motion in the bankruptcy case of Al Moriarty, 81, seeking to cover up Moriarty’s name from its stadium scoreboard. Moriarty was convicted last month in connection with a $22 million Ponzi scheme. Moriarty had paid $625,000 in 2009 for naming rights to the video scoreboard.

    Some claims in the class action lawsuit relating to the $800 million Ponzi scheme of MRI International were dismissed and some were allowed to proceed. The complaint alleged that MRI misrepresented that its business was legitimate and that the company purchased and collected medical accounts receivable. The lawsuit named MRI, along with Edwin J. Fujinaga, 67, Junzo Suzuki and Paul Musashi Suzuki as defendants. Fujinaga owned and operated the company in Las Vegas, and Junzo Suzuki handled the marketing and investment solicitations in Japan. The lawsuit also named LVT aka Sterling Escrow, which handled MRI’s bookkeeping.

    Palm Beach Finance Partners and Palm Beach Finance II sued BMO Harris Bank for $23.6 billion for the alleged actions of M&I Marshall & Ilsley Bank which BMO acquired. The lawsuit alleges that M&I was complicit in the Thomas Petters scheme, that they knew no retailers were making payments into the Petters’ accounts, and that they knew Petters’ accounts only had a few million dollars at a time, rather than the billions of dollars in collateral that lenders granted him. M&I never filed a suspicious activity report with regulators.

    The court in the Scott Rothstein Ponzi scheme case approved a settlement between the victims of the Ponzi scheme and the creditors of Rothstein’s law firm, Rothstein Rosenfeldt Adler. The settlement resolves competing claims to about $50 million of assets that will be divided between the government seeking forfeiture of those assets and the trustee of the law firm.

    Investors in the Martin Sigillito Ponzi scheme have filed a new lawsuit against the former chief executive of Enterprise Trust Co., Paul Vogel, and Argos Partners LLC. The plaintiffs allege that they lost more than $4.8 million in the scheme in which investments were sought for loans to Distinctive Properties of London, England, known as The British Loan Program. The lawsuit accuses Vogel of participating in the scheme and referring investors to it in exchange for a $150,000 finder’s fee. A previous lawsuit against Vogel was settled for a confidential sum. The lawsuit alleges that Vogel created two companies, Brad-Green Development LLC and Cranmer Associates LLC, to divert investor money to himself.

    The SEC decided not to appeal the recent decision by the appeals court in Washington that held that the Stanford Financial victims are not “customers” under the terms of SIPA. The appellate court agreed with the lower court that an estimated 7,800 former customers of Stanford Group Co. did not qualify for reimbursement from SIPC because they did not fit the statutory definition of a “customer.”

    The Fifth Circuit affirmed the lower court’s ruling in favor of the Stanford Financial receiver against net winners in the Ponzi scheme. The court agreed with the lower court that investors had provided reasonably equivalent value to the extent they received back their principal investments, but that the receiver could recover amounts paid back in excess of their principal investment. See Janvey v. Brown, 2014 U.S. App. LEXIS 17580 (5th Cir. Sept. 11, 2014).

    The Department of Justice sought a stay of civil discovery in the SEC’s action against Telexfree. The government argued that the administration of its parallel criminal case might be impaired by the defendants’ use of the civil discovery process in the SEC case.

    The lawyers and turnaround advisors for TelexFree who were involved in TelexFree’s bankruptcy case before the trustee was appointed have agreed to cut their fee requests significantly. The company’s lawyers, Greenberg Traurig, agreed to cut its fee request from $969,999 to $320,000. The turnaround advisers, Alvarez & Marsal, agreed to reduce their fees from $876,000 to $435,000.

    The Massachusetts Securities Division has reached a settlement with Fidelity Co-operative Bank for $3.5 million to resolve claims in the TelexFree Ponzi scheme. The president of Fidelity is John Merrill, the brother of alleged Ponzi schemer James Merrill. The bank will establish a $35 million relief fund for individuals defrauded in the $1.1 billion TelexFree Ponzi scheme. TelexFree made three deposits into the bank totaling $10.1 million. James Merrill and Carlos Wanzeler each also had personal accounts at the bank, and Wanzeler moved $3.5 million from his personal account to an overseas bank account in Singapore.

    Morgan Stanley was fined $280,000 for ignoring “numerous red flags” in connection with the $35 million Ponzi scheme run by Benjamin Wilson through his company, SureInvestment. Morgan Stanley ignored warning signs such as documents that showed that SureInvestment had returns of 2,850% and 45 consecutive profitable months. The CFTC had alleged that the firm failed to supervise its officers and employees in the handling of the company’s accounts.

    The ZeekRewards receiver requested authority to sue at least 23 Canadian residents to recover a total of about $2.91 million.

Sunday, August 31, 2014

August 2014 Ponzi Scheme Roundup

Posted by Kathy Bazoian Phelps

    Below is a summary of the activity reported for August 2014. The reported stories reflect: 10 guilty pleas or convictions in pending cases; over 138 years of newly imposed sentences for people involved in Ponzi schemes; at least 5 newly discovered schemes; and an average age of approximately 55 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.

    Gabriel Bitran, 69, and his son Marco Bitran, 39, have agreed to plead guilty to running a hedge fund scam that lost more than $140 million. They ran their Ponzi scheme through GMB Management and GMB Capital Partners, promising returns of 16% to 23%.

    Terrence Brown and Antranik Kabajouzian, 35, were sentenced to 15 years and 10 years, respectively, for their roles in a $5 million real estate Ponzi scheme that they operated through Bay Area Equity Group. Approximately 40 victims were promised “guaranteed” returns of 15%.

    Bryan Caisse, 50, pleaded guilty to operating a $1.2 million Ponzi scheme that defrauded more than 20 victims. Caisse ran a hedge fund called Huxley Capital Management in which he promised investors annual returns of 8% in connection with short-term loans. Caisse instead used the money to fund his lifestyle including car services, tuition for his daughter’s school, and $10,000 on a dating service.

    Robert H. Cassandro, 47, was sentenced to 15 months to 4 years in prison in connection with an at least $11 million Ponzi scheme. Cassandro was found guilty after a two month trial. He obtained loans from family and friends to build about 30 single-family homes on Long Island, and he pledged the new houses as security for the loans. The homes had already been pledged in connection with other loans. Cassandro used the funds on luxury items such as a race horse, a glass-enclosed home gym and pool, and parties.

    Jenny Coplan, 55, was sentenced to 4 years in connection with a $4 million Ponzi scheme aimed at immigrants. Coplan defrauded 46 investors through her company, Immigration General Services LLC, and promised them 60% to 120% interest from nonexistent government-secured immigration and bail bonds.

    Blayne Seth Davis, 33, pleaded guilty to charges in connection with an $11.9 million Ponzi scheme. Davis ran the scheme through his company, Capital Blu, which represented that it was investing in off-exchange foreign currency trading through an entity called CMB FX Fund LP. Davis ran the scheme with Damien L. Bromfield, who has pleaded guilty, and Donovan G. Davis, Jr., who has pleaded not guilty.

    Archie Evans, 43, a convicted Ponzi schemer, was indicted on a firearm charge that could add another 10 years to his 7 year prison sentence he is already serving in connection with his $3.7 million Ponzi scheme. Evans had tried to bring a handgun into the federal courthouse on the day of his sentencing and was considered a felon in possession of a firearm. Evans scheme had targeted members of the Tilly Swamp Baptist Church where he was pastor and promised investors quarterly returns of 10% to 12% for investing in his company, Gold & Silver LLC.

    Glen Galemmo, 48, was sentenced to 15 years, 8 months for conducting a $100 million Ponzi scheme through his company, Queen City Investment Fund. The scheme defrauded about 140 victims. Galemmo had filed a request for a shorter prison sentence of 6 years following his guilty plea and original request of 8 to 10 years. The government had sought 12½ to 5½ years.

    Fotios Geivelis Jr., 34, was sentenced to 5 years in prison for a Ponzi scheme that defrauded 47 investors out of $3.9 million. Geivelis ran the scheme through Worldwide Funding III Ltd. He promised investors quick returns on their investments from the use of their money to make overseas loans for humanitarian causes. Instead of investing, however, Geivelis split the money with Bernard Butts, 70, and about 10% went to brokers.

    Keelan M. Harris, 38, pleaded guilty to charges relating to a Ponzi scheme orchestrated by his brother, Kevin Harris, 49, who was sentenced to 7 years in prison in connection with the scheme. The $20 million Ponzi scheme was run through a company called Complete Developments LLC. About 400 victims were promised between 5% and 12% interest per month in connection with foreign-exchange trading and were promised that 80% of their money was safe. Investors lost $15.8 million.

    Robert L. Holloway, 56, was found guilty in connection with a Ponzi scheme run through his Utah-based U.S. Ventures Company. He had promised investors 5% per month using a special software program. He ran a commodities trading program in which investors lost about $10.5 million.

    Mark Holt, 45, was sentenced to 10 years in prison for his $4 million Ponzi scheme that he ran through Harbor Planning Investment Group. Holt promised returns though safe long-term investments but instead spent investor funds on his travel, clothing, and gym and club memberships.

    William Ison pleaded guilty to charges that he helped defraud investors out of almost $7 million. Ison acknowledged assisting Douglas Ellingson in soliciting investors into a scheme that was supposedly safe because it was backed by Ison’s multi-billion dollar mining company.

    Sam Israel, 54, will not be released from prison. His request to be released early from prison was denied. Israel, the founder of Bayou Hedge Fund Group, was sentenced to 20 years in prison in connection with the $450 million Ponzi scheme run through Bayou.

    David Lincoln Johnson lost his appeal of his convictions and sentence in connection with a $20 million Ponzi scheme he ran through Gentech Fabrication Inc. The Ninth Circuit largely upheld his conviction and sentence.

    James Willis Kirk, 63, Carol April Graff, 61, and Glen Smith Jr., 60, were sentenced to 4 years, 4 years and 18 months, respectively, in connection with a $20 million Ponzi scheme masterminded by Thomas Kimmel. The scheme was run through Sure Line Acceptance Corporation and targeted church-goers who were promised that their principal was protected by collateral such as cars and car loans. The 3 defendants had pleaded guilty and had each testified against Kimmel.

    Rick Koerber saw all criminal charges get dropped against him in connection with allegations that he had operated a $100 million Ponzi scheme. The alleged scheme was known as FranklinSquires Cos. and Founders Capital, but the case was dismissed because the court cited the government’s pattern of neglect and dilatory conduct" as well as "several instances of questionable ethical conduct in prosecuting this case."

    Robert Timothy Koger, 48, was sentenced to 11 years in prison in connection with a $55 million Ponzi scheme. Koger was the president and sole owner of Molinaro-Koger, an international hotel real estate brokerage and advisory firm. He ran three different schemes that involved flipping hotels and promissory notes.

    Terry Kretz, 61, was sentenced to 14 years in prison and ordered to pay about $14.7 million in restitution for his role in an $18 million Ponzi scheme. Kretz offered investors the opportunity to invest in Hanover Corporation and issued them promissory notes bearing high interest rates. Kretz' co-conspirators, Daryl Bornstein, 55, a Hanover salesman, and Robert Haley, 55, Hanover's chief financial officer, previously pleaded guilty and were also sentenced this month to 5 years and 70 months, respectively.

    Anthony J. Lupas, 80, had his criminal case dismissed due to his age and medical condition. Lupas was declared incompetent to stand trial. Lupas had been charged in connection with an alleged $6 million Ponzi scheme in which he promised annual tax-free investment returns of at least 5%.

    Andrew Mackey and Inger Jensen saw their prison sentences upheld by the Eleventh Circuit. See U.S. v. Jensen, 2014 U.S. App. LEXIS 14636 (11th Cir. Jul. 31, 2014). The two had run a Ponzi scheme through Andrew Samuel Mackay Financial Funding Corp. and had received 14 and 27 year prison terms, respectively.

    Robert McGregor, Jason Bryant Smith, and Brian Rose were indicted and accused of running a $15 million Ponzi scheme that defrauded more than 160 investors. The scheme operated under the name Earth Energy Exploration, but Rose started operating under the name New Century Coal when Earth Energy came under investigation. They represented that the company was the country’s largest producer of “Blue Gem” coal, and investors were promised quarterly payments of 6% of their investment.

    Sean Meadows, 41, was indicted in connection with an alleged Ponzi scheme involving the retirement accounts of more than 50 investors. Meadows is a financial planner that used his firm, Meadows Financial Group, to defraud his victims out of at least $10 million. He told his victims that their money would be placed in bonds and real estate, and he promised returns of up to 10%. Instead, he used the money for personal expenses and to make payments to other investors. 

    Al Moriarty, 81, pleaded no contest to charges against him relating to a $22 million Ponzi scheme. Moriarty ran his scheme through Moriarty Enterprises. Moriarty had filed bankruptcy claiming $18 million in debt.

    Doris Elizabeth Nelson, 55, who pleaded guilty in April to running a Ponzi scheme through The Little Loan Shoppe, is the subject of a forfeiture action. The U.S. government is seeking the forfeiture of millions of dollars, property and jewelry from Nelson. Nelson had admitted that she took in about $137 million from at least 650 investors, but her later request to withdraw her guilty plea was denied by the court.

    Kelly Ng, 57, Walter Ng, 84 their advisory firm The Mortgage Fund LLC, and Bruce Horowitz agreed to resolve fraud charges brought against them by the SEC. The SEC alleged in its complaint that they defrauded investors in their real estate fund, Mortgage Fund ’08 LLC, and that they secretly used its assets to rescue another fund called R.E. Loans LLC. Kelly Ng and Walter Ng will be barred from the securities industry and will pay fines over $5 million along with the others.

    Frank Preve, 70, pleaded guilty to charges in connection with the Scott Rothstein Ponzi scheme. Preve ran the Banyon Group feeder fund, which invested funds into the Rothstein scheme. Preve admitted that he should have known that Rothstein's firm, Rothstein Rosenfeldt Adler PA, was sending the feeder funds documents for sham legal settlements.

    Stuart Rosenfeldt, 59,  and Russell Adler, 52, both former law partners of Scott Rothstein, lost their licenses to practice law in Florida.

    Lynn Alan Simon pleaded guilty to a Ponzi scheme that defrauded 4 victims out of $100,000. He promised investors a high rate of return for investments in his company, Financial Security Planning, Inc.  Simon also operated Insurance Shoppe and Financial Security Planning.

    Jeffrey Dean Schrader had his broker-dealer and investment adviser registrations revoked by the New Jersey Bureau of Securities. Schrader sold unregistered notes offered by Liberty State Benefits of Pennsylvania, Inc. The notes raised more than $10 million from investors, and the funds were improperly used in a Ponzi scheme by Michael William Kwasnik and others. Schrader is not alleged to have participated in the Ponzi scheme, but he did assist Kwasnik in selling the unregistered securities.

    Irene Shannon aka Irene Stay, 50, was sentenced to 5 years in prison for her role in aiding the Scott Rothstein Ponzi scheme. Shannon was the CFO of Rothstein’s law firm, Rothstein Rosenfeldt Adler and oversaw the firm’s bank accounts. Shannon pleaded guilty and admitted to floating checks between bank accounts to launder money.

    Nicholas D. Skaltsounis and his companies, AIC Inc. and Community Bankers Securities LLC, were ordered to pay penalties of nearly $70 million relating to what the SEC called a Ponzi scheme. At trial, Skaltsounis and his companies were found liable for a fraud that defrauded at least 74 investors in 14 states. AIC billed itself as a financial services holding company that acquired small broker-dealers such as Community Bankers, CBS Advisors, Waterford Investor Services and Advent Securities. They had promised investors dividends of between 9% and 12.5%.

    Joel Steinger, 64, was sentenced to 20 years in prison for masterminding an $800 million Ponzi scheme run through Mutual Benefits Corp. The scheme victimized more than 30,000 investors who were promised high returns for their investments. Mutual Benefits would supposed buy life insurance policies from people with AIDS, cancer and other chronic illnesses and would sell them to investors. The policyholder would be paid an upfront discounted amount, and the investor was promised a larger insurance payout when the insured died.

    Douglas L. Swenson, 66, and Mark Ellison, 66, were sentenced to 20 years and 5 years, respectively, for their roles in the Ponzi scheme of DBSI Inc. The scheme defrauded more than 250 people out of more than $100 million. They were convicted after a 42 day trial in which the evidence revealed a scheme involve a range of security investments, including bonds, notes and tenant-in-common investments in real estate.

    Donna Tucker was charged by the SEC with running a $730,000 Ponzi scheme that defrauded elderly clients of UBS Wealth Management. Tucker resigned from UBS in 2013, and UBS has reimbursed several customers.

    Stephen Walsh agreed to a permanent ban on trading and soliciting funds and to settle civil litigation brought against him by the CFTC. Walsh had previously pleaded guilty to charges relating to a $553 million commodity pool scheme through WG Trading Co.

    Deepal Wannakuwatte, 63, fired his lawyer at his sentencing hearing, claiming that he had been coerced into pleading guilty. His sentencing was postponed indefinitely to give Wannakuwatte an opportunity to be represented in court by a lawyer. His scheme, run largely through International Manufacturing Group, is believed to have involved more than 100 victims and more than $200 million, with a net loss of about $108 million. He had promised investors returns to be generated from $100 million in hospital supply contracts which were actually only worth $25,000. Wannakuwatte also invoked his Fifth Amendment rights and refused to answer questions at the meeting of creditors in his bankruptcy case.

    Ronnie G. Wilson, 67,  is facing new charges that he conspired with his wife, Cassandra Kendall Wilson, 66, and his brother, Timothy L. Wilson, 60, to hide $400,000 in gold, silver and cash. Wilson allegedly gave his wife and brother ammunition canisters containing cash. Ronnie Wilson is currently serving a 19.5 year prison sentence after pleading guilty to running a $57.4 million Ponzi scheme through his company, Atlantic Bullion and Coin, Inc. that defrauded 798 investors. Cassie and Tim have also been charged with conspiracy.

INTERNATIONAL PONZI SCHEME NEWS

India

    Wayward Industries, Wayard Infrastructure Company and Warish Group of Companies, have been accused of running a Ponzi scheme that defrauded investors of more than 100 crore.

    Raids were conducted of the offices of Mid Touch Assets and Securities Ltd., as well as at the residence of the managing director, Soubhagya Kumar Samal. The companies are believed to be running a Ponzi scheme.

    PACL was banned by the Securities and Exchange Board of India from collecting any more money from investors. It is believed that the PACL Ponzi scheme involved Rs 50,000 crore and 5.85 crore investors. Investors believed they were investing in “agricultural land.”

New Zealand

    Grant Malcolm, 63, was accused of running a Ponzi-like scheme through Herbert Insurance Group Limited, which owed $3.1 million to insurers when it was liquidated in 2011.

South Africa

    Gary Anthony Croxford, 60, and Jacobus Basson, 41, were charged in connection with an alleged R8.8 million Ponzi scheme. The two promised safe capital investments in a micro-lending business called Streetwise Mutual Assistance. Investors were promised 24% returns with 2% payable monthly or, in some cases 36% per year with 3% paid monthly.
 
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

    A settlement of a class action against East West Bancorp in connection with the Ponzi scheme of AOB Commerce Inc. was approved. The settlement of $10 million resolves claims that the bank assisted the $48 million Ponzi scheme. It was alleged that AOB promised investors guaranteed returns of between 3% and 5.5% and that the bank was the primary bank that AOB used to pay returns and commissions to investors.

    The trustee of the Berjac Ponzi scheme sued a number of banks, claiming that they enabled the Ponzi scheme. The banks are Umpqua, Pacific Continental Bank, Century Bank and Summit Bank. The trustee is seeking the return of allegedly fraudulent transfers of $27.7 million from Umpqua Bank, $22.9 million from Century Bank, $6.3 million from Pacific Continental and $251,906 from Summit. The trustee is also seeking $10 million in punitive damages. The complaint also alleges that accounting firm Jones & Roth aided and abetted the scheme. Berjac was run by Mike Holcomb and Gary Holcomb and started out as an insurance premium finance company.

    The Second Circuit affirmed a lower court decision denying the trustee in the Bernard Madoff case the ability to void two settlements between Madoff victims and feeder funds. Picard v. Fairfield Greenwich Ltd., 2014 U.S. App. LEXIS 15274 (2d Cir. Aug. 8, 2014). The trustee had sought to void a $410 million settlement with J. Ezra Merkin and an $80 million settlement with Fairfield Greenwich on the grounds that the settlements interfered with his administration of the Madoff case and were essentially an end run around the fraudulent transfer claims that the trustee is asserting against those entities. The Second Circuit did not agree with the trustee and permitted the settlements to stand. The trustee’s fraudulent transfer cases against the feeder funds remain pending.

    The bankruptcy court in the Madoff case found that more than 300 individuals who had invested in the Madoff scheme indirectly through Employee Retirement Income Securities Act plans were not “customers” of Madoff’s firm and therefore cannot recover from SIPC. In re Bernard L. Madoff Securities, 2014 Bankr. LEXIS 3563 (S.D. N.Y. Aug. 22, 2014).

    Investors in the Mueller Capital Management Ponzi scheme run by Sean Mueller may receive $10 million from the receiver administering the case. Mueller had promised investors returns of 12% to 20% using a proprietary day-trading system. More than 100 claims were filed in the case seeking $117.6 million in damages, of which $68.4 has been approved. Mueller pleaded guilty in 2010 and received a 40 year prison sentence. John Elway is among the largest claimants and is expected get back $1.44 million of the $9 million he invested. Mueller’s scheme involved at least 145 investors and over $147 million.

    An appeals court dismissed claims of the Palm Beach Funds against U.S. Bank that the bank aided and abetted the Thomas Petters Ponzi scheme. Varga v. U.S. Bank, N.A., 2014 U.S. App. LEXIS 16095 (8th Cir. Aug. 21, 2014).

    A court awarded investors $105 million in connection with their claims against Mamoru Saito and Takahito Sakagami, along with Tetsuya Hashikura, Hiromi Hashikura, Amiworld Inc., EBOA Ltd., EUBK Holdings Inc. and Tsukuyomi Corp. Saito and Sakagami masterminded the Ponzi scheme the defrauded Japanese investors

    The Eleventh Circuit affirmed a $67 million jury verdict against TD Bank in connection with the Scott Rothstein Ponzi scheme. Coquina Investments v. TD Bank, 2014 U.S. App. LEXIS 14388 (11th Cir. July 29, 2014). TD Bank was found liable for aiding and abetting the Rothstein scheme.

    The district court presiding over the Allen Stanford Ponzi scheme declined to compel the receiver to arbitrate his fraudulent transfer cases against defendants.

    A court rejected Robert Allan Stanford’s attempt to enjoin the activities of the receiver of his companies in prosecuting litigation against various defendants. Stanford accused the receiver of illegally taking his customers’ account information and using estate assets to pay his legal fees.

    A Louisiana congressman urged the SEC to appeal the recent D.C. Circuit ruling that the investors in the Stanford Financial Ponzi scheme are not entitled to relief from the Securities Investor Protection Corp. Rep. Bill Cassidy asked SEC Chairwoman Mary Jo White to seek Supreme Court review of the decision.

    The receiver of WCM777 is seeking court approval to pursue claims against a California lobbying firm, Governmental Impact Inc., for $750,000. Ming Xu, affiliated with WCM777, entered into a contract with GII around the time that the WCM777 program was barred in Massachusetts and a Desist and Refrain order had been entered in California. GII allegedly did not perform any work.

    The receiver in Zeek Rewards obtained approval to make interim partial distributions on allowed claims on September 20, 2014. The receiver said he would pay an amount equal to 40% of each allowed claim using the rising-tide method of calculation which was approved by the Court. See The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes, Chapter 20.04[3][e] for an explanation of the rising tide method.

    The Zeek Rewards receiver also received permission to sue net winners overseas who had a net gain of at least $1,000.