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Posted by Kathy Bazoian Phelps, Partner at Diamond McCarthy LLP
Below is a summary of the activity reported for November 2016. The reported stories reflect: 6 guilty pleas or convictions in pending cases; over 37 years of newly imposed sentences for people involved in Ponzi schemes; at least 3 new Ponzi schemes worldwide; and an average age of approximately 50 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what’s in the news, not writing or verifying it.
Gino Franciesco Accettola, 49, was accused in a lawsuit of running a Ponzi scheme. Accettola told clients that he was a builder who could provide large returns for investors in his construction projects. The lawsuit alleges that 11 victims lost more than $3.7 million.
Will Allen, 38, pleaded guilty to charges relating to his operation of a $35 million Ponzi scheme. Allen, who played for the New York Giants, Miami Dolphins and the New England Patriots, ran a scheme that involved high interest loans to athletes. Co-defendant, Susan C. Daub, 56, also pleaded guilty. Allen and Daub had set up Capital Financial Partners in 2012 and recruited investors by promising high returns. They took in more than $35 million and repaid less than $22 million.
Brenda Ashcraft had her preliminary hearing continued due to a recent change in lawyers. Ashcraft is a former real estate agent who was indicted earlier in the year on accusations that she defrauded investors out of $15 million. Ashcraft allegedly misrepresented that she was using investor funds to invest in real estate but instead used the money to support a lavish lifestyle, including buying a $50,000 package of Cincinnati Reds season tickets last year.
Eric Bartoli, 62, was sentenced to 20 years in prison and ordered to pay more than $47 million in restitution in connection with a $65 million Ponzi scheme that he ran through Cyprus Funds. Bartoli had fled to Peru for more than 10 years and was brought back to the U.S. last year. He pleaded guilty and as part of his plea agreement prosecutors agreed to seek a sentence of up to 10 years. The judge doubled the sentence after hearing from the victims. The scheme defrauded 800 investors by promising them high returns in conservative blue-chip stocks.
Stephen C. Browere, 57, was sentenced to 5 years in prison and was ordered to pay $3.7 million in restitution for a Ponzi scheme run through his company, Stephens Capital Management Inc. Browere promised guaranteed returns to investors in connection with the purchase of $1.66 million in promissory notes in Douglas Capital Corp., but failed to tell investors that his relative was the president of Douglas Capital and that Browere ran the day-to-day operations. Browere used investor funds to purchase a yacht and a BMW.
Andrew Capersen, 40, was sentenced to 4 years in prison in connection with his Ponzi scheme in which he stole nearly $40 million from family and friends and from a hedge fund foundation. Prosecutors sought a prison sentence of 15 years, but the court considered testimony from an expert on gambling addiction in reaching its conclusion.
Clarence Counterman, 59, and Robert Lova, 52, were convicted in connection with a scheme that was run through their solar energy related companies, including Renewable Energy Consultant, Inc. (Nevada); EP Solar Technologies, Inc. (Nevada); LITTCE, Inc. (Texas); and Eco Global Corporation (Texas). About $2.1 million from more than 50 investors was used to pay earlier investors or for the personal use of Counterman, Lova and one other defendant, Leopoldo Parra, 54. Counterman is the owner of a Texas tax preparation business called Taxrite.
Stephen S. Eubanks was charged in connection with an alleged Ponzi scheme that took in at least $529,000 from investors. Eubanks held himself out as a successful hedge fund manager and operated through Eubiquity Capital LLC, promising to invest in stocks, options and other securities. Eubanks used $145,000 to pay for his personal expenses.
Claus C. Foerster, 56, was sentenced to 2 years in prison and ordered to pay $3.5 million in restitution in connection with a $3 million Ponzi scheme while employed as a financial adviser at Morgan Keegan & Co. Foerster advised clients to invest in SG Investment Management, a company wholly owned by Foerster that was “totally fictitious.”
Ronald Mason, 47, was sentenced to 6 years in prison in connection with a $650,000 Ponzi scheme. Mason had previously served 33 months in prison and used a fake last name, Budalucci, when released from prison to avoid federal supervision. Meanwhile, he solicited funds from more than 100 people who had been defrauded in the Financial Resources Management scheme run by Scott Farrar and Donald Dodge. Mason stole funds from the FRM victims and concealed his status as a fugitive.
Ash Narayan was barred by the Certified Financial Planner Board of Standards from using its certification. Narayan is the subject of an SEC action which accused him of transferring more than $33 million of his clients’ funds to an online sports and entertainment ticket business called The Ticket Reserve. Narayan was an investment adviser who worked for RGT Capital Management, and he failed to disclose that he was a member of Ticket Reserve’s board, owned millions of shares of the company, and received a $2 million finder’s fee for the investments. Narayan also falsely told investors that he was a CPA when he was not. Ticket Reserve’s chief executive, Richard Harmon, and its chief operating officer, John Kaptrosky, were also charged in connection with the scheme.
Aaron Olson, 42, was ordered to pay more than $22.8 million in restitution in connection with a $28 million Ponzi scheme that he ran through AEO Associates and KMO Associates LLC. Olson was not a licensed investment broker, and he defrauded about 100 investors. About $2.6 million of the investors’ funds were used by Olson on himself. In April, Olson was sentenced to 5 years in prison.
Maria Elena Perez, 44, was suspended by the Florida Supreme Court for ethics violations in connection with her representation of Nevin Shapiro in his Ponzi scheme case. Perez represented Shapiro in connection with his criminal case relating to the $930 million Ponzi scheme he ran through his business, Capitol Investments USA. Perez had worked with the NCAA during her tenure as Shapiro’s lawyer and provided information to the NCA that proved to be detrimental to Shapiro in the NCAA investigation.
Sann Rodrigues, 44, was sentenced to time served (57 days) on an immigration charge that he presented a green card that he had obtained based on false statements to immigration officials. Rodrigues faces civil charges from the SEC in connection with the TelexFree Ponzi scheme. Rodrigues has also been involved in other schemes known as Universon Fone Club and IFreeX.
Michael Skupin, 54, who was being investigated for running an alleged Ponzi scheme, was convicted for possession of child pornography that was found on his laptop during the Ponzi scheme investigation. A few days after the conviction, Skupin admitted to running a Ponzi scheme and pleaded guilty to one count of larceny. The scheme was called “Pay it Forward.” Victims would invest $10,000 and were eventually paid back from new investors’ money.
R. Allen Stanford, 66, lost his appeal to the Supreme Court seeking to overturn his 2012 conviction and 110 year prison sentence for running a $7.2 billion Ponzi scheme. The Supreme Court rejected the appeal without comment, leaving in place the Fifth Circuit’s decision upholding Stanford’s conviction and sentence.
The Blessing Loom was labeled a Ponzi scheme by the Better Business Bureau. The Blessing Loom had a social media site that promised large returns. Participants who sent $100 to a PayPal account would obtain a spot on the “Blessing Loom” and would then recruit others to hopefully receive an $800 return on their investments.
David P. Thomas, 56, was arrested on allegations that he was running a Ponzi scheme that defrauded at least 17 victims. The scheme involved more than $500,000 in his financial planning firm. Thomas represented that he was an adviser for Thomas & Company Wealth Management. He was licensed through his insurance company, originally Thomas & Company, now Insured Solutions on Magnolia Street.
INTERNATIONAL PONZI SCHEME NEWS
Twenty-two employees of Ezubao were indicted in connection with an illegal international border crossing into Myanmar. Last year, Ezubao, a P2P service, was shut down by police in multiple Chinese jurisdictions on allegations that it had defrauded about 900,000 investors out of more than 50 billion yuan ($7.4 billion) in a Ponzi scheme. Ezubao also has operations in Myanmar. Ding Ning, the chairman of Yucheng International Holdings Group Ltd., Ezubo’s parent company, and Zhang Min, Ezubao’s president, were accused of financial fraud, and Ding was suspected of possessing guns and attempting to arrange for others to flee to Myanmar. It is reported that nearly 1,000 P2P platforms have been closed so far this year after failing to repay investors.
Some of the more than 6,000 victims of the $300 million Ponzi scheme run by Exential Group have hired a private consulting and financial fraud company to assist them in recovering their money. Most of the victims are from the cabin crew of the Emirates Airline and were promised returns of 120% on investments in “forex managed accounts.” Exential’s parent company, FCI Markets, is a forex brokerage based in the British Virgin Islands.
Prakash Panda of M/s Siridi Sai Real Estate Pvt. Limited was found guilty in connection with a Ponzi scheme that defrauded investors
Authorities are investigating whether OneCoin Vietnam is a Ponzi scheme. The cryptocurrency scheme is promoted by Bulgarian Ruja Ignotova and is run via a “financial exchange” called Bamboo. The scheme represents that the purchase of one coin for €0.6 per coin will yield €20 in less than one year. Or, if an investor chooses the VIP package and pays an initial €33,600 to obtain 56,000 OneCoin units, they will recover €1.12 million ($1.24 million) once the price rises from €0.6 to €20. In addition to the virtual currency trading scheme, OneCoin Vietnam is also soliciting investors into its cash-based financial investment scheme, seeking investors of VND5 million (223) and promising a dividend of VND6.5 million ($290) after only 10 days. OneCoin stopped paying interest to its investors in September.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES
A group of investors in the Jay Peak investment program are seeking production of all emails with the word “Ponzi” from the brokerage firm for Ariel Quiros, one of the developers of the Jay Peak program which was the center of the EB5 scheme. The firm, Raymond James, contends that the search of emails of 20 employees for a 10 year period would produce an overwhelming number of results, most of which would be related to other cases in the news. The investors allege that Raymond James placed the word Ponzi at issue in its motion to dismiss the case against it by stating that to support aider and abetter liability against Raymond James, the plaintiffs would have to allege facts showing that the firm had actual knowledge that Quiros was operating a Ponzi scheme.
The trustee in the Bernard Madoff case has reached a $32.1 million settlement relating to Cohmad Securities Corp., whose clients invested more than $1 billion with Madoff. The settlement is with the estate of former Cohman Chairman Maurice “Sonny” Cohn, his widow Marilyn Cohn, and their daughter Marcia Cohn, who was Cohmad’s chief operating officer.
The court presiding over the Bernard L. Madoff Investment Securities SIPA proceeding dismissed the Madoff trustee’s subsequent transfer claims against foreign entities on the basis of international comity and extraterritoriality. The ruling dismissed the trustee’s $21.53 million of claims against Charles and David Koch, among others.
The Madoff court denied without prejudice Fairfield Sentry’s assignment of more than $900 million of claims to the Madoff trustee. The proposed assignment was just part of the entire settlement agreement and the ruling was without prejudice to the Fairfield liquidators to seek approval of the entire settlement agreement. In re Fairfield Sentry Limited, 2016 Bankr. LEXIS 4046 (Bankr. S.D. Nov. 22, 2016).
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.