Ponzi Scheme Roundup: June 2017

Posted on 07-18-2017 by
Tags: Ponzi Scheme

ponzi scheme

By Kathy Bazoian Phelps 

PONZI SCHEME ROUNDUP: June 2017 

Below is a summary of the activity reported for June 2017. The reported stories reflect: 4 guilty pleas or convictions in pending cases; over 44 years of newly imposed sentences for people involved in Ponzi schemes; at least 6 new Ponzi schemes worldwide; and an average age of approximately 57 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.

Rodney Allen, 65, is missing amid allegations that he was running a fraudulent scheme through his securities investment company, KA Investments Inc. Allen owes more than $1.1 million to investors. His accounts were frozen after his disappearance. Allen’s wife said that Allen took his passport, gun and cash from their safe.

William Apostelos, 55, was sentenced to 15 years in prison and ordered to pay restitution in excess of $32 million. Aposteles ran a $70 million Ponzi scheme through his firm, WMA Enterprises LLC, in which about 480 victims lost about $20 million.

Hugh Monroe Dyson, 67, was convicted of running a Ponzi scheme through his fictitious oil and gas drilling firm called Keyport Oil. He used scissors, tape and a copier to fabricate stock certificates for investors, who lost more than $289,000.

GAW Miners and ZenMiner, founded by Homero Joshua Garza, were ordered to pay $10.3 million in disgorgement and interest, plus a $1 million penalty, in an SEC action against them. Garza offered investors shares in a bitcoin mining operation and allegedly defrauded over 10,000 investors out of nearly $20 million.

Omar Hafez, 25, was sentenced to 46 months in prison and ordered to pay $1.5 million in restitution after pleading guilty to charges that he ran a Ponzi scheme through a number of entities, including Lotus Global. Hafez misrepresented that he had access to shares of companies before their high-profile initial public offerings. Over $1.5 million was invested in the scheme.

Stephen J. Hatch, 68, was sentenced to 5 years in prison for running a $70 million Ponzi scheme that defrauded 110 investors. The scheme involved investments in land in Arizona and Hatch preyed on Christian victims to invest in the real estate scheme. Hatch had previously pleaded guilty and one of the terms was that Hatch’s children, Stephen D. Hatch, Adam Hatch, Ryan Hatch, and Jessica Hatch, would not be charged.

Merl William Hickman Sr., 68, sought commutation of his 160 year prison sentence in connection with a scheme run through The Hickman Agency. His request was denied. About 160 investors lost more than $8 million. Investors were promised returns of 20% but no money was ever invested. Hickman’s son, Merl William “Billy” Hickman Jr., served a 5 year prison terms in connection with the scheme.

Patrick Kiley, 79, had his 20 year prison sentence upheld by an appellate court. Kiley sold investments in foreign currencies on the radio on his show “Follow the Money” which was broadcast on a Christian radio network. He defrauded more than 700 people nationwide in a $194 million Ponzi scheme.

Karen McClaflin, 58, pleaded guilty to charges alleging she was running a Ponzi scheme through her franchise of “We Buy Ugly Houses” which she named Trademark Properties and Trademark Reality. The business used investor money to supposedly purchase and renovate distressed houses, then reselling the houses at a profit. Trademark filed bankruptcy and McClaflin moved the investors to a new company called Homesource Partners which did the same fix and flip business model. She promised them 6% to 15% profits and offered them trust deeds to secure their position.  

Randy Miland, 63, was sentenced to 7 year and 6 months in prison and ordered to pay $214,000 in restitution for operating a Ponzi scheme that defrauded investors out of $500,000. Miland fraudulently solicited money from 10 investors, promising them to invest in futures and other investment. He had previously been convicted in another fraudulent scheme and sentenced to 55 months in prison.

John Kevin Moore pleaded not guilty to charges relating to an alleged $2 million Ponzi scheme run through a mining company called Big Sky Mineral Resources and a fine art investment company called Glacier Gala.

Raymond K. Montoya was charged with running a $30 million Ponzi scheme through his companies, Research Magnate Advisors LLC and Resource Managed Assets LLC. He allegedly use investors’ money for his personal benefit and was able to raise funds by exaggerating the size of his investment funds and by inflating returns.

Jason Nissen, 44, was accused of running a $70 million Ponzi scheme that he ran through his ticket company, National Event Co. found at NECO.com. Nissen deceived a private equity firm and a diamond wholesaler into loaning him money to buy tickets to the Super Bowl, “Hamilton,” Adele concerts, and the US Open. National Event Holdings LLC filed a Chapter 11 bankruptcy petition as a result of the alleged fraud conducted by Nissen. The company’s subsidiaries National Event Co. II LLC, National Event Co. III LLC, National Events Intermediate LLC and World Events Group LLC also filed their own Chapter 11 bankruptcy petitions.

Rodney Scott Phelps (no relation to the author) was indicted on charges that he ran a Ponzi scheme through Maverick Asset Management LLC along with Jason Castenir. The scheme involved an alleged oil and gas venture in Belize as well as a supposed investment in a casino.

David Phoenix has been accused by former clients of running a Ponzi scheme in a lawsuit filed in Los Angeles. Phoenix is an interior designer for many celebrities and has been accused of taking millions of dollars to buy goods but instead delivering cheaper goods or no goods at all.

Peter Ressler, 70, pleaded guilty to running a $3 million fraudulent scheme. Ressler is a former partner with Groob, Ressler & Mulgueen, which was one of Connecticut’s oldest bankruptcy firms. The scheme was equated to a Ponzi scheme in the plea agreement. Ressler took retainers from at least 30 clients that were earmarked for bankruptcy and tax matters, but instead used the money on personal and business expenses.

Timothy Sammons, 61, is facing extradition to the U.S. in connection with an alleged Ponzi scheme involving artwork. Sammons would acquire art from collectors, promise to find a buyer, and then sell or borrow against the artwork and use the money for himself.

Steven Scudder, 62, was sentenced to 14 months in prison for his role in the $70 million Ponzi scheme run by William Apostelos. Scudder served as trustee of the WMA Trust, a land trust that purported to secure investments made with Apostelos. Apostelos pleaded guilty and was sentenced to 25 years in prison for the scheme.

Gary Todd Smith, 47, pleaded guilty to charges relating to his role in a $64 million Ponzi scheme. The scheme was a complicated lending program in which old loans were repaid with new loans.

Jeffrey M. Stauffer, 69, lost his appeal in the Sixth Circuit regarding his conviction and 10 year prison sentence. Stauffer was convicted on charges relating to his $1.9 million foreign exchange Ponzi scheme.

Cecily Sturge, 69, was arrested on charges that she made material false charges to a federal agent regarding Scott Wolas’, her ex-husband’s whereabouts. Sturge allegedly passed off Wolas as her brother, named Cameron Sturge.  Wolas, 67, is a disbarred lawyer who is charged with operating a $1.5 million real estate investment scheme.

Cory Williams was the subject of an asset freeze requested by the CFTC for an alleged Ponzi scheme run through Williams Advisory Group LLC. The CFTC accused Williams of running a $13 million trading scheme that defrauded members of the Mormon Church.

Roger Williams was scheduled for trial in connection with an alleged Ponzi scheme in which about 100 investors lost about $2 million.

Michael Wright, 30, was accused of running a Ponzi scheme through a company called Wright Time Capital Group. The scheme took in more than $400,000 from investors and, although he represented that he invested those funds in foreign currency transactions, he used the funds to pay personal expenses and to make payments to earlier investors.

INTERNATIONAL PONZI SCHEME NEWS

Abu Dhabi

Officials arrested 54 people in connection with a luxury car scam that defrauded over 1,000 victims. The scheme involved the purchase of second-hand cars using post-dated checks. The cars would then be sold to the victims, but not delivered. The money would be used to pay back previous investors. Investors were initially promised 100% returns on their money, which was later revised to 70 – 80%.

Australia

Bill Vlahos faced charges that he defrauded more than $120 million from members of his punting club in a Ponzi scheme. It is alleged that Vlahos defrauded hundreds of investors through his scam betting syndicate, The Edge.

Cambodia

Teng Saroeun and Teng Makara were arrested and questioned with respect to the operations of Investment Consultant Association and Empire Big Capital Limited. The companies are believed to be operating a Ponzi scheme, promising monthly returns of 10%. The scheme allegedly defrauded 7,000 people out of $60 million.

Canada

Jeremy James (Jay) Peers was sentenced to 3½ years in connection with a Ponzi scheme that he ran through Federal Mortgage Co. and the related management company, Peers Foster Kristiansen Inc. The companies went bankruptcy, leaving $77 million in debt.

India

Sunil Panda, the director of Green India, was sentenced to 3 years in prison for his involvement in a Ponzi scheme.

Venkatachari Sampath, the head of Sastra Enterprises, Ltd., was sentenced to 4 years in prison. Sastra had collected 50 crore from investors, offering high returns, but did not return at least 3.3 crore.

Ashraf Khan was arrested after having jumped bail several years ago. Khan is accused of involvement in several Ponzi schemes from 2011.

Regulators began investigation of an alleged Ponzi scheme run through Webwork Trade Links, a cash-for-clicks scheme. The scheme allegedly involved about $772 million, with payouts in bitcoin.

New Zealand

We Grow Bitcoins was accused of running a fraudulent scheme. The scheme promised investors $148,300 monthly returns and required a NZ$30 million entry fee.

Paul Hibbs was charged with defrauding investors in a Ponzi scheme run through Hansa Limited and Cameron Gladstone Investments Limited.

Guy Edwards Sayers was accused of soliciting investors to invest in Arena Capital, trading as BlackfortFX, which is believed to be a Ponzi scheme.

South Africa

Myles Ndlovu, 34, was arrested in connection with an alleged scheme run through DMD Capital PTY Ltd. and Profit Trading.

Uganda

Equity Bank, under the instruction of its parent Bank of Uganda, suspended an account belonging to Magara Smart Protus, the promoter of an online sports trading platform called D9 Club. The club promotes high returns from sports trading on a site called BetFair which places bets on different sports and offers “bonuses” every Monday for 52 weeks through bitcoins. BetFair was founded in Brazil last year by Danilo Santana and recruits in Uganda and Kenya.

Vietnam

The government issued a strong statement against OneCoin, an alleged Ponzi scheme. The government says that it did not license the company and the Vietnamese license it claims to have is a forgery. Norway and Belize are also investing this scheme.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The Second Circuit affirmed a decision that backed the decision of the trustee of the Bernard Madoff scheme to ignore inter-account transfers when calculating claims of customers.

The trustee over the Bernard Madoff investment firm case settled with the estates of Madoff’s two sons. The settlement of $23 million will leave the estates of each brother with $3.75 million combined.

The Eighth Circuit upheld a lower court ruling that the insurers of 3M Co. do not have to cover 3M’s losses in the Ponzi scheme of WG Trading.

The receiver over JCS Enterprises which operated Virtual Concierge Machine filed a new round of fraudulent transfer lawsuits seeking to recover funds for the defrauded victims. The scheme defrauded about 1,800 victims out of $80.8 million. Investors believes they were purchasing more than 22,500 Virtual Concierge machines which they were told would be placed in hotels, casinos and sports venues. They were promised $300 a month from advertising on the machines. In reality, only 84 machines were ever produced.

A court approved a settlement of more than $4.2 million between the receiver of the Arthur Nadel $168 million Ponzi scheme and Wells Fargo Bank.

 A court declined to dismiss a lawsuit against General Electric Capital Corp. for its alleged participation in the $3.6 billion Ponzi scheme run by Tom Petters. The court allowed a lawsuit by the trustee of Palm Beach Finance Partners LP to proceed against GECC, finding that the trustee had standing to bring the lawsuit and that the trustee of the Petters case did not have exclusive standing to bring the claim.

The Eighth Circuit upheld a lower court’s ruling denying 69 investor plaintiffs the ability to recover from St. Louis Bank in connection with the Martin Sigillito Ponzi scheme

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