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By Kathy Bazoian Phelps
Below is a summary of the activity reported for September 2017. The reported stories reflect: 7 guilty pleas or convictions in pending cases; over 100 years plus one life sentence of newly imposed sentences for people involved in Ponzi schemes; at least 5 new Ponzi schemes worldwide; and an average age of approximately 58 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.
Nicholas Baratoff, 80, pleaded guilty and was sentenced to 5 years’ probation in connection with a Ponzi scheme in which he promised to invest money for others but instead used the money to fund his lavish lifestyle and to pay other clients with new funds.
Larry Bates, 73, was sentenced to 21 years and 10 months in prison and ordered to pay more than $21 million for operating a Ponzi scheme through First American Monetary Consultants that defrauded more than 400 victims. Bates told listeners of his Christian broadcast programs that they should buy gold and silver coins as financial protection from a supposedly imminent religious and economic collapse called “Mystery Babylon.” Investors paid $87 million into the scheme to buy precious metals, but Bates and his two sons, Chuck Bates and Robert Bates, and daughter-in-law, Kinsey Bates, kept the money for their personal use. Chuck and Robert were sentenced to more than 12 years and Kinsey received more than 5 years.
Brian R. Callahan, 47, was sentenced to 12 years in prison and ordered to pay almost $67.6 million in connection with a $118 million Ponzi scheme in which Callahan allegedly siphoned off $96 million. The scheme involved 40 investors whom he promised returns from investments in mutual funds, hedge funds and other securities. Instead, Callahan purchased Panoramic View, a struggling 117 unit beachfront resort and residence development that he owned with his brother-in-law and co-defendant Adam Manson. Manson was sentenced to ___.
Craig Carton, 48, was charged with running a Ponzi scheme involving the ticket-resale industry. Carton has hosted the WFAN radio show, Boomer and Carton in the Morning, with NFL quarterback Boomer Esiason since 2007, but Esiason is not accused of any wrongdoing. Michael Wright, 41, was also charged alongside Carton. Carton has also been sued for fraud by the SEC, which accused Carton and Joseph Meli, 43, of raising more than $5 million from investors claiming access to tickets for resale. Mark Varacchi has pleaded guilty to charges in connection with the scam. Carton allegedly used the money to repay a $2.5 million gambling debt. Carton resigned from the WFAN after his arrest for allegedly being part of a $5.6 million Ponzi scheme.
Bryan Coats and Jonathan Davey, 52, lost a partial summary judgment to the CFTC and a preliminary injunction was ordered against them in connection with a $40 million Ponzi scheme run through Black Diamond involving a currency trading platform which didn’t actually exist. Coats and Davey were previously sentenced to 21 years and 15 years, respectively, in connection with the scheme.
Nicholas Gelfman and his firm, Gelfman Blueprint Inc. (GBI) were sued by the CFTC and accused of running a $600,000 Bitcoin Ponzi scheme. The scheme promised 7% to 9% monthly increase in bitcoin from supposedly sponsoring a high-frequency bitcoin trading algorithm called “Jigsaw.” Gelfman allegedly tried to conceal the Ponzi scheme by claiming that the company had been hacked and that all customer funds had been stolen. The scheme took in $60,000 from 80 investors.
Robert Allen Helms and Janniece Kaelin were sentenced to 78 months in prison for a Ponzi scheme they ran through Vendetta Royal Properties. They had promised at least 80 investors that they would use their funds to acquire oil and gas royalty interests.
Michael S. Holcomb, 74, Gary L. Holcomb, 72, Jennifer L. Chalmers, and Kristen S. Van Breemen all pleaded guilty to charges that they operated a Ponzi scheme through their businesses, Berjac of Oregon and Berjac of Portland. Prosecutors alleged that the scheme defrauded more than 400 investors out of more than $40 million.
Jeremy R. Lundin, 30, was charged in connection with an alleged scheme run through his company, Big Island Capital. Lundin solicited more than $1 million from at least 51 investors and promised 67% to 97.8% returns through options trading. Lundin used the money to buy a Maserati and a boat and to pay off personal debts and take a trip to Paris. Lundin was previously booked for choking is wife and threatening to stab her with a broken lamp, and was convicted of assaulting a police officer after spitting on an officer’s arm during a traffic stop. Lundin pleaded guilty, acknowledging that he created phony account statements and provided investors online access to fictitious quarterly statements.
Hamlet Peralta, 38, was sentenced to 5 years in prison and ordered to pay $5 million in restitution in connection with a $12 million Ponzi scheme that he ran under the guise of a wholesale liquor business.
Stephen Peters and his company, VisionQuest Wealth Management, LLC, had their assets frozen in connection with allegations that Peters took millions of dollars from more than 70 investors. No charges have been filed, but a civil case that has been filed names Peters his companies and his wife, Amy Peters.
David Petersen lost his appeal of his conviction and 5 year sentence in connection with a Ponzi scheme run through Westover Energy Trading LLC and Ramco and Associates LLC. The Eleventh Circuit denied his appeal. U.S. v. Petersen, 2017 U.S. App. LEXIS 17671 (Sept. 13, 2017).
Hasan Sarwar aka Alexander Sarwar dba Profit Management Int. and his spouse, Rachida Elfimi dba Profit Management, were charged by the CFTC with running an alleged $1.2 million Ponzi scheme through a futures commodity pool. The scheme allegedly defrauded more than 40 investors, promising them that they would double their money in less than 5 months.
Sen. Carlos Uresti, a Texas state senator under a fraud indictment, pleaded not guilty but acknowledged that the company FourWinds Logistics “might have been a Ponzi scheme.”
Leon Vaccarelli, 40, was charged with running an alleged Ponzi scheme. Vaccaerelli and his financial advisory firm, Lux Financial Services, allegedly defrauded at least nine victims in a scheme that lasted more than four years and took in more than $1 million.
James VanBlaricum, 78, was sentenced to 7 years in prison and ordered to pay $322 million in restitution in connection with a Ponzi scheme that he ran through Signal Oil and Gas Co. and Texas Energy Management. VanBlaricum previously pleaded guilty to defrauding investors into buying securities in his oil and gas companies.
James Harvey Cameron, 66, was sentenced to 11 years in prison, ordered to pay $1.8 million in restitution and a $550,000 fine for tax evasion in connection with a $9 million Ponzi scheme that he ran through Venture Trading Inc. About 160 people invested in the scheme.
Benoit Senecal, 61, was sentenced to 2 years and 10 months in prison in connection with a Ponzi scheme that defrauded more than 200 investors out of $19 million. Sophie Jolicoeur, 48, and Jean-Mark Lavallee, 69, have also been charged in connection with the scheme.
Harold Backer, 54, is facing disciplinary proceedings over an alleged Ponzi scheme involving about $1,230,000 taken from at least 6 clients and 2 individuals. Backer disappeared in 2015 after failing to cooperate with an investigation into his conduct, but turned himself in about 18 months later.
Yian “Ethan” Sun and Yulan “Amy” Hu have been sued by both employees and investors in Istuary Innovation Labs Ltd. who allege that the tech company is running a Ponzi scheme. The company has 400 workers in North America and 1100 in China and has now closed its Vancouver office. The company was started in 2013 with the goal of linking high tech start-up companies in Canada with potential customers in China.
Ding Ning, the founder of Ezubao and chairman of its holding company Anhui Yucheng Holdings Group, was sentenced to life imprisonment in connection with the $7.6 billion Ponzi scheme that defrauded about 900,000 investors. Ding Dian, brother of Ding Ning, was also sentenced to life imprisonment, and 24 others received sentences ranging from 3 to 15 years.
Kamalakanta Pattnaik, the founder of Sai Pragati Assets and Properties Pvt Ltd. was arrested in connection with an alleged Ponzi scheme.
Sanjit Bhowmik and Mithun Chatterjee were arrested in connection with alleged Ponzi schemes run through Sagarika Realtors Projects India Ltd. and Sagarika Mutual Benefits Funds Ltd.
Mugundhan Gangam, Sellathrurai Bhaskar, Chella Dhuri, Amal Raj, Ram Krishna Murthy and Kamal K Bakshi were charged in connection with an alleged Ponzi scheme run through Unipay 2U Marketing Pvt Ltd and Unigateway 2U Trading Pvt Ltd.
Hamish McIntosh, a defrauded investor in the scheme run by Ross Asset Management, is liable for interest on the $454,047 judgment against him to return fictitious profits received from the scheme. The High Court ruled that not only must the fictitious profits be returned, but McIntosh is liable for interest at 5%. The McIntosh case is a test case and the liquidators of Ross Asset Management intend to pursue other investors as well.
Shane Richard Scott, 60, pleaded guilty to running a $5.4 million Ponzi scheme that promised investors high returns from property developments and overseas investments. Scott told investors he was investing their money in brokering deals in Thailand, the diamond trade, South African trade deals, and a chicken farm in New Caledonia.
Sandile Mantsoe, 27, has been accused of running a Ponzi scheme through his company, Trillion Dollar Legacy. At least 124 people claim that Mantsoe scammed them through his forex trading company. Mantsoe was previously arrested for the murder of his girlfriend, Karabo Mokoena.
Graeme Minne, 54, and his wife, Carolina Minne, 52, were sentenced 15 years and three year house arrest, respectively, for a Ponzi scheme that promised high returns of up to 65% from forex trading. The scheme took in about R278,786,853 from about 934 investors.
Officials raided the house of Pudit Kittihradilok, the managing director of The System Plug and Play Company and Innovation Holding Company. The scheme is alleged to have defrauded over 5,000 investors.
The Eleventh Circuit affirmed a lower court order denying the motion of the United States to dismiss a complaint against it filed by a bankruptcy trustee seeking avoidance of the debtor’s federal tax payment. The trustee alleges that the tax payments were fraudulent made by DBSI, Inc. Zazzali v. U.S. (In re DBSI, Inc.), 2017 U.S. App. LEXIS (9th Cir. Aug. 31, 2017).
Thema International Fund PLC, an Irish fund that sent investor money to Bernard Madoff, agreed to pay the trustee over the Madoff scheme $687 million to settle claims.
The receiver in the Arthur Nadel Ponzi scheme made an additional distribution of $5 million to about 400 victims who were defrauded in the scheme. This brought the investors’ total recovery to 52% of their losses. This was the seventh distribution, bringing the total to $68 million.
Ritchie Capital Management lost its request to terminate the receivership over the assets of Thomas Petters. U.S. v. Petters, 2017 U.S Dist. LEXIS 158769 (Sept 27, 2017).
The liquidating trustee of Banyon 1030-32 LLC, one of the feeder funds in the Scott Rothstein $1.2 billion Ponzi scheme, filed a lawsuit against Harden & Associates, claiming that the insurance broker’s negligence caused the fund’s insurers to deny coverage. The firm had been hired to obtain $70 million in commercial crime insurance to protect the fund from theft by Rothstein.
Prosecutors withdrew a motion to shorten Scott Rothstein’s 50 year prison sentence, saying that he lied to the government and violated the terms of his plea deal. They had asked the judge to reduce Rothstein’s sentence because of his help in bringing down about 30 others in connection with the scheme. Rothstein intends to object to the prosecutors’ decision.
Hunton & Williams LLP settled allegations that it aided Robert Allen Stanford in his $7 million Ponzi scheme. The settlement involves payment of $34 million that will go to benefit some of Stanford’s thousands of victims.
The receiver of the Stanford Financial Ponzi scheme was denied his post-verdict request to revive an $88 million fraudulent transfer claim against Gary Magness. The receiver, who believes that court gave improper jury instructions on the standard for a good faith defense, has vowed to appeal the ruling.