Ponzi Scheme Roundup: December 2017

Posted on 01-04-2018 by
Tags: Ponzi Scheme


By Kathy Bazoian Phelps 

Ponzi Scheme Roundup: December 2017 

Below is a summary of the activity reported for December 2017. The reported stories reflect at least 10 new Ponzi schemes worldwide: over 130 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 52 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.

Golan Barak, 50, was sentenced to 33 months in prison for stealing  more than $2 million in a real estate Ponzi scheme. Barak promised investors returns from 50-50 partnerships in buying houses and then selling them or managing them for rental income.

Bar Works Capital had a $1.6 million default judgment entered against it by the SEC in connection with a Bitcoin scam. Bar Works was operated by Renwick Haddow, and the court imposed a constructive trust on property owned by Bar Works. The SEC sued Bar Works and Renwick, in addition to Bitcoin Store, Inc., and Bar Works 7th Avenue, Inc.  Haddow, who is sitting in Moroccan jail, agreed to be extradited to the U.S. Haddow is accused of stealing $37 million from investors.

Frederick Darren Berg, 55, was found missing from prison where he was serving an 18-year prison sentence for defrauding more than 800 investors out of more than $100 million. Berg was the founder of Meridian Group which operated a Ponzi scheme. Berg is the third inmate to escape from Atwater prison this year.

Bitcoin dominated the news this month. Bitcoin and other cryptocurrencies have been referred to as the first decentralized Ponzi scheme. However, both fans and naysayers are speaking out for and against cryptocurrency. For those riding the bitcoin wave, be cautious and vet the investment program you are considering.

John V. Bivona, 76, and his company, Saddle River Advisors LLC, agreed to disgorge nearly $50 million to settle charges brought by the SEC. The scheme defrauded investors in a Ponzi scheme to invest in Twitter and startups before their initial public offerings.

BTC Cloud Services Ltd. was sued by an investor in a $9.1 million lawsuit alleging that the company was running a virtual currency Ponzi scheme. Investors understood that BTC was providing bitcoin mining services, but the company never mined even a single bitcoin.

William P. Carlson Jr., 54, who previously pleaded guilty to charges relating to a scheme run through RIA Forum Financial Management, was sentence to four and half years in prison. Carlson carried out the scheme by drawing checks from a client’s accounts and then intercepting them in mail when the client was not home.

Steve Down and Steve Down Companies have been accused of running a Ponzi scheme. Complaints have been made to the SEC relative to activity in Oregon and Oklahoma. Certain real estate projects are on hold amidst the investigation.

Mark Feathers, 54, pleaded guilty to one count relating to a scheme that he ran through Small Business Capital Corp. The SEC had accused him of running a $50 million Ponzi-like scheme that defrauded 250 investors.

Paul Garceau Jr., 51, was sentenced to up to 20 years in prison for running a Ponzi scheme that defrauded 12 of his clients out of more than $800,000. Garceau was an insurance agent who defrauded his mostly senior clients in this company, Apex Wealth Management, convincing investors to take money out of legitimate investments to re-invest in other opportunities that would supposedly earn them more money.

Evan Greebel, 44, was found guilty of wire fraud and securities fraud for his conduct as the former lawyer for companies run by Martin Shkreli. Shrekli was found guilty of securities fraud in August for running a Ponzi scheme involving his biotechnology company Retrophin Inc. Greebel was outside counsel for Retrophin and was found guilty of scheming with Shkreli to commit fraud.

John Zane Jeppesen, 57, was sentenced to 30 days in jail following his guilty plea to one felony count. Jeppesen raised about $8 million from 134 Utah investors to invest in Beverly Hills Development Corporation, a real estate development enterprise. Investors were told that their investment would be fully secured by a trust deed against real property and that they could pull their money out at any time. The scheme was run with Charles Fitzgerald.

Alex Reaves Lundin, 25, was charged with conspiracy to commit mail fraud for her role in the Ponzi scheme run by her husband, Jeremy Lundin, 30. Jeremy pleaded guilty to the scheme run through Big Island Capital, last year. The scheme defrauded 51 investors by promising reutrns from options trading. Although Jeremy did not guaranty an exact percent, he said he would “shoot for” returns of between 40% and 80%. Alex assisted the scheme by lying to investors, telling them that their money was safe.

Bradley C. Mascho was added as a defendant in the SEC against Dawn J. Bennett for an alleged Ponzi scheme run through DJBennett. The scheme raised more than $20 million through the sale of company notes, and Mascho targeted his brokerage customers to invest in the scheme. Bennett was previously barred by the SEC from working as an investment advisor for misstatements and omissions run through her advisory firm, Bennett Group Financial Services. Bennett entered a plea of not guilty.

Sergei Mavrodi launched a new cryptocurrency called Mavro. Mavrodi has previously been convicted in Russia and other countries for running scams, including MMM (Mavrodi Mondial Moneybox) in Russia, which launched subsidiaries in Asia, Africa and South America. Mavrodi also launched MMM Global which was a bitcoin-based High Yield Investment program. Mavrodi’s latest scheme is advertised on the MMM website which says that the Mavro will act as “a conventional unit for measurement of provided [sic] help to other participants in MMM.” The Initial Coin Offering claims that it is the “first decentralized and absolutely transparent platform for Multi-Level Marketing structures based on Blockchain Ethereum.”

Jason Todd Mogler, 49, was sentenced to 24 years in connection with a Ponzi scheme that defrauded 225 investors. The scheme involved purported investments in land deals in Mexico, recycling companies in Las Vegas and Chicago and distressed real estate in Phoenix. The SEC accused Mogler of stealing close to $10 million for strip club outings, vacations to Hawaii and Disneyland, and personal expenses such as mortgage payments.

John Bryan Murphy, 44, was arrested on charges that he ran a Ponzi-style investment scheme. Murphy solicited investments and promised the investors that their money would be professionally invested. Instead, he used the funds to support his personal lifestyle, to speculate on the stock market and to repay earlier victims some of their investments.

Steven Condon Peters, 44, was charged in connection with a scheme run through VisionQuest Weatlh Management that defrauded investors out of $15.3 million by promising them 8% to 9% returns. Peters’ assets, including a home in Costa Rica, a horse farm, jewelry, artwork and a dozen guns, have been seized.

Nathan Pyles and his company, Shiloh Management Services Inc., were accused of running a Ponzi scheme. Bankruptcy cases were filed listing about $13 million in creditor claims. Pyles was arrested on four felony count of writing checks with insufficient funds.

Merrill Robertson, 37, was sentenced to 40 years in prison for his role in a $10 million Ponzi scheme that he ran with his business partner, Sherman Carl Vaughn. Robertson and Vaughn had said that their firm, Cavalier Union Investments LLC, involved businesses such as restaurants, real estate, alternative energy and natural resource assets.

Robert H. Shapiro and the Woodbridge Group of Companies LLC first filed bankruptcy in Delaware and were then sued by the SEC on Florida in connection with an alleged real estate Ponzi scheme that defrauded more than 8,400 investors out of $1.22 billion. Investors were told that they would be “repaid from high rates of interest” that Shapiro’s companies were earning on loans to third-party borrowers. The borrowers were companies owned and operated by Shapiro. Returns of 5% to 10% were promised to investors.

Gary Truman Smith, 72, offered a plea deal to settle charges relating to an alleged Ponzi scheme that he ran through Smith Advertising. Smith’s son and business partner, Gary Todd Smith, 47, pleaded guilty earlier this year to the scheme that borrowed money from more than 150 investors. The total losses exceed $55 million.

Paul W. Smith , 63, was charged by the SEC in connection with an alleged scheme that defrauded about 30 investors out of $2.35 million. The alleged scheme was run through The Haverford Group and involved trading of securities.

Kevin Wanner pleaded guilty in connection with an investment fraud scheme that defrauded 66 investors. Woodbury Financial Services Inc. has agreed to pay nearly $600,000 to investors who were victimized by Wanner when he worked there as a registered securities agent. Questar Capital Corporation had previously agreed to pay $2.4 million to investors.

INTERNATIONAL PONZI SCHEME NEWS

Canada

Rashida Samji, 64, had her appeal of her conviction and 6-year prison sentence dismissed. Samji was convicted on charges that she ran a $110 million Ponzi scheme.

Joshua James Tenhove, 45, was charged in connection with a scheme run through Silvertip Energy, Inc. involving mobile light towers. The schemed defrauded investors out of $10 million by selling or renting the same equipment multiple times on paper, and by offering devices that had never been manufactured.

China

Authorities cracked down on 107 forms of knock-off altcoins in 2017, claiming they were Ponzi schemes in disguise. These include scams such as Five Elements Coin, Asia-Euro Coin, Onecoin and Ticcoin.

Zhang Xiaolei surrendered to police after Ponzi scheme allegations were made against Qbao.com aka Qianboa. Xiaolei owns 95% of the company.

India

Sashibhusan Das was arrested in connection with an alleged Ponzi scheme run through Tresty Securities Limited. Dayanidhi Mohapatra, Hari Arjun Panda and Rasmi Ranjan Mohapatra were arrested in 2015 in connection with the scheme.

A judgment was entered attaching assets for Citrus Holidays and Royal Twinkle Star Club Ltd., which are alleged to have been running a Ponzi scheme. The companies were operating out of 52 collection centers and promising returns of 13% to 15% for buying into holiday packages.

Ayushi Aggarwal, the wife of Anubhav Mittal, was arrested in connection with the scheme run through Ablaze Info Solutions Pvt Ltd.

India’s Finance Ministry cautioned investors about the risks of trading in cryptocurrencies such as bitcoin, saying that investments in digital currencies are like Ponzi schemes. The statement said “There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes.”

Singapore

James Phang Wah, 58, was sentenced to 9 years in prison in connection with the Sunshine Empire. The scheme involved $190 million in a type of Ponzi scheme. Wah was the self-proclaimed Warrant Buffet of Singapore.

South Korea

New regulations for cryptocurrency were proposed by the government in light of the rapidly increasing number of fraudulent cryptocurrency exchanges. Several fake exchanges were exposed including BitKRX, Bithumb, and Mining Max.

Thailand

A group of investors filed a complaint with the consumer protection police against Luxury Delight and the owner, Nattapong Pohsukarn. The company allegedly tricked people into joining the business by selling collagen supplements. Nuttapong denied the allegations and said that the business had about 30,000 members and he could not control their behavior.

Phudit Kittitradilok was sentenced to 13,275 years in prison for a scheme that defrauded 2,600 out of 574 million baht. However, he will likely only serve 20 years due to limitations in the Penal Code. The scheme was run through The System Plug and Play, and Innovision Holding. Investors were invited to invest in businesses involving beauty care, used cars, export, property development and foreign exchange. Investors were promised 1% weekly returns plus 5% of new investment money for those who recruited new members.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

LPL Financial lost a $462,000 arbitration, being found liable for failure to supervise its broker, Charles Fackrell. Fackrell was sentenced to more than 5 years in prison for running a $1.4 million Ponzi scheme that operated under the name Robin Hood.

Ritchie Capital Management LLC’s lawsuit against JPMorgan for aiding and abetting Thomas Petters in his $3.7 billion Ponzi scheme was dismissed. The court found that Ritchie Capital had not established that the court had personal jurisdiction and that the case was barred by statute of limitations.

The receiver of Stanford International Bank was denied his request to overturn a jury decision denying his claim to recover $88 million from billionaire Gary Magness.

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