Subscribe to LexTalk to stay on top of today’s legal issue and trends.
Catapult Your Career |
Industry Insights & Trends |
Product Training & Tips
Posted by Kathy Bazoian Phelps
Below is a summary of the activity reported for August 2018. The reported stories reflect at least 7 new Ponzi schemes worldwide; about 20 years of newly imposed sentences for people involved in Ponzi schemes; 2 guilty pleas or convictions, and an average age of approximately 53 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.
Arthur Lamar Adams and Madison Timber Properties LLC were the subject of an SEC complaint accusing them of running a multimillion dollar Ponzi scheme. Adams had previously pleaded guilty to charges brought in Mississippi. Investors were told their money would be used by MT Properties to acquire timber-harvesting rights from landowners. Investors were promised returns of 12% to 15%. More than $100 million was invested by more than 250 investors. Adams’ sentencing in his criminal case has been delayed until October.
Michael D’Alessio, 52, was arrested on charges relating to an alleged Ponzi scheme in New York. Alessio sold investments for real estate projects through his firm, Michael Paul Enterprises. Instead of generating promised returns, however, Alessio use the funds to pay his own debt, to gamble and for other personal expenses.
Jerome H. Cohen, 63, and his son, Shaun D. Cohen, 39, were sued by the SEC in connection with an alleged $135 million Ponzi scheme run through Equitybuild Inc. and Equity Build Finance. The scheme allegedly defrauded about 900 investors and promised returns of 12% to 20% from a real estate scheme that supposedly identified undervalued property. EquityBuild is a Florida corporation with an office in Chicago and solicited funds from investments in Chicago real estate projects.
John “Jack” William Cranney, 77, of Texas was sentenced to 5 years in prison in Massachusetts and ordered to pay more than $5.5 million in restitution in connection with a $6 million scheme that defrauded 15 investors. Cranney created shell companies and convinced victims to transfer their IRA and 401k retirement funds to him, including Employee Stock Ownership Plan. He spent the money on personal expenses and to prop up his failing nutrition products distributorship.
Randall Alan Finer, 55, pleaded guilty to running a Ponzi scheme in Iowa. Finer raised $887,700 from investors for his day-trading operation but used more than half the money on personal expenses and to pay promised returns to earlier investors.
Gilbert Fluetsch, 52, was barred by the SEC from the securities industry. Fluetsch was the chief operating officer of California-based Hoplon Financial Group and was alleged to have assisted Daniel B. Vazquez Sr., the company’s owner, in creating the New Economic Opportunities Fund I, or NEON. The Fund was to pool investor funds to purchase and flip real estate. They sold membership units in the fund totaling $2.18 million to 27 investors. The funds were misused on unrelated business or personal expenses.
Michael James Frew, 70, was indicted in Nevada on charges that he ran a real-estate related Ponzi scheme. Investors understood that Frew would invest their funds in real estate in the United States and abroad, but Frew instead spent the money on personal expenses, to speculate in the stock market, and to repay earlier victims a portion of their investment.
Evan Greebel, 45, was sentenced to 18 months in prison and ordered to pay $10 million in restitution for his role in the scheme run by Martin “Pharma Bro” Shrekli. Shrekli was previously found guilty of securities fraud 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.
Barry M. Kornfeld, Ferne Kornfeld, Lynette M. Robbins, Andrew G. Costa, Albert D. Klager and their companies, including Knowles Systems Inc., were sued by the SEC and accused of selling retail investors more than $243 million in unregistered securities in Woodbridge Group of Companies LLC to more than 1,600 investors. Woodbridge was allegedly running a $1.2 billion Ponzi scheme. Robbins was the highest-earning external agent of Woodbridge, receiving at least $8.1 million in commissions.
Hector May, 77, was accused of running a Ponzi scheme that stole millions of dollars from a company’s pension plans. May was a financial adviser whose advisory firm, Securities America, operated as Executive Compensation Planners.
Edward Lee Moody Jr., 47, and his Virginia-based company, CM Capital Management LLC, were sued by the SEC, claiming that Moody embezzled over $2 million and paid out $1.4 million in a Ponzi-like fashion.
John K. Moore aka Kevin Moore was found guilty of running a Ponzi scheme in Montana. Moore had been charged with defrauding 36 investors out of $2.7 million through his mining company called Big Sky Mineral Resources and a fine art investment company called Glacier Gala. Moore had previously been convicted in the late 1980s for defrauding a victim out of $75,000 in a gold coin scheme.
Daniel Rivera, 48, was indicted in New Jersey on charges that he ran a scheme through a company called Robbins Lane Properties, Inc. Rivera, a financial advisor, misrepresented that the company employed real estate professionals who would use the investments to fund real estate ventures. The investors were promised monthly returns based on “secure real estate investments in the company’s portfolio.” Rivera spent the money on personal expenses and his child’s tuition and sorority fees.
Brandon Walton Stewart, 33, pleaded guilty to charges that he ran a $13.5 million Ponzi scheme. Stewart was arrested in Dallas and extradited back to Orange County, California. He had promised investors that he would invest their money in stocks such as Facebook, but he instead spent the money on himself.
Cory Ryan Williams, 40, of Arizona, was sentenced to 7 years in prison for running a Ponzi scheme that brought in about $13 million from about 50 victims. Williams promised investors returns of 5% weekly but he lost more than $8 million in trading stock futures. Williams and his company, Williams Advisory Group, were previously charged by the CFTC with running a commodity futures fraud, promising to invest funds using his expertise and based on his supposed profitable past.
INTERNATIONAL PONZI SCHEME NEWS
Authorities have alleged that Todd Norman John Bezzasso, Bezzaz Holdings Group Ltd., Nexus Global Trading Ltd., Wei Kai Liao aka Kevin Liao, and Florino Corsi, were running a fraudulent investment scheme. Bezzasso was the sole director and officer of Bezzaz and Nexus, Liao was a finder for Bezzaz, and Corsi was a finder for Bezzaz and Nexus. About $5 million was raised from about 85 investors who were promised monthly returns in various investments. The returns promised ranged from 5% to 30% for periods of one to 6 months.
Linlijia Commerce and Trade wound up all of its stores when its sole investor, Shanlin Shanghai Financial Information Service, was busted for running a Ponzi scheme. Shanlin was running a peer-to-peer lending operation and when its accounts were frozen it was no longer able to inject cash into Linlijia’s accounts.
Freddy David, 49, was sentenced to 6 years in prison. He admitted to stealing about $19 million from about 55 people in a Ponzi scheme by selling them fake investments through HBFS Financial Services, a wealth management company. David targeted mostly Jewish victims from his synagogue. The rabbi of the congregation apologized for calling David up to read a blessing, not knowing that David had defrauded members of the congregation. David lost much of the money on gambling websites.
Ganesh Hazare, the director of Atharva4U Infra and Agro Pvt Ltd., and Shivaji Nikale, the managing director, were arrested in connection with an alleged Ponzi scheme run through the companies. The scheme promised investors that they would double their money in a period of 5 years, triple their money in 7 years, and make 4 times their money in 10 years.
The Ponzi scheme run through GainBitcoin saw two more suspects arrested. The scheme defrauded victims out of $150 million. The individuals had close ties to Amit Bhardway, the individual who started GainBitcoin.
Divyesh Darji was arrested upon his arrival from Dubai for his role in the Bitconnect scheme. Darji is the Asia head of the scheme which was shut down by regulators in Texas and North Carolina.
Gardas Ramesh and four others were arrested at the premises of GRM Estates on charges that they defrauded over 1,200 investors out of $1.43 million in a Coinx Trading cryptocurrency scheme.
Thirteen executives and employees of Maxim Trader Group were found guilty of defrauding investors out of about $453 million. The firm was supposedly engaged in foreign exchange trading and other investment opportunities and promised investors between 3% and 8% per month, and as much as 98% per year. About 50,000 people from Taiwan, Southeast Asia, Hong Kong, China, Japan, South Korea and Australia invested with the company before it collapsed in 2015. Chang Chin-su, the chief executive, was sentenced to 11 years in prison, and Chia Hsiang-chieh, the chief assistant, was sentenced to 9 years. Chang’s sister, Chang Mu-tan, was sentenced to 5 years. Maxim had claimed that it was an affiliate of Royale Globe Holding, a NASDAQ-listed company. Malaysian authorities earlier this year indicted Andrew Lim Ann Hoe, the chief executive of Maxim Capital, and company executives Chin Ming Kam and Goh Seow Mooi on charges relating to a scheme known as the Maxim Trader Compensation Plan. Malaysian investigators estimated that 50,000 investors around Asia had lost a total of US $5 billion.
Officials in Thailand are seeking the extradition of four Singapore citizens believed to be involved in the Eagle Gates Group Ponzi scheme. The scheme has resulted in losses of about $9.8 million and 250 Thai and foreign investors. U.S. national, Derrick Matthew Keller, has been detained as an alleged accomplice and has admitted that he was an actor that was hired by the CEO of Eagle Gates to deceive investors in China, Hong Kong, Macau, Malaysia and Thailand.
Charles Nwabuikwu, 44, was arrested on charges that he ran a Ponzi scheme through Development Channel that defrauded Ugandans. The company described itself as “the world’s most comprehensive platform for increasing access to basis development needs between the developed and under developed countries and communities.”
The Bank of Uganda released a statement cautioning the public against investing in businesses which sound too good to be true. The Bank stated that if a business guarantees high returns with little risks of losing the investment, it is false.
NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES
City National Bank agreed to pay $33 million to settle claims that it aided and abetted a Ponzi scheme run by Nationwide Automated Systems Inc. The scheme involved the sale of ATM machines to investors who were promised $.50 from each ATM transaction.
About $16 million is being distributed in the Thomas Petters Ponzi scheme case. The payments will go to about 360 investors.
Proskauer Rose LLP and the receiver in the R. Allen Stanford $7 billion Ponzi scheme reached a $63 million settlement of claims against the law firm in connection with the scheme. The firm admits no wrongdoing in the settlement.
A putative class of investors settled with United Development Funding IV to resolve claims that the company and covered up its “Ponzi-like” nature. The settlement is for $13.5 million.