February 2019 Ponzi Scheme Roundup

Posted on 03-04-2019 by

Posted by Kathy Bazoian Phelps

Below is a summary of the activity reported for February 2019. The reported stories reflect at least 3 new Ponzi schemes worldwide; about 39 years of newly imposed sentences for people involved in Ponzi schemes; and an average age of approximately 54 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Donato Baca Jr., 36, Jonny Ngo, 32, and NL Technology LLC were charged by the SEC in connection with an alleged $61 million Ponzi scheme that defrauded over 350 investors. The scheme promised returns from NL Technology’s wholesale technology import business. Without admitting or denying the charges, Baca consented to judgment permanently enjoining him from any future securities violations and ordering him to pay $4.7 million in disgorgement along with interest and penalties of over $1 million.

Jeff Carpoff and his company, DC Solar Inc, were accused by the FBI of running a Ponzi scheme. DC Solar sold solar panels to supply emergency power to cell towers and to provide lights at sporting events. The FBI alleges that it was running an $800,000-plus Ponzi scheme. Carpoff and his wife, Paulette Carpoff, touted the tax benefits of investing in alternative energy in luring in investors. The company filed bankruptcy this month as well.

Homero Joshua Garza, 33 was sentenced to 21 months in prison for his involvement in the PayCoin cryptocurrency scheme that defrauded investors out of $9 million.

Todd Hitt, 54, of Virginia pleaded guilty to charges related to a $20 million Ponzi scheme. Hitt falsely claimed that his firm, Kiddar Capital, managed $1.4 billion in assets. The scheme involved various real estate projects, but Hitt improperly commingled funds and used investors funds for personal expenses like vacations and sports tickets.

Patrick Joseph Kiley, 80, lost his appeal of his 20-year sentence for his involvement in the Trevor Cook Ponzi scheme. The Eighth Circuit found that Kiley’s challenge based on ineffective assistance of counsel and alleged potential conflicts of interest of his counsel was not sufficient to reverse his sentence. Kiley, along with Cook ran a $193 million Ponzi scheme

Ice Poseidon

Edward Lee Moody, 47, was sentenced to 13 years in prison and ordered to pay $4.8 million in restitution in connection with a Ponzi scheme run through CM Capital Management LLC. Moody solicited about $6.6 million from 55 investors, some of whom were elderly and liquidated the retirement accounts so they could invest. Moody did not actually buy and sell securities for the most part, but instead used the money for his personal benefit.

James Nickels, 67, of Wisconsin, reached a plea agreement regarding charges that he ran a Ponzi scheme through The Fiscal Concierge. Nickels had collected more than $5 million from at least 35 investors to whom he had sold promissory notes. The investors’ losses totaled about $3 million, and Nickels was ordered to pay $3.6 million in restitution.

Lynette Robbins, 73, and her company, Knowles Systems Inc., agreed to repay $1 million of the funds that they received in connection with the $1.2 billion Woodbridge Group of Companies LLC Ponzi scheme. Robbins raised about $147 million from investors by advising them that the investments in Woodbridge were “safe and secure.”

Niket Shah, 26, of New Jersey, and his company, Spark Trading Group LLC, who had been charged by the SEC in connection with an alleged Ponzi scheme that brought in $250,000, were the subject of a final judgment. The scheme involved a binary options trading account. The judgment permanently enjoins them from further violations of security laws and orders them to disgorge about $300,000.

Robert Shapiro, Jordan Goodman, Albert Klager, Ferne Kornfeld and Barry Kornfeld were permanently banned by the SEC from ever working as brokers or investment advisors due to their selling unregistered securities for Woodbridge Group of Companies. The $1.2 billion Ponzi scheme defrauded 8,400 investors by selling them unregistered promissory notes and securities in supposedly low-risk investments in luxury real estate. Shapiro alleged spent around $21 million of investor funds on personal expenses and luxuries, and the Kornfelds, Goodman and Klager netted a total of over $7.4 million in commissions. Floyd Powell was also barred by FINRA; he sold Woodbridge notes to 13 investors and consented to a settlement without admitting or denying the allegations.

Shawn Patrick Watkins, 48, was sentenced to 51 months in prison in connection with a Ponzi scheme that he ran with Angel Bronsgeest, 55, through The Equity Growth Group and Investors Workshop Inc. They promised investors returns from real estate deals but diverted funds for their own use. Watkins conducted monthly seminars in which he offered investments in bridge loans to acquire properties.

INTERNATIONAL PONZI SCHEME NEWS

Benin

Guy Aplogan and Ludovic Dohou, both senior directors of ICC Services, an investment firm, were jailed for 10 years for a scheme that may have defrauded more than 150,000 out of more than 150 billion CFA francs. The scheme promised returns of 150% to 200% per quarter.

Canada

About $136 million worth of cryptocurrency supposedly held by QuadrigaCX is missing. Stockholders say that the holdings are stuck in an electronic vault because the company’s founder and sole employee died without sharing the password. Researchers say that publicly available transaction records suggest that the money may be gone.

Timothy Ray Carruthers, 59, pleaded guilty to running a $5.3 million Ponzi scheme. The scheme involved fake bridge mortgage loans. Only about $1.7 million of the funds were repaid.

Yan Zhu aka Rachel Zhu and Guan Qiang Zhang had their bank accounts seized in connection with an alleged Ponzi scheme that defrauded 464 people. The scheme was run through Bossteam E-Commerce Inc., which described itself as an online advertising business. About $4.8 million was used to pay administrative penalties in connection with the case.

Arnold Breitkreutz, 70, and Base Finance Ltd. were ordered to pay more than $4 million in penalties in connection with a Ponzi scheme that brought in $137 million from investors and left them with $122 million in losses. Office administrator Susan Elizabeth Way, 67, was ordered to pay an administrative penalty of $150,000 and to disgorge $362,000.

Ghana

Wealth Drive Ghana Limited, Global Coin Help Limited, and TCL Market Ghana Limited were allegedly operating a Ponzi scheme and had promised returns of between 10% and 30%. More than 9,000 Ghanians invested in the scheme. The companies have been arraigned for prosecution for operating without licenses.

Japan

Masato Doko, 41, and Keizo Adachi, 58, along with 8 others, were accused by the police of running a Ponzi scheme through Texsear Japan Holdings. The scheme brought in ¥46 billion from 13,000 investors. The company held seminars titled “The Assembly to Energize Japan” to solicit investors and promised returns from “businesses that are expected to grow rapidly.” Tokiji Nakamura, 66, and Teruhisa Miyoshi, 60, are among the eight in custody.

Nigeria

The SEC shut down Dantata Success and Profitable Company, which was carrying out capital market activities without proper registration. The company promised investors returns of between 25% and 50% from supposed returns in trading, oil and gas, transportation and import, export. Hajiya Basira Dantata started the business as a family business and the reported business was to solicit funds from investors.

The SEC shut down Growing Circle International Limited, an international advertising company with headquarters in the U.S. The company allegedly engaged in illegal fund management activities that are described as a Ponzi scheme.

South Africa

Jacques Magliolo was accused of running a Ponzi scheme through his business, Business Consultants International. Magliolo, who has published more than 17 books on investment advice, denies the charges.

Thailand

Thirty investors filed complaints against CryptoMining.Farm, a cryptocurrency cloud mining company. The scheme allegedly defrauded 140 victims out of more than $1.3 million. The company is believed to be operated by Lifetime Technology Co. Ltd. and is linked to possible owner, Pimongkol Tawpibarn. The scheme may have promised guaranteed returns of 70% per year.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The receiver over ClearPath Wealth Management LLC filed a motion to include former employee, and former House Minority Leader, Patricia Morgan, as an insider. Morgan was an employee but has appealed the designation of her as an “insider.” Patrick E. Churchville, the owner and president of ClearPath, was sentenced to 84 months in prison for orchestrating the $21 million Ponzi scheme that defrauded more than 110 investors.

The Second Circuit revived billions of dollars of lawsuits brought by the Trustee in the Bernard Madoff Ponzi scheme by permitting the lawsuits seeking to recover transfers of assets made overseas. The trustee had sued foreign investors for recovery of funds that had initially been paid to foreign feeder funds, and the court found that a foreign subsequent transferee could be sued to recover property that had been transferred to it by a foreign initial transferee. In re Bernard L. Madoff Investment Securities LLC.

Wells Fargo was dismissed from multidistrict litigation brought against it by investors in the Telexfree Ponzi scheme.

Investors in the scheme run by United Development Funding III filed a proposed class action to recover their losses in the failed real estate lending scheme.

The FBI is soliciting information from investors in Bitconnect, using a voluntary questionnaire to acquire information about their interaction with Bitconnect.

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