Articles Posted in Ponzi Scams

Minnesota-Based Investment Adviser Gets Six-Year Jail Term
According to the Minnesota Department of Commerce, Levi David Lindemann was ordered to serve a 74-month prison sentence—that’s six years—for bilking clients in a Ponzi scam.  Lindemann owned Gershwin Financial, which did business using the name Alternative Wealth Solutions. He pleaded guilty to money laundering and federal mail fraud charges.

Minnesota Commerce Commissioner Mike Rothman said that Lindemann abused his position as a financial adviser when he defrauded clients, including older investors. He did this by promising to invest their funds in safe investments but instead used their money to make Ponzi-type payments to clients and pay for his own expenses.

Lindemann’s guilty plea states that he solicited money from about 50 investors. He attempted to hide the securities fraud by generating fake secured notes as supposed evidence of the clients’ investments. The SEC permanently barred him from the securities industry earlier this year.

SEC Accuses Barred Broker of Selling Securities to Older Investors 

According to the SEC, ex-Morgan Stanley (MS) broker Rafael Calleja solicited $2.7M from 10 retiree and elderly investors after he had already been barred from the securities industry. The regulator claims that Calleja told investors their principal was insured and they would get a fixed return rate in a year. Meantime, he allegedly used at least $12K of their funds to pay for cruises, golf outings, and other personal expenses. He also purportedly failed to tell investors that his broker license had been revoked.

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The Secretary of the Commonwealth of Massachusetts has charged Stephen S. Eubanks over his alleged involvement in a Ponzi scam. According to state securities regulator William F. Galvin, the former investment adviser took at least $529K from 15 investors, including neighbors, friends, and their families. Four of the investors were Massachusetts investors who gave $195K of the funds.
According to the state’s complaint, in 2011, Eubanks allegedly pretended he was a successful hedge fund manager who ran Eubiquity Capital LLC. He solicited investors to get them to invest their money in options, stocks, and other securities. However, instead of investing their funds, he allegedly used $145K for his own expenses, including trips to Martha’s Vineyard and to cover boat costs, and $140K to pay back earlier investors.
Galvin’s notice said that Eubanks lost all of the investors’ money. Many of the investors were close friends of Eubanks, including an ex- college roommate and the older father of a former fraternity brother. He befriended the other investors online.

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The estate of Stanley Chais has agreed to pay the victims of Bernard Madoff’s Ponzi scam $277M to settle claims accusing Chais, a Beverly Hills manager, of enriching himself through the fraud while costing thousands of investors, including his own clients, money.
Chais was one of Madoff’s oldest friends and one of his earliest investors. When the multi-billion dollar scam failed eight years ago, however, Chais claimed he had been fooled by Madoff, too, and that he knew nothing about the fraud. Yet he and his estate have since been the subject of securities fraud cases related to the Madoff Ponzi scam for years. Chais died in 2010.
Now, his estate has agreed to pay Madoff trustee Irving Picard over $262M, as well as $15M to California’s attorney general to settle a class action case. Picard had accused Chais and his wife Pamela, as well as entities under their control, of allegedly making about $1B from bogus securities transactions conducted by Madoff’s firm. Chais also earned hundreds of millions of dollars as a money manager for sending his customers’ money into Bernard Madoff’s financial firm.

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The Financial Industry Regulatory Authority has banned Stuart G. Dickinson, a Dallas broker, from the securities industry for recommending that customers back a Ponzi scam. At the time, Dickinson was with  WFG Investments. The firm fired him in 2013.

In addition to the bar, Dickinson must pay seven customers $924K in restitution over the Texas securities fraud. According to FINRA’s default decision notice, Dickinson failed to perform the reasonable due diligence on ATM Financial services (ATMF) and did not detect the red flags indicating that it was a sham. As a result, said the self-regulatory organization, investors lost $1.02M.

It was in 2007 that Dickinson sold over $1M in limited partnership interests in ATM Alliance. He had formed contracts with the company to service and manage ATM machines in a number of locations. Dickinson established a general partnership to raise funds for the ATM investments and he became a 90% owner while his supervisor Trent W. Schneiter became a 5% owner. As part of the agreement, they would earn 20% off what the banking machines made.

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 SEC Charges Hawaii-Based Investment Adviser for Misleading Clients and Cherry Picking
The U.S. Securities and Exchange Commission has filed civil charges against Oracle Investment Research, which is based in Hawaii, and its owner Laurence I. Balter. The regulator claims that the investment adviser cherry picked trades that were profitable for his own accounts. He is also accused is  misleading clients, including senior citizens, about the risks involved in the investments he recommended, as well as about the fees they would be charged.
According to the SEC Enforcement Division, Balter and Oracle Investment Research bought options and equities in an omnibus account but waited to distribute the trades until their execution. Then, he would allegedly move the profitable trades into his accounts and the unprofitable ones to the accounts of clients. 

A U.S. District Court judge has ordered Medical Capital Holdings, related companies, and a number of executives to pay $831M of disgorgement. The disgorgement comes seven years after the U.S. Securities and Exchange Commission brought its securities fraud case against Medical Capital over its billion-dollar Ponzi scam.

The allegations eventually forced dozens of mid- and small-sized independent brokerage firms that sold Medical Capital private placements, among other deals that failed, to shut down in the wake of the slew of investor securities fraud cases that followed. Nearly 9,000 investors were owed about $1.08B from the Ponzi scam.

Medical Capital raised over $2B through its independent brokerage firm network from ’03 and ’09. The money was supposedly going toward the purchase of discounted medical receivables, payment of general operating expenses, and loans that were secured.

The private placement offerings promised 8.5-10.5% yearly returns. Meantime, Medical Capital made almost $325M in administrative fees.

Investors, alleging fraud, unsuitability, and misrepresentation, have since recovered $432M, including what was recovered and given out by a court appointed receiver, $101M from brokerage firms, and $180M from banks or bond indenture trustees. Investors who got money back were paid 40 cents on the dollar.

In June, ex-Medical Capital Holdings COO and president Joseph Lampariello was sentenced to 10 years and a month behind bar. He also was told to pay almost $40M to investors that were harmed. Lampariello is accused of misappropriating money from investors to pay other investors, as well as issuing administrative fees to himself.

Our private placement fraud lawyers represent investors in getting their investment losses back from negligent firms, brokers, investment advisers, and others in the industry. Your initial consulation with Shepherd Smith Edwards and Kantas, LTD LLP is a free, no obligation session. We work with investors throughout the US and with investors based abroad who have been defrauded by US-based financial firms.

Medical Capital Ponzi scheme case ends with $432 man recovered, Reuters, August 22, 2016

Securities Cases: Medical Capital Executive To Pay Almost $40M for Private Placement Fraud, Momentum Investment Partners Accused of Not Disclosing Fees, and First Mortgage Corp. Settles Mortgage Fraud Claims, Stockbroker Fraud Blog, June 22, 2016

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The U.S. Attorney’s Office has issued a statement announcing that Patrick E. Churchville, the president and owner of ClearPath Wealth Management, will plead guilty to one count of tax fraud and numerous counts of wire fraud related to the running a $21M Ponzi scam. According to prosecutors, Churchville also used $2.5M of investor money to buy a house and neglected to pay over $820K of his federal income taxes.

Court documents report that a federal probe determined that from ‘08 through October ’11 the Rhode Island investment adviser and his firm invested about $18M in JER Receivables on behalf of investors. The government said that in 6/10, Churchville found out that the investments were no longer rendering returns and that ClearPath had been the subject of misleading and fraudulent representations by JER principals. However, instead of notifying clients that he lost millions of dollars of their money, he tried to hide the losses while continuing to collect investment fees.

As a result, Churchville misappropriated about $21M of investor money, misusing their funds while bringing in money from new investors. For example, he used investor money to repay JER investors while pretending that the funds were investment returns. He also lied when he told investors that past investments with JER Receivables had resulted in high return rates.

The government’s probe, conducted by the FBI, the U.S. Attorney’s office, and the IRS Criminal Investigation, also found that Churchville set up a scam in which he used investor money as collateral and, without their permission, used the funds to help him get $2.5M to buy a home. He did not report that money as income on his personal tax returns, hence the more than $820K nonpayment of his taxes.

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SEC Stops Ponzi Scam Involving Pre-IPO Stocks and Middle Class Investors
The U.S. Securities and Exchange Commission is charging Jaswant Gill and Javier Rios with fraud. The regulator claims that the two men and their investment firm, JSG Capital Investments, targeted middle-class investors through a Ponzi scam in which they touted purportedly huge returns through pro-IPO stock in renowned companies such as Airbnb, Alibaba, and Uber.

Gill and Rios are accused of pocketing at least $2.8M in investor money for their own lavish spending instead of investing the money in the pre-IPO shares. Funds of new investors were used to pay “returns” to earlier investors.

Gill allegedly touted fake credentials. He, Rios, and their firm are not registered with the Commission or with a state regulator.

The SEC said that in total the two investment advisers raised $10M through their company and related entities. They are said to have promised these retail investors access to investment opportunities that were typically only available to “one-percenters.” They also guaranteed yearly returns as high as 60%.

The U.S. Attorney’s Office for the Northern District of California has filed a parallel criminal case against Rios and Gill.

Trader Accused of Bilking Friends and Family of Millions of Dollars
The SEC is suing Haena Park for allegedly defrauding friends, her ex-Harvard classmates, family members, and other individuals of millions of dollars. Park is accused of using investor funds and making misrepresentations about her investment history, as well about the profits the investments were supposed to have made.

Since 2012, Park has raised at least $14M from over 30 investors, sustaining $16M in trading losses in the process.

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Texas Oil and Gas Ponzi Scam Leads to 13-Year Prison Term
The owner of RHM Exploration has been sentenced to over 13 years months behind bars for a Texas oil and gas Ponzi scam that raised about $4.5M from investors. William Risinger must pay more than $3.7M to those whom he bilked.

Risinger pleaded guilty to criminal charges of money laundering and wire fraud. From 11/10 to 6/14 he stole funds from investors for three gas, oil, and mineral ventures that were scams. Court documents state that he used proceeds from his fraud for his own spending and for ‘lulling” payments to make it appear to investors as if the joint venture they put their money into was running promised.

As part of his sentence, Risinger will spend 160 months in prison and serve three years of supervised release.

Linn Energy Seeks Chapter 11 Bankruptcy Protection
In other oil and gas news, Linn Energy LLC (LINE) has filed for Chapter 11 bankruptcy. The Houston-based company cited weak energy prices as a reason for having to seek protection.

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Petters Ponzi Scam Victims to Get Back $172M
Victims of Tom Petters’ $3.65B Ponzi scam collapse are about to get $172M. Petters were sentenced to 50 years behind bars for bilking investors out of all that money.

Investors thought they were putting their money into the purchase of consumer electronic goods that were to be resold at a profit to retailers. Instead, the funds went toward supporting Petters’ companies and his extravagant lifestyle. There are also over 100 lawsuits pending against specific investors that will hopefully bring in more money for the victims.

Petters was convicted of wire fraud, conspiracy to commit wire fraud, conspiracy to commit mail fraud, mail fraud, conspiracy to commit money laundering, and money laundering.

Potential investigators were given bogus documents listing goods that Petters Company’ PCI had purportedly bought from vendors and then sold to retailers. Falsified records made it appear as if PCI had invested money, too. In Ponzi-like fashion, earlier investors were paid with the money of subsequent investors rather than from real profits.

Appeals Court Affirms Ex-Madoff Employees’ Convictions

The U.S. Court of Appeals for the Second Circuit said that the convictions of five former employees who worked for Bernard Madoff were proper. Daniel Bonventre, JoAnn Crup, Annette Bongiorno, George Perez, and Jerome O’Hara were convicted in 2014 for aiding Madoff in his $20B Ponzi scam and making money from the fraud.

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