Articles Posted in Ponzi Scams

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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In Manhattan, prosecutors are charging Fred Elm, the founder of Elm Tree Investment Advisors LLC, and Ahmed Naqvi, its COO, of running a $17M Ponzi scam that allegedly bilked over 50 investors. According to the government, the two men falsely claimed they had access to pre-initial public offerings and that their funds would be placed in privately held companies, such as Uber Technologies and Twitter Inc.

Manhattan U.S. Attorney Preet Bharara said that only $7.1M of the $17M was actually invested and investor funds were mixed together in one account. Elm is accused of spending millions of these dollars in expensive purchases, including high-end cars and a nearly $2 million home.

Investors were told that Elm and Naqvi would receive a 2 % management fee and 20% of any profit made. Unfortunately, there never was any profit. $5.2M of new investors’ funds was used to pay earlier investors, which is typical of a Ponzi scam. The two men are accused of making misrepresentations that were fictitious to hide their scheme from investors.

Elm and Naqvi are charged with wire fraud, securities fraud, and conspiracy.

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According to a law enforcement source that spoke to Newsweek, there may be a connection with a $12 million Ponzi scam involving restaurateur Hamlet Peralta and an investigation that the FBI is conducting into allegations of corruption at the NYPD. Peralta, who is the purported mastermind of the alleged scheme, has been arrested.

According to a federal indictment, investors thought they were investing in Peralta’s wholesale liquor business. Instead, he used $700K of their funds on liquor and over $11 million to pay earlier investors, purchase spa treatments and cover his other expenses. Peralta purportedly lied when he told investors that he was the owner of the West 125th Street Liquors. (The business belongs to his sister.) One investor gave Peralta over $3.5M.

Peralta is charged with wire fraud. At least 12 investors were allegedly bilked. Peralta is said to have promised them regular interest rate returns that he claimed would come from profits made by his business. Instead, he misappropriated the money.

Now, Newsweek is saying that the liquor scam may be tied to the FBI’s NYPD probe. The FBI is reportedly looking into whether senior members of the police department received gifts in exchange for favors from two businessmen who invested with Peralta.

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New Jersey adviser John Bivona is facing U.S. Securities and Exchange Commission charges accusing him of raising over $53M from investors in a Ponzi-like scam that involved the selling of investments in pre-IPO tech companies. However, contends the SEC, instead of investing the funds as intended, he used investor money to pay taxes, legal fees, a car loan, a vacation house mortgages, and cover his nephew’s credit card bills.

The regulator, in its complaint, said Bivona funneled millions of dollars into earlier funds that he and his company managed, while at least $5.7M went to family members, including nephew Frank Mazzola, who also is dealing with SEC charges for a previous investment scam.

The Commission alleges that Bivona raised the money through Saddle River Advisors, which has not registered with the regulator since 2013, and SRA Management. Because he purportedly took the money for his own spending, to pay family bills, and keep different funds running, his firms often never had enough money to buy the shares investors had been promised.

The SEC believes that Bivona was able to keep his Ponzi scam going because he kept transferring funds between over a dozen bank accounts associated with a number of entities. Meantime, investors never received financial statements they were promised.

In its press release announcing the charges, the SEC linked to one of its bulletins that identifies the possible warnings signs that the unregistered offering you are thinking of investing in may be a scam. The Commission noted that unregistered securities are

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Guy Gentile, who owns a New York-based brokerage firm, is charged with fraudulently inflating two micro-cap stocks’ prices before selling them to investors. His alleged actions purportedly allowed him to make $17.2M in gross trading proceeds.

Gentile was indicted in federal court. He and co-conspirators Itamar Cohen and Michael Taxon, both Canadian stock promoters, are accused of buying Kentucky USA Energy Inc. and Raven Gold Corp. shares from 4/07 to 6/08 and then using misleading marketing collateral and manipulative trading to inflate the shares. Taxon and Cohen have already pleaded guilty to their involvement in the Ponzi scheme. Gentile, who is charged with securities fraud and conspiracy to commit securities fraud, could be facing twenty years in prison.

Running a Ponzi scam is not the only way to get in trouble for it. Connecticut fund manager Marlon Quann has been ordered to surrender nearly $81M in profit for helping Thomas Petters run his $3.5B Ponzi scheme. The U.S. Securities and Exchange Commission said that Quann hid evidence of the fraud in part with $187M in “round trip” transactions.” The SEC also sued Quan’s Acorn Capital Group LLC, Stewardship Investment Advisors LLC, and ACG II LLC.

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FINRA Panel Awards Estate Over $34M from Morgan Stanley in the Wake of Churning Allegations
A Financial Industry Regulatory Authority arbitration panel awarded the estate of Home Shopping Network Roy M. Speer over $34M in its case against Morgan Stanley (MS). The panel ruled that the firm, branch manager Terry McCoy, and broker Ami Forte were jointly liable for breach of fiduciary duty, negligence, unauthorized trading, constructive fraud, unjust enrichment, and negligent supervision. The alleged negligence would have occurred from 1/09 to 6/12 and involved investments in the financial services and banking sectors.

According to Mrs. Speer’s lawyer, in six of Mr. Speer’s accounts, about 12,000 transactions took place, most of them involving municipal bond trading and corporate trading. Many of these trades were unauthorized.

The arbitrators awarded $32.8M in compensatory damages to Speer’s widow, Lynnda Speer, and $1.5M for the costs involved in the arbitration process. The panel said that Morgan Stanley violated a law in Florida that prohibits the exploitation of vulnerable adults. Mr. Speer had dementia. Forte, who was his broker, is said to have been in a relationship with him.

Former Craig Scott Capital Broker Accused of Elder Financial Fraud
FINRA is accusing broker Edward Beyn of making over $1.7M in commissions and fees by engaging in excessive trading in client accounts while he was a registered representative at Craig Scott Capital. He is now with Rothschild Liberman. Beyn is accused of churning nine accounts of six customers, all of them over the age of 60, from 3/12 through 5/15. They all sustained losses.

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