April 29, 2015

Ex-Sonics Special Assistant Accused of $4M Wire Fraud, Ponzi Scam

Steve Gordon, who used to be the special assistant to the Seattle SuperSonics basketball team, has been charged with federal wire fraud. Gordon is accused of using false pretenses to initiate at least $4 million in business deals. The criminal charges come after a 10-month probe by the Federal Bureau of Investigation.

Gordon, who also worked with the Minnesota Timberwolves and the Portland Trail Blazers, is accused of creating a Ponzi scam that involved at least 30 investors. Newer investors’ money was allegedly used to pay earlier investors their promised returns.

The wire fraud count accuses him of using misrepresentations, fraudulent promises and false pretenses, and concealing material facts to solicit money from investors. He also purportedly used his friendship with ex-Microsoft SCEO Steve Ballmer by falsely claiming that the billionaire was his partner and financial backer. However, according to the fraud charges, Ballmer never promised to give Gordon any money.

Gordon is said to have used that relationship and his connections with NBA players to secure partnerships with financial and legal professionals to give him more credibility. During phone calls to potential investors he allegedly had someone pretend to be Ballmer, as well as different government officials who supposedly were involved in overseeing the financial and banking industries.

One investor, ex-Australian basketball player Wayne Carroll, said that he and Knox Basketball, the amateur basketball federation in Australia of which Carroll is executive director, paid Gordon $4,000 monthly for two years as a consultant. Carroll said that Gordon told him Ballmer was ready to invest in big basketball promotion ventures in China and Australia. However, the deal with Ballmer never happened.

Gordon is also accused of telling investors that Ballmer promised to help him establish a multi-million dollar fund and get him a position as a minority owner in the Sonics in the future—both were lies. In 2013, Ballmer cut all ties with Gordon.

Steve Gordon, Sonics special assistant, charged with federal wire fraud, The Seattle Times, April 20, 2015

Ponzi scam, SEC

More Blog Posts:
SEC Sues Ex-New York Giants Cornerback Over Alleged Ponzi Scam, Stockbroker Fraud Blog, April 8, 2015

Ponzi Scams: Madoff Victims to Get $93M, Fraud Lawsuits Name Insurance Brokerage Head in $10M Scheme, Stockbroker Fraud Blog, March 24, 2015

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

April 8, 2015

SEC Sues Ex-New York Giants Cornerback Over Alleged Ponzi Scam

The U.S. Securities and Exchange Commission is suing a former New York Giants player for allegedly helping to run a Ponzi scam. According to the regulator, Will Allen and his business partner Susan Daub raised over $31 million from investors, promising them profits from loans made to professional athletes. Allen and Daub managed Capital Financial, which was compromised of several companies.

The SEC said that the alleged financial scam took place from 7/12 through 2/15 and involved over 40 people investors, who were told they could make up to 18% in interest. The Commission contends that Allen and Daub misled investors about the circumstances, terms, and the existence of certain loans.

For example, according to the complaint, last year, at least two dozen investors handed over approximately $4 million that was supposedly going to go toward a $5.6 million loan for an NHL player. They were given a copy of a promissory note and loan agreement that was supposed to have been signed by both Allen and the player. The player was to make monthly payments.

However, says the regulator, the loan was a sham and the player never signed the agreement or promissory noted nor did he ever receive a $5.65 million loan. That said, earlier this year, Capital Financial submitted proof of claim, after the NHL player filed for bankruptcy, listing the company as one of its creditors. The amount was for $3.429,750, along with a $3.4 million promissory note that the player signed, as well as a loan agreement. Still, that figure is a far cry from the $5.6 million loan that investors told they were getting involved in.

Also, some $7 million of client funds was allegedly used to fill a payment shortfall to other investors, while other of their funds is said to have gone toward personal spending at nightclubs and casinos. A federal court has since frozen the assets related to the alleged Ponzi scam and the Commission wants to impose penalties.

If you were the victim of a Ponzi scam and sustained substantial losses, contact our securities fraud law firm today.

SEC Accuses Ex-Giants Cornerback Allen of Running Ponzi Scheme
, Bloomberg, April 7, 2015

Did Ex-NFLer Will Allen's Alleged Ponzi Scheme Prey On Jack Johnson?, DeadSpin, April 7, 2015

More Blog Posts:
LPL Financial Should Pay $3.6M in Fines, Repayments for REIT Sales to Older Investors, Says NH Regulator, Stockbroker Fraud Blog, April 7, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors, Stockbroker Fraud Blog, March 30, 2015

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities, April 6, 2015

March 24, 2015

Ponzi Scams: Madoff Victims to Get $93M, Fraud Lawsuits Name Insurance Brokerage Head in $10M Scheme

Investors who were bilked in Bernard Madoff’s Ponzi scam will be getting back another $93 million. Madoff Trustee Irving Picard said that Defender Limited and related entities have consented to give back that amount, which they received from investing with the Ponzi mastermind. As part of the agreement, the $93 million will be withheld from the over $422 million that Defender is waiting to get back for its own losses in the scam.

To date, Picard has gotten back over $10.6 million of investors' $17.3 billion in principal. This is the latest deal reached between the trustee and a so-called feeder fund. These funds pooled investor money and then sent the cash Madoff’s way. Bogus returns were issued to the funds, which gave the money to their individual investors.

Picard contended that the parties behind the Defender fund were aware, or if not then they should have been, that Madoff’s company was a fraud. The $93 million is representative of all the money that Defender withdrew from its fund from its formation in 2007 until the end of 2008 when Madoff liquidation proceedings began. As part of the agreement, parties involved with Defender will cooperate with Picard to get back the $550 million. Picard has also reached deals with feeder funds Premo Fund, Herald Fund SPC, and Senator Fund SPC.

In other Ponzi scam news, A number of securities fraud lawsuits have been submitted accusing Loren Holzhueter of racketeering and fraud related to his alleged running of a $10 million Ponzi scam. The 69-year-old was the head of ISC Inc., an insurance brokerage and investment business. Many of his investors were retired and had limited financial resources.

In November, IRS investigators went to Holzhueter’s offices and confiscated records because they suspect him of running the Ponzi scheme. Earlier this year, the U.S. Securities and Exchange Commission sued Holzhueter, his assets were frozen, and a monitor was appointed to take charge of his business.

The SEC claims that Holzhueter lied to investors, who had been allowing him to handle millions of dollars over the last several years. They claim he said that investor funds would be placed in a special investment account and they could take their money out whenever they wanted. Others were purportedly told that their money went into mutual funds, Individual Retirement Accounts, or other investments. Instead, claims the agency, these investments were not executed and investors' money were mixed in with other ISC revenue.

Now ISC’s investors want their money back. According to the securities cases, they now believe that the regular financial reports given to them by Holzhueter were bogus and that the defendants—Holzhueter’s wife is one of them—misappropriated their funds for their personal use. The SEC said that Holzhueter and his family may have collected over $500,000 from accounts that contained investor money and used some $400,000 for a company that belonged to him. More than 122 investors may be entitled to financial recovery.

Last week, the SEC requested that the district court judge prevent ISC from paying its lawyers because of concerns that the company may not be capable of making any significant lump sum payments. The Commission does not believe that Holzhueter’s lawyers should get preferential treatment when so many others, including creditors and bilked investors, remain unable to get their money back.

Madoff Trustee Strikes $93 Million Deal with Feeder Fund, The Wall Street Journal, March 24, 2015

Judge freezes assets of man SEC accuses of running Ponzi scheme, Milwaukee Wisconsin Journal Sentinel, JSonline.com, January 28, 2015

The Madoff Recovery Initiative, Madoff Trustee

More Blog Posts:
SEC Judge Orders Two Investment Advisers to Pay Over $6.3M Related to Bernard Madoff-Linked Hedge Funds, Stockbroker Fraud Blog, January 9, 2015

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

DOJ’s Fund for Madoff Victims Has Received 51,700 Claims Worth $40B, Institutional Investor Securities Blog, May 14, 2014

March 16, 2015

Ex-Green Bay Packers’ Bruce Wilkerson Awarded $2M Against Resource Horizons Group Over Ponzi Scam Involving Rogue Broker

Bruce Wilkerson, the former tackle of the Green Bay Packer, has been awarded $2 million against Resource Horizons Group. The ex-NFL player lost $650,000 in an alleged Ponzi scam run by Robert Gist, an alleged rogue broker at the Georgia-based financial firm.

Unfortunately for Wilkerson the former pro football player is unlike to get his money back, which was a substantial chunk of his net worth. The now defunct broker-dealer closed shop in November after it was slapped with more $4 million in judgments in two arbitration awards that it could not afford to pay. The Financial Industry Regulatory Authority has suspended the firm for not complying with the award, as well as canceled its license.

The arbitration awards are also linked to Gist, who in 2013 consented to pay $5.4 million to resolve Securities and Exchange Commission charges accusing him of running the Ponzi scam and converting the money for personal use over a 10-year period. At least 32 customers were allegedly bilked.

Gist is accused of using his Gist, Kennedy & Associates Inc., an entity that is not registered nor is it affiliated with Resource Horizons, to make false customer statements. The firm hired him in 2001 even though he already had customer disputes on record.

The $4 million FINRA arbitration awards were also against Resource Horizons executives David Miller and Kelly Miller. They are accused of failing to supervise Gist, not recognizing warning signs that something was amiss, as well as of negligence. The couple was held jointly liable with the firm, and they have since filed for bankruptcy protection. According to InvestmentNews, Miller is now with Kovack Securities Inc.

Unfortunately, professional athletes are among those targeted for securities fraud. Our securities fraud law firm represented many who have lost millions of dollars because their investments were improperly handled, they received bad investment advice, or were blatantly defrauded. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Ex-NFL player left out in the cold after $2 million award, InvestmentNews, March 16, 2015

More Blog Posts:
Resource Horizons Group’s Future Hangs in Balance Following $4M FINRA Arbitration Award, Stockbroker Fraud Blog, September 25, 2014

Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Blog, January 31, 2015

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

February 20, 2015

SEC Cases: Brothers-In-Law Charged in Louisiana Insider Trading Scam, NY-Based Broker-Dealer Accused of CDO Liquidation-Related Fraud, & Colorado Ponzi Scam is Halted

The Securities and Exchange Commission is charging former VP of The Shaw Group’s construction operations Scott Zeringue and his brother-in-law Jesse Roberts III with insider trading. Zeringue has already agreed to settle the regulator’s charges by consenting to pay disgorgement of ill-gotten gains plus a penalty.

The SEC says that the insider trading took place in 2012 when Zeringue, while working at The Shaw Group, became privy to confidential data about the company’s upcoming acquisition by Chicago Bridge & Iron Company. Prior to the announcement of the deal, he bought 125 shares of Shaw stock and asked Roberts to buy for him, too. Roberts went on to tip others and they collectively made close to $1 million in illicit profits.

Meantime, parallel criminal charges have been filed against Roberts. Zeringue has already pleaded guilty to the criminal charges against him.

In another SEC case, the regulator is charging VCAP Securities and its CEO Brett Thomas Graham with improperly arranging for a third party brokerage firm to secretly bid at certain auctions that they conducted for their affiliated investment adviser. The auctions were for liquidating collateralized debt obligations. The brokerage firm was supposed to help them acquire bonds to benefit certain funds.

However, engagement deals with CDO trustees did not allow VCAP and its affiliates to bid while also acting as auction liquidation agent. Because the brokerage firm had access to confidential data regarding bidding, Graham was able to make sure that the third-party firm won the bonds at prices just a little higher than what other bidders made. The affiliate investment adviser would then buy the bonds from the bidder right away.

The Commission said that Graham and the firm made material misrepresentations to the different CDO trustees. They also falsely represented that they would not bid in auctions or wrongly use confidential bidding data. Trustees were given documents that failed to disclose that the affiliate investment adviser was the winning bidder. As a result, the investment adviser was able to get 23 bonds. VCAP and Graham will pay close to $1.5 million to settle SEC charges.

In federal court, the SEC announced an emergency asset freeze and fraud charges against a Colorado-based Ponzi and pyramid scam that promised 700% returns. The scheme purportedly raised $3.8 milion from investors in less than a year.

According to the Commission, Kristine L. Johnson and Troy A. Barnes touted what they called a “3-D matrix “and “triple algorithm.” They got investors to purchase positions in Work With Troy Barnes Incorporated. Web promotions and internet videos were used to solicit participants.

The two reportedly claimed their program wasn’t a pyramid scam, yet the company did not have legitimate business operations. Instead, earlier investors were paid “returns,” which was really money from newer investors. Barnes and Johnson would take money out for their own spending.

SEC Order in the Colorado Ponzi Scam (PDF)

The SEC Order Alleging CDO-Liquidation-Related Fraud (PDF)

The SEC Complaint in the Louisiana Insider Trading Case (PDF)

More Blog Posts:

U.S. Bank National Association Must Pay $18M to Peregrine Customers, Says Court, Stockbroker Fraud Blog, February 18, 2015

DOJ Investigating UBS Over Losses Related To Firm’s V10 Enhanced FX Carry Strategy, Stockbroker Fraud Blog, February 17, 2015

US Probing Whether Morgan Stanley Data Breach Was Linked to Fired Financial Adviser, Institutional Investor Securities Blog, February 18, 2015

February 16, 2015

Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K

A federal jury has decided that ex-U.S. Ambassador to Ecuador Peter Romero would not be allowed to keep over $758K in expenses, fees, and interest he earned while lending his legal counsel and credibility to Allen Stanford. Instead, he will pay that sum to the court appointed receiver.

Stanford was convicted in 2012 of fraud and money laundering, perpetuating a global multibillion-dollar scam in the process. His Houston-based empire was shut down in 2009 when the U.S. Securities and Exchange Commission accused him of running his $7 billion Stanford Ponzi scam that bilked thousands of investors. The scheme involved the sale of CDs from his bank in Antigua.

Receiver Paul Janvey contends that Romero and certain other consultants did not ask the most basic questions about Stanford’s bogus banking empire. Romero was invited to serve on Stanford’s International Advisory Board after sitting next to him at an inaugural ball for President George W. Bush in 2001.

Romero received $1 million in fees for his role as consultant-fixer over issues involving business and politics in Central America. During testimony, he claimed that he had no idea Stanford was committing fraud and said that he too was deceived.

He is not the only one that Janvey is going after. Ex-Texas Lt. Governor Ben Barnes was purportedly paid $5 million, while ex-Houston Mayor Lee Brown was paid under $300K. Both will be allowed to keep all of the money if they can persuade a jury that their work with Stanford was conducted in good faith and that the services provided were the reasonable equivalent in value to how much they were paid.

Unfortunately it is investors who lose out when they become the victims of a Ponzi scam. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our Texas securities fraud lawyers are here to help investors recoup their losses.

Ex-envoy who aided Ponzi schemer Stanford must pay $758,000, Dallas jury decides, The Dallas Morning News, February 13, 2015

Former U.S. diplomat implicated in Stanford Ponzi scheme, CNBC, January 22, 2015

Texas jury rules U.S. ex-diplomat must repay over $700,000 in Ponzi scheme, Reuters,

More Blog Posts:
Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

February 13, 2015

Securities Fraud Cases: NY Hedge Fund Manager Bilks Investors of Over $800K, Maize Fund Scam Leads to Restitution, Madoff Ponzi Scheme Victims Get $355M, and Kentucky Scheme Ends with Probation, Compensation

SEC Says New York Hedge Fund Manager Stole From Investors
The U.S. Securities and Exchange Commission says that Moazzam Malik, a purported hedge fund manager in NYC, stole money from investors. Malik allegedly falsely claimed to be running a hedge fund holding about $100 million in assets under management. He is accused of touting high returns.

Malik raised over $840,000, but his fund, which didn’t make actual investments, never held over $90,177 in assets. Instead, he kept taking out money and spending the funds. He refused to give investors back their money, even pretending to be a fund employee and sending out an e-mail saying that he had passed away. Mailk purportedly kept soliciting investors even as he received redemption requests.

Maize Fund Investment Scam Leads to $6.7M Restitution
The U.S. Commodity Futures Trading Commission has gotten a federal court order demanding that Scott M. Ross and his Maze Asset Management LLC, Maize Capital Management, LLC and his Maize Capital Management LLC pay $5.4 million in restitution and a $1.3 million civil penalty for his Maize Fund investment scam. Ross is serving time behind bars for his involvement in two other financial scams.

Ross and his companies are accused of making false statements to prospective customers, putting out bogus account statements reflecting trading profits when there were none, mishandling client funds, and not properly registering as a Commodity Pool Operator with the CFTC. The regulator’s complaint charged Ross and the companies with violating core anti-fraud Commodity Exchange Act provisions related to their solicitation and managing of the Maize Fund, which is a pooled foreign exchange account.

Madoff Ponzi Scam Victims Get Back Another $355M
According to the Securities Investor Protection Corporation, about $355 million will be returned to the victims of the Bernard Madoff Ponzi scam. Along with a $497 million settlement reached with federal funds Primeo Fund and Herald Fund, some $10.5 billion has been recovered in the liquidation proceedings for the scheme that bilked inventors of billions of dollars.

This is Madoff trustee Irving Picard’s fifth distribution of recovered moneys to Madoff customers. He is in charge of the Securities Investor Protection Act liquidation of Bernard L. Madoff Securities LLC.

$1.3M Restitution in Kentucky Securities Fraud Case
The Department of Financial Institutions says that Pamela Jean Williams and Richard Dow Williams must pay over $1.3 million in securities fraud restitution to five victims. If they don't pay, then their sentences of one year and three years, respectively, would go from probation to time behind bars.

The Williamses were charged on multiple counts of selling unregistered securities, fraudulent securities practices, and omitting or misrepresenting material facts about a gas well investment. Each pleaded guilty to one consolidated fraud charge and has agreed to pay restitution.

Fraudulent Hedge Fund Manager Moazzam Malik Fakes Own Death, ValueWalk, February 16, 2015

Federal Court Orders Scott M. Ross and his Companies to Pay More than $6.7 Million in Restitution and a Civil Monetary Penalty for Defrauding Investors in His Commodity Pools, Mishandling Customer Funds, and Failing to Properly Register as a Commodity Pool Operator, CFTC, February 13, 2015

Madoff's Victims Are Repaid Another $355 Million, Trustee Says, NPR, February 9, 2015

More Blog Posts:
Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case, Stockbroker Fraud Case, January 31, 2015

Standard & Poor’s Settles Inflated Ratings Case for $1.5 Billion, Institutional Investor Securities Blog, February 3, 2015

SEC Subjects Credit Rating Agencies, Asset-Backed Securities Issuers to Tighter Rules, Stockbroker Fraud Blog, August 28, 2014

Magoffin man, woman ordered to pay more than $1.3 Million in securities fraud case, Floydcountytimes, February 12, 2015

January 21, 2015

Investment Adviser Fraud Cases Lead to Civil Charges, Criminal Convictions, and Investor Losses

SEC Accuses Elm Tree Investment Advisors, its Founder, of $17M Securities Fraud
The Securities and Exchange Commission has filed fraud charges against Elm Tree Investment Advisors LLC and its founder Frederic Elm for running a Florida-based securities scam that raised over $17 million in a little over a year. The regulator contends that Elm, his firm, and the funds Elm Tree Motion Opportunity LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Investment Fund LP misled investors and used the bulk of the funds to issue Ponzi-like payments. Elm also is accused of using the money to purchase expensive homes, jewelry, and autos, as well as cover his daily living expenses.

According to the SEC, Elm, his unregistered advisory firm, and the three funds violated the regulator’s anti-fraud rules as well as federal securities laws. The Commission wants relief for investors as well as the restoration of the purportedly ill-gotten gains and financial penalties.

A judge granted the regulator’s request for a temporary asset freeze and issued restraining orders against all those named. Elm’s wife, Amanda Elm, is a relief defendant.

District Court Issues 40 Month Sentence for Cherry Picking Scam
In other investment adviser fraud news, a district court has sentenced Noah Myers to 40 months behind bars for running a cherry picking securities scheme. Myers pleaded guilty last year to one count of securities fraud, which the government says cost investors around $470,000. Myers owns MiddleCove Capital LLC.

Between 4/09 and 11/10, Myers bought a number of securities, including the leveraged exchange-traded fund (ETF) ProShares UltraShort Financials. He then disproportionately allocated the trades that went up in value to his own accounts. In 2013, the SEC took back MiddleCove’s investment adviser license. Myers is now barred from the securities industry.

Ohio Man Accused of $5.5M Ponzi Scam
In an unrelated Ponzi scam, an Ohio man has been charged with running a $5.5 million scheme that bilked at least 19 investors. Geoffrey Nehrenz is accused of promoting and selling investments contracts to clients via Keystone Capital Management. The investment adviser firm is not registered with the SEC.

Nehrenz allegedly falsely represented to prospective clients that their money would be pooled, invested in mid- and large-capitalization, publicly traded U.S. securities by day, and changed into cash at night. He is accused of instead using the funds to cover his personal and business spending and, without client permission, make side pocket investments involving speculative, high-risk trades in overseas and domestic private placement vehicles.

SEC ALJ Finds Harding Advisory Firm Liable for CDO Fraud
An SEC Administrative Law Judge has found Wing Chau and his Harding Advisory LLC liable for fraud. The regulator accused Chau of letting a hedge fund control which assets would back a collateralized debt obligation, the Octans I CDO Ltd., without notifying investors.

The firm must pay $1.7 million as a penalty. Chau has to pay $340,000. They also must disgorge $1 million in profits plus interest.

Uniontown man accused of defrauding investors $5.5M, WKYC, January 16, 2015

Connecticut investment adviser sentenced to 40 months in prison for fraud, Reuters, January 12, 2015

An Investment Adviser Who Sued Michael Lewis For Defamation Has Been Found Liable For Fraud, Business Insider, January 13, 2015

SEC Charges Investment Adviser and Manager in South Florida-Based Fraud, SEC, January 21, 2015

More Blog Posts:
Investment Adviser News: Barred Representative is Now a Finance Coach, Bellingham Man Gets Prison Term for Bilking Seniors, Stockbroker Fraud Blog, January 13, 2015

Standard & Poor’s to Pay Almost $80 Million to Resolve SEC Charges Over Ratings Fraud Involving CMBSs, Institutional Investor Securities Blog, January 21, 2015

UBS Settles SEC Dark Pool Case for $14M, Stockbroker Fraud Blog, January 16, 2015

December 31, 2014

Securities Fraud News: SEC Charges NY Firm With Stealing Investor Funds, Stock Promoter Accused of Bilking Clients Over Twitter, Facebook Pre-IPO Shares, and NY Lawyer Under Fire for Alleged Ponzi Scam

SEC Charges NY Firm, Fund Managers With Securities Fraud
The Securities and Exchange Commission is charging VERO Capital Management, its CFO Steven Downey, President Robert Geiger, and General Counsel George Barbaresi with secretly taking investor money to support a side business. The three men ran funds with offering documents that touted their objective as making good returns via mortgage-backed securities investments. Instead, after winding down the funds, the officers allegedly diverted around $4.4 million to undocumented bridge loans to an affiliate company that was supposedly in risk management. Investors and the funds’ directors were purportedly not notified that these unauthorized loans were taking place.

The SEC Enforcement Division also claims that VERO Capital and the three men compelled the funds to buy three notes totaling $7 million from an affiliate, which is a principal transaction that requires written notice and consent of a client before the transaction can be finished. The division claims that no attempt was made to get this mandatory notice. The regulator is alleging multiple violations of the Investment Advisers Act of 1940 and other rules.

California-Based Stock Promoter Accused of Bilking Clients In Supposed Sales of Pre-IPO Twitter, Facebook Shares
The SEC is charging Efstratios “Elias” Argyropoulos and his firm Prima Capital Group with securities fraud. According to the regulator, the two parties fraudulently raised close to $3.5 million from investors for the supposed purchase of Facebook and Twitter shares before their initial public offerings.

However, the Commission claims that instead of buying the shares as promised, Prima Capital and Argyropoulos used the money mainly for day trading and to pay back certain investors who spoke out about not receiving the shares promised to them. As part of settling the civil charges, Argyropoulos consented to be barred from working for a brokerage firm or investment adviser and he will pay financial penalties. He and his firm settled without denying or admitting to them.

Also charged in a separate administrative proceeding for his involvement in the securities scam is Khaled A. Eldaher, who lives in Texas. While working with a registered firm, Eldaher allegedly reached a side deal with Argyropoulos to solicit investors and get 50% of the mark-up on shares of Facebook that he sold. He received over $15,400 for selling more than $360K worth of the shares. His brokerage firm fired him when it found out he was selling the securities for another party.

New York Lawyer Charged in Ponzi Scam Involving European Real Estate MBSs
Charles Bennett, an attorney based in Manhattan, faces SEC charges accusing him of running a Ponzi scam that bilked friends, relatives, and legal clients. The Commission says that he raised about $5 million by selling purported investments in a pool of funds that were invested in certain joint ventures. Investors were told that the cash would be used primarily to fund investments in real eastate mortgage-backed securities in Europe. The securities supposedly were expected to yield lucrative return rates of 6-25% in a short period of time.

The regulator, however, contends that Bennett was running a scheme. The fund does exist but he is not connected to it or the joint ventures and didn’t invest anything in any of them at all. Instead, he allegedly misappropriated clients’ money to pay off earlier investors and support his lavish lifestyle. His Ponzi scam failed earlier this year.

SEC Charges California-Based Stock Promoter With Defrauding Investors Seeking Pre-IPO Facebook and Twitter Shares, SEC, December 23, 2014

Read More About Bennet's Ponzi Scam (PDF)

The SEC Order Against Vero Capital Management and Its Executives (PDF)

More Blog Posts:
FINRA Orders Pershing to Pay $3M Fine for Customer Protection Rule Violations, Stockbroker Fraud Blog, December 30, 2014

NASAA Wants Life Partners Held Accountable for Texas Securities Act Violations, Stockbroker Fraud Blog, December 28, 2014

Standard & Poor’s on the Verge of Civil Settlement Over Real-Estate Bond Ratings, Reports WSJ, Institutional Investor Securities Blog, December 29, 2014

December 8, 2014

Ex-California Insurer Charged with Running $11M Ponzi Scam

Joseph Francis Bartholomew is charged with 30 felony counts related to his alleged operation of an $11 million Ponzi scheme. The 75-year-old former licensed insurance agent has been called Orange County, Ca.’s Bernard Madoff, after the financier who ran a multibillion-dollar Ponzi scam for decades. Bartholomew allegedly bilked over 27 investors.

According to the California State Department of Insurance, he used his insurance business, MBP Insurance Services, to get people to trust him. Those involved reportedly included a number of family trusts, a church, an ex-baseball player, and senior citizens.

The Orange County Register said that Bartholomew made false promises to investors telling them that they could earn fast returns of up to 40%. For example, he is accused of offering one investor an unsecured investment while making the claim that the customer would get $10,000 a month if he invested $500,000. Bartholomew allegedly gave fraudulent assurances that the investment on third party life insurance policies was a legitimate one. He also made other misrepresentations, including claiming that over the last decade there had been no problems getting payments to investors.

Bartholomew had stopped paying investors by March 2013.

He is accused of running his financial scam from 2005 into 2014. If convicted, he faces up to 40 years behind bars.

Also charged for her alleged involvement in Bartholomew’s Ponzi scam is insurance agent Wendy King-Jackson. She worked at MBP Insurance Services.

King-Jackson is accused of selling unsecured securities connected to bogus insurance policies. She allegedly told clients that the policies were legitimate and the investments were legal while falling to notify them that the California Department of Corporations did not give the insurer the authority to sell the securities. She faces up to 16 years maximum in state prison if convicted.

Two OC residents arraigned in $11 million Ponzi scheme, Insurance.Ca.Gov, December 4, 2014

More Blog Posts:
SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014
SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda, Stockbroker Fraud Blog, November 29, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

November 28, 2014

Securities Fraud Headlines: ConvergEx Group Subsidiary Gets Criminal Sentence for Fraud, Ohio Man Gets Prison Term for Scam, Two Men Face Charges Over Predictive Software, and Fund Manager Admits to $17M Ponzi Scam

CGM Limited Pleads Guilty to Securities Fraud
CGM Limited, a subsidiary of ConvergEx, must pay a criminal penalty and restitution of $26 million for conspiracy to commit both securities fraud and wire fraud, as well as for wire fraud. The U.S. Department of Justice says that CGM limited charged clients millions of dollars in hidden and unwarranted fees. CovergEx is a global trading and brokerage firm. CGM Limited pleaded guilty to the criminal charges.

The government says that CGM Limited and certain traders and executives bilked clients by lying to them and taking the money in the form of fees. CGM Limited admitted that there were ConvergEx Group broker-dealers that regularly sent over securities trade orders so a mark-up could be taken when the orders were executed.

To hide the fees, traders issued false transaction reports to clients that included inaccurate details about how many many shares were part of a trade, how long it took to execute a trade, and the price at which shares were sold or bought. In total, about $12.8 million in trading profits were taken from the clients who were sent the false statements.

CGM Limited and ConvergeEx Group are paying about $43.8 million in restitution and criminal penalties.

Ohio Man to Go to Prison for $1.8M Securities Fraud
Anthony Davian was sentenced to almost five years behind bars for running a fraudulent investment scam that bilked investors of close to $1.8 million. Davian, who is from Ohio, pleaded guilty earlier this year to wire fraud, mail fraud, securities fraud, and money laundering. He also must pay nearly $1.8 million in restitution.

Between 2008 and 2013, Davian used Davian Capital Advisers LLC to sell securities to at least 20 investors in several states. But rather than investing customer’s funds, he paid back earlier investors and bought himself expensive items. He persuaded them to place money in his hedge fund by pretending that he oversaw millions of dollars.

Direction Labs Executives Charged with Soliciting Investments In Predictive Software
Direction Labs Chairman Chisan Cong and COO Steve Linnenkamp are facing multiple counts of felony securities fraud and theft. The two men were arrested and charged with soliciting investments in predictive software that they claimed could let investors know whether to go into or leave positions. The product was supposed to eliminate any guesswork in making trades on domestic and foreign exchanges. One investor was purportedly bilked out of $848,000.

Investment Fund Manager Enters Guilty Plea, Admits to $17M Ponzi Scam
James M. Peister has pled guilty to securities fraud involving a $17.9 million Ponzi scam. In addition to forfeiting that amount, Peister has consented to pay over $9.6 million in restitution to investors that were defrauded. He also faces up to 20 years behind bars and a $5 million fine.

Peister fooled 74 investors about how well their investments were doing in funds that he managed so they wouldn’t try to get their money back. The scam went on for nearly 10 years, during which time he used investors’ money to pay for his expensive lifestyle and pay earlier investors. He also deceived investors by generating false financial statements to make it appear as if their investments were doing well and so they would keep investing.

Peister’s Ponzi scheme was discovered when the investor pool ran out of funds during the 2008 financial crisis.

Investment Fund Manager Pleads Guilty to Securities Fraud for Operating a $17 Million Ponzi Scheme, Federal Bureau of Investigation, November 12, 2014

2 Greenwood Village executives arrested, charged with bilking Englewood couple out of $848,000, The Denver Channel, November 28, 2014

Securities Fraud Nets Ohio Man Prison Sentence, FA-Mag, November 26, 2014

ConvergEx Group Subsidiary Sentenced for Securities Fraud Scheme, FBI, November 19, 2014

More Blog Posts:
Unregistered Florida-Based Broker Charged with Securities Fraud, Stockbroker Fraud Blog, November 26, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources Tell Bloomberg, Stockbroker Fraud Blog, November 13, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

September 11, 2014

SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims

The Securities and Exchange Commission has said that it no longer intends to continue trying to get the Securities Investor Protection Corporation to pay back investors the losses they sustained in R. Allen Stanford’s $7 billion Ponzi scam. The decision comes after the U.S. Court of Appeals for the District of Columbia Circuit ruled that the regulator failed to prove that the scheme’s victims were “customers” eligible for compensation by the SIPC. That decision upheld an earlier ruling by a district court in 2012.

Even though the SEC is no longer seeking to compel the brokerage industry insurance fund to pay the investors, the agency says it is committed to the victims and will keep working with the U.S. Department of Justice, the Stanford Receiver, and others in an effort to maximize investor recovery.

SIPC keeps a special fund to pay back investors if their securities and cash were lost when a brokerage failed. The agency, however, said it couldn’t compensate the Stanford Ponzi scam victims because their losses were not a result of a broker-dealer failing but due to their purchase of CDs from a foreign bank—assets that they are still holding and now have no value.

Prior to the SEC lawsuit, SIPC had offered to pay each Stanford Ponzi scam victim up to $250,000. The regulator said this was not enough.

R. Allen Stanford is currently serving more than 110 years behind bars for his Ponzi scam. Authorities say that he sold investors fake CDs through his Stanford International Bank in Antigua. He would use their money to pay back earlier customers while also taking money to back his own enterprises. Thousands of customers were bilked in the scheme.

U.S. SEC won't appeal ruling against Stanford's Ponzi victims, Reuters, September 5, 2014

Court denies payout to Ponzi scheme victims, CNBC, July 18, 2014

Securities Investor Protection Corporation

More Blog Posts:
US Supreme Court Considers Hearing Stanford Ponzi Lawsuits, Stockbroker Fraud Blog, October 3, 2012

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Blog, February 10, 2014

June 27, 2014

Ponzi Scams: FINRA Bars Ex-Raymond James Broker Over $3M Ponzi Scam, Expels Success Trade Securities, Inc. for Bilking NFL and NBA Players

The Financial Industry Regulatory Authority is ordering Success Trade Securities Inc. and its President and CEO Fuad Ahmed to pay 59 investors, mostly current and ex-NBA and NFL players, about $13.7 million in restitution for losses they sustained in a Ponzi scam. Success Trade is now expelled from FINRA membership and Ahmed is also barred.

According to a FINRA hearing panel, between 2/09 through 3/13, the firm and Ahmed sold $19.4 million in bogus promissory notes to investors while omitting or misrepresenting material facts. These facts would have revealed that parent company Success Trade Inc. was in financial trouble.

Ahmed and the firm are also accused of misrepresenting that the funds would go toward costs for marketing and growing the businesses of the parent company. The SRO says that the funds instead went toward went toward unsecured loans to Ahmed for his personal spending and to pay interest payments to note holders.

In an unrelated Ponzi fraud, FINRA is barring Claus C. Foerster, a former Raymond James Financial Inc. (RJF) broker, for allegedly bilking clients of approximately $3 million. According to the SRO, Foerster convinced clients to move money they had in brokerage accounts into SG Investments, which was a nonexistent income fund that was actually a bank account that he controlled.

Clients received bogus account statements and some were paid dividends on a monthly basis. The fraud, which FINRA says began in 2000, purportedly went on until May 20014.

Earlier this month, Raymond James fired Foerster. The firm is the one that notified authorities and FINRA. It also has started paying restitution to clients.

Foerster accepted the industry ban and FINRA’s filing without denying or admitting to the charges.

Another alleged Ponzi scam artist is facing criminal charges in his alleged $15 million Ponzi scam. Race car driver Brian C. Rose. He has been indicted for allegedly bilking 164 investors in different states. These investors thought they were putting their money in coal mines.

Rose and eight others now face money laundering and fraud charges. He allegedly used investors’ money to purchase race cars, thoroughbred horses, and other luxuries, as well as to support his living expenses. $10 million of investor money has not been accounted for. Rose's father, David G. Rose, previously served time behind bars for his own $15.4 financial scam.

Ponzi Scams
A Ponzi scheme is an investment fraud. This type of scam typically involves using new investors' money to pay paying “ returns” to older investors. This gives the false appearance that investors are involved in an actual business that is making money.

Because Ponzi scams have no legitimate earnings, they can fail when the new investor money runs out or when too many investors want to cash out. Common signs you may be involved in a Ponzi scheme:

· You were promised high investment returns and hardly any/no risk

· Your returns are too consistent

· The sellers that are not licensed

· Investments are unregistered

· Complex investment strategies are involved

· You aren't receiving your payments

· You are having trouble cashing out

Please contact our securities fraud lawyers today. We can help you determine whether you have grounds for pursuing a civil lawsuit.

FINRA Hearing Panel Expels Success Trade Securities and Bars CEO Fuad Ahmed for Fraudulent Scheme, FINRA, June 25, 2014

Swindler's son accused of own $15M Ponzi scheme, The Courier-Journal, June 27, 2014

Finra Bars ex-Raymond James Broker Accused of $3 Million Scam, The Wall Street Journal, June 20, 2014

More Blog Posts:
Man Convicted in $46M Michigan Ponzi Scam, Stockbroker Fraud Blog, May 20, 2014

Finra Bars ex-Raymond James Broker Accused of $3 Million Scam, The Wall Street Journal, June 20, 2014

May 20, 2014

Man Convicted in $46M Michigan Ponzi Scam

David McQueen, of Byron Township in Michigan, was found guilty of 15 felony charges, including those involving money laundering, mail fraud, and failure to file taxes. McQueen is accused of running a $46 million Michigan Ponzi scam that bilked over 800 victims. Many of them gave him their retirement money, cashed in IRAs, and mortgaged their homes so they could invest.

McQueen, a former insurance salesperson, began investing people’s money in Multiple Return Transactions, which promising investors 10% returns. It wasn’t until later that he found out that the MRT was actually a Ponzi scam. However, instead of telling investors in his company, Accelerated Income Group, that MRT was a scam, he told them their funds were secure and growing. He then found new investors and took their money to pay off earlier investors.

According to Assistant U.S. Attorney Matthew Borgula, McQueen paid himself a salary of $100,000 from investor funds. He also gave these customers bogus account statements to make them think that their investments were profitable. The government said that when McQueen discovered that his Michigan Ponzi scam was about to fail, he took 30% of the investors’ money and placed them in highly speculative investment and other scams.

In December, Trent Francke, McQueen’s business partner, pleaded guilty to federal charges, including securities fraud, conspiracy to sell unregistered securities, and failure to file a tax return over income. He agreed to testify against McQueen.

According to the plea deal, McQueen, Francke, and others ran several investment funds, including Accelerated Investment Group, International Opportunity Consultants, Diversified Global Finance, and Diversified Liquid Asset Holdings. They told investors that their money would be placed in real property, forex trading, and projects involving ethanol, and others. Francke said that they knew that they were selling investment plans without providing information or a prospectus that explained the risks involved.

Ponzi Scams
Ponzi scams can lead to huge losses for investors who think that they are making money when actually a fraudster is just giving them another investor's money. If you were the victim of a Ponzi scam you should speak with a securities fraud law firm right away. You may be able to recoup your losses.

Investors detail how they lost savings to West Michigan duo's alleged $46.5 million scam, MLive.com, December 28, 2011

Read the Indictment (PDF)

More Blog Posts:
Madoff Ponzi Scam: Five Ex-Aides Convicted of Securities Fraud, Victims to Recover $349 Million, Stockbroker Fraud Blog, March 26, 2014

Texas Man Gets 25 years in Prison for $11M Ponzi Scam, Stockbroker Fraud Blog, April 21, 2014

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

April 21, 2014

Texas Man Gets 25 years in Prison for $11M Ponzi Scam

After a federal jury convicted Gary Lynn McDuff of conspiring to defraud investors, a U.S. District Court for the Eastern District of Texas judge sentenced the 58-year-old to 25 years behind bar for the $11 million investment scam. McDuff’s co-conspirators, Robert Reese and Gary Lancaster, had both pleaded guilty—Reese has since died. They too received prison terms.

The three men lied to investors when they told them their funds would be invested in top rated bonds that carried low risk. Instead, the fraudsters laundered investor money.

They solicited investments from customers throughout the U.S. while working at Lancorp Investment Fund. The indictment says that McDuff claimed that Lancaster was a registered adviser and the fund was properly registered.

Misrepresentations were made to customers to get them to give money, including that only A+ and A1 rated bonds would be invested in and each investment’s principal would be insured. Lancaster was touted as someone with previous experience in these investments.

In a statement, the Plano Texas U.S. attorney said that McDuff was in charge of the Ponzi scam while Lancaster was the ‘front.’ A prior felony conviction prevented McDuff from having a securities license or selling securities. Reese, who had previously been accused of fraudulent conduct in California, was also brought in to sell. The men’s prior convictions and violations were never mentioned to customers.

As part of the sentence, McDuff must pay $6.5 million in restitution to investors that were bilked in the Ponzi scam.

Shepherd Smith Edwards and Kantas, LTD LLP is a Texas securities fraud law firm that works with investors to get their money back.

Pasadena Man Sentenced to 300-Month Term in Multi-Million-Dollar Investment Fraud Scheme, FBI, April 16, 2014

Jury Convicts Recidivist Ponzi Man, Courthouse News Service, March 29, 2013

More Blog Posts:
$550M Securities Fraud Case Between Texas’ Wyly Brothers & SEC Goes to Trial, Stockbroker Fraud Blog, April 2, 2014

Mixed Securities Verdict Reached in SEC Case Against Texas-Based Life Partners Holdings, Stockbroker Fraud Blog, February 19, 2014

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

March 4, 2014

Ex-Merrill Lynch Adviser, Already Jailed for Massachusetts Securities Fraud, Now Indicted Over Ponzi Scam

Even as she serves her 33-month sentence for securities fraud, Jane O’Brien, a former Merrill Lynch (MER) broker, has now been indicted for her alleged involvement in a Ponzi scam that purportedly ran for nearly two decades. The U.S. Attorney's Office for the District of Massachusetts says that O’Brien is facing criminal charges for mail fraud, investment adviser fraud, and wire fraud involving the misappropriation of $1.3 million in client monies.

Per the indictment, between 1995 and 2013 and while she worked at Citigroup (C)'s Smith Barney and then later with Merrill, O’Brien persuaded a number of clients to withdraw money from brokerage accounts and their banks. She got their permission to invest the funds in private placements. However, instead, the 61-year-old allegedly used the money to repay other investors and cover her personal expenses.

O’Brien is also accused of making misrepresentations to clients, providing them with materially false statements, “making lulling payments,” and offering false assurances that their money was secure. She even in one instance, allegedly, got a client to invest in “Crooked Arrows,” a Hollywood film, in return for a promised 25% return, which did not happen.

In December 2012, O’Brien pleaded guilty to securities fraud over a separate case having to do with a $240,000 investment in a nonexistent security. According to the state, she also borrowed about $1.7 million from the client, which violates not just Merrill Lynch’s policies but also the rules of the securities industry. Late last year, Merrill settled with Massachusetts regulators over allegations that it did not properly supervise O’Brien. The firm paid $500,000, some of which went to investors who had been bilked.

Also, in August 2012, the Financial Industry Regulatory Authority barred O’Brien from the industry, contending that between 2004 and 2011 she borrowed over $2 million from clients even though she did not have permission.

Unfortunately, every year there are investors that get reeled in and robbed because they inadvertently became involved in a Ponzi scam or some other type of securities fraud. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today if you suspect you maybe one of these investors, and we can help you explore your legal options.

Former Merrill Lynch broker accused of 18-year Ponzi scheme, InvestmentNews, March 4, 2014
Needham Financial Advisor Sentenced to 33 Months in Securities Fraud, Justice.gov

More Blog Posts:

Massachusetts Securities Regulators Fine Merrill Lynch $500,000 For Alleged Failure to Stop Rogue Broker, Stockbroker Fraud Blog, October 29, 2013

North American Securities Administrators Association Releases 2013 List of Top Threats to Investors, Stockbroker Fraud Blog, October 22, 2013

Detroit, MI to Pay UBS and Bank America $85M Over Interest Swaps Settlement, Institutional Investor Securities Blog, March 4, 2014

January 24, 2014

Madoff Ponzi Scam Victims Win Right to Appeal for Interest

A group of investors that were victimized in the Bernard Madoff Ponzi scam has won the right to appeal directly to a federal court about a bankruptcy ruling that prevents them from factoring in the amount of time they invested with the financial fraudster as interest that they want back. According to the US Court of Appeals in New York, the plaintiffs met the criteria for a “direct appeal” so that they won’t have to go through the district court first.

U.S. Bankruptcy Judge Burton R. Lifland had said that “time-based” calculations might not be fair to creditors who are last in line for payments and that this could give a windfall to claims by traders even though they weren’t victims of Madoff’s scam. Lifland recently passed way.

Madoff’s victims want bankruptcy trustee Irving Picard to put aside about $1.4 billion to pay back interest they say they are owed. They believe that factoring in time when equating damages allows for inflation to be considered.

Picard is working to repay thousands of investors that lost $17 billion in the fraudsters’ investment advisory business when the Ponzi scam failed in 2008. So far, he has gotten back over $10 billion via securities fraud settlements and lawsuits, with $4.9 billion handed over to investors. In 2011, Picard won an appeals ruling affirming his request to calculate losses according to cash that investors invested while subtracting money that was withdrawn instead of using the total found on final account statements of investors (which factored in bogus profits from fake trading).

Meantime, five ex-Madoff employees, accused of helping him run his Ponzi scam, are still on trial. The defendants include Daniel Bonventre, who is the ex-operations chief; Joann Crupi, who managed big accounts; Annette Bongiorno, who was in charge of the investment advisory unit; and Jerome O’Hara and George Perez, both computer programmers. The latter two are accused of writing code so that millions of bogus trade confirmation account statements were printed. All of them allegedly got rich from Madoff’s Ponzi scam. Six of their former colleagues are testifying against them.

The US government says that the five defendants used the fake statements and confirmations to deceive customers into thinking their funds were used to purchase securities when actually no investment trading was happening. The trial started in October.

Madoff, who pleaded guilty to fraud, is behind bars for 150 years. At least seven others have also pleaded guilty for their role in the Madoff Ponzi scam.

Ponzi Scam
Ponzi scams inevitably collapse when fraudsters are no longer able to draw in new investors to pay previous investors or when too many of the participants want their money back at the same time. Madoff’s Ponzi scam impacted not just regular retail investors but also the incredibly wealthy and famous.

Contact our Ponzi fraud lawyers if you want to know whether you have grounds for a securities case.

Madoff Victims Win Right to Direct Appeal Over Interest, Bloomberg, January 23, 2014

Judge: No interest on Madoff victims' money, Newsday, September 10, 2013

More Blog Posts:
Family Pleads Guilty to $10M Massachusetts Ponzi Scam, Stockbroker Fraud Blog, January 22, 2014

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

SEC Goes After Alleged Ponzi Scammers, Stockbroker Fraud Blog, November 15, 2013

January 22, 2014

Family Pleads Guilty to $10M Massachusetts Ponzi Scam

Steven Palladino, his wife Lori, and son Gregory have pleaded guilty to their involvement in a Massachusetts Ponzi scam that cost at least victims over $10 million, much of which can never be recovered. Defrauded investors included friends, acquaintances, and a veteran’s group.

In Suffolk Superior Court this week, Palladino pleaded guilty to criminal charges that implicated him as the lead player in the financial scheme, which he ran through Viking Financial Group. Lori and Gregory also entered their guilty pleas to charges related to the fraud.

Prosecutors claim the Palladinos promised high returns from high-interest, low-risk loans. The family used investors’ money to pay for a fancy lifestyle, including jewelry and expensive cars. Palladino also reportedly used some of the money for his mistress.

Now, Palladino must serve 10 to 12 years behind bars, in addition to probation, and he will have to pay restitution. Lori will serve two years in the house of correction and also pay restitution. A similar sentence was issued for Gregory, although he is also on probation for 5-years. Viking must pay restitution and serve five years probation.

Unfortunately, family and friends can fall easy targets to Ponzi scammers seeking to make money off of others’ money and trust. This is why it is so important that even if you personally know the financial representative you should still do your due diligence to make sure that they are properly registered as a professional and they don’t have a history of claims and lawsuits against them.

Contact our Massachusetts Ponzi fraud lawyers today.

West Roxbury family pleads guilty to multimillion-dollar Ponzi scheme, Boston.com, January 21, 2014

Investors Bilked In Alleged West Roxbury Ponzi Scheme Appear In Court, CBS Boston, January 14, 2014

More Blog Posts:
SEC Goes After Alleged Ponzi Scammers, Stockbroker Fraud Blog, November 13, 2013

Two Investors’ Securities Fraud Lawsuit Against SEC Over Stanford Ponzi Scam is Dismissed, Stockbroker Fraud Blog, August 16, 2013

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

November 15, 2013

SEC Goes After Alleged Ponzi Scammers

The Securities and Exchange Commission is pursuing securities fraud charges against Wendy Ko and Yin Nan Wang and certain entities over their alleged involvement in a Ponzi-like scam. The regulator is asking for an asset freeze against Velocity Investment Group, its managed funds, and Rockwell Realty Management, Inc. These entities are controlled by Wang and Ko.

The SEC claims that the two of them offered and sold over $150 million securities as unsecured promissory notes through Velocity and its unregistered investment funds. The offerings promised a substantial investment return rate. That said, to fulfill these interest obligations the funds needed to make returns higher than the market average.
Wang purportedly ordered that an accountant be given financial information that included material overstatements of fund receivables. He also is accused of publishing false financial data on a website.

The Commission says that Ko and Wang took newer investors’ money to pay back older investors and made transactions between Rockwell and the funds to hide the securities fraud. The two of them are accused of violating the Securities Act Section 17(a), Exchange Act Section 10(b), and Rule 10b-5.

In another unrelated Ponzi scam, the SEC got an asset freeze against companies in the US and New Zealand accused of soliciting bogus investment opportunities. The emergency action was to stop Christopher A. T. Pedras, his companies, and associates from raising more funds from US investors.

The agency says that Pedras and his partners raised at least $5.6 million from over 50 US investors through a fraudulent offering involving the Maxum Gold Trade Program and the FMP Renal Program. Pedras purportedly told investors that Maxum Gold was an intermediary between global banks so they could trade unspecified financial instruments. Pedras said that Maxum Gold would move part of the profits earned from this to investors.

The SEC says that when payments to investors by Maxum Gold were delayed in 2012, Pedras told them it was because New Zealand regulators were conducting an audit and also that there had been technical difficulties. He then started pushing the FMP Renal Program, in which investors could buy supposedly premium/preferred shares by moving in their Maxum Gold Trade Program investments.

The Commission says that half of the money Pedras and the other parties raised was used in a Ponzi-like manner to pay off older investors. Some of the funds went towards commissions, while Pedras misappropriate about $1.2 million for his own spending and certain business matters.

Pedras and his associates are charged with violating sections of the Securities Act and the Exchange Act.

Ponzi Scams
This type of fraud usually involves the fraudsters using new investor money to pay existing investors their supposed “returns.” New investors are usually solicited, promise that they are getting involved in a venture with low risk and high returns. Ponzi scams eventually fail when it becomes too hard to bring in new investors or when too many investors seek to cash out because the “earnings” run out.

SEC Obtains Asset Freeze in California-Based Real Estate Investment Scheme, SEC, November 1, 2013

SEC Halts Ponzi Scheme Involving New Zealand Companies, SEC

More Blog Posts:
Two Investors’ Securities Fraud Lawsuit Against SEC Over Stanford Ponzi Scam is Dismissed, Stockbroker Fraud Blog, August 16, 2013

US Supreme Court Hears Oral Argument on the Impact of SLUSA on the Stanford Ponzi Scams, Institutional Investor Securities Blog, October 17, 2013

SEC and SIPC Go to Court Over Whether SIPA Protects Stanford Ponzi Fraud Investors
, Stockbroker Fraud BLog, February 6, 2013

August 30, 2013

Securities Headlines: UBS to Pay $4.5M Over Unregistered Assistants, $6M Ponzi Scam Allegedly Funded Reality Show, & Cherry Picking Allegations Lead to SEC Charges

UBS Settles Unregistered Assistant Allegations for $4.5M
UBS AG (UBS) has agreed to pay $4.5 million to settle state regulator allegations that its assistants may not have been licensed in the states where they conducted business. The New Jersey Bureau of Securities, which led the securities case, contends that for about six years, the financial had “client service associations” that lacked the necessary state registrations take orders.

An unknown amount of unsolicited trades were reportedly involved in these transactions between 2004 through 2010 when UBS had about 2,277 sales assistants on staff. The fine will be divided between the 50 States, DC, Virgin Islands, and Puerto Rico. By settling, the Zurich-based bank is not denying or admitting to the allegations. However, in late 2010 it modified its order-entry system so that employee state-registration statuses could be validated.

SEC Sues Over Alleged $6M Ponzi Scam that Invested in Bounty Hunter Enterprises
The Securities and Exchange Commission says that it now as an emergency court order freezing the assets of Guaranty Reserves Trust LLC and its owner John Marcum. The Indiana man is accused of defrauding over three dozen individuals by purportedly getting them to invest in promissory notes. He also is accused of promising them double-digit yearly returns with no risk to principal and told them that he would be day trading.

The regulator says that Marcum got investors to give them their retirement by presenting himself as a trader who was able to garner high returns without loss and he even provided them with account statements exhibiting yearly returns of over 20%. In truth, contends the SEC. Marcum lost over $900K on any trading he did do, while the rest of the funds paid for his lavish lifestyle or was used to invest in ventures, including a bridal shop, a bounty hunter-owned restaurant, and a reality TV show about bounty hunters.

California Investment Adviser Sued by SEC for Alleged Cherry Picking
Ian O. Mausner and his firm J.S. Oliver Capital Management are now facing SEC charges accusing them of taking part in a cherry picking scam that directed winning trades toward certain clients, such as hedge funds in which the investment adviser and his family had investments. According to the Commission, Mausner and his company also misappropriated over $1.1M in soft dollars, which are rebates or credits that clients pay for trades in their accounts.

As a result, says the regulator, investors lost about $10.7 million from the financial scam, which would have occurred from 6/08 through 11/09, with the misappropriation of soft dollars taking place after this period through 11/11. The SEC says the soft dollars were used to pay money that was owed to Masuner’s wife, business “rent” for space used in his home, “outside research” services that were actually payments made to a JS Oliver employee, and maintenance on a personal timeshare in NY. The SEC investigation into the allegations is ongoing.

Our securities lawyers represent investors that have been bilked by brokers, investment advisers, broker-dealers, hedge fund managers, and other industry professionals.

SEC says Indiana man used Ponzi scheme to fund a reality TV show, Chicago Tribune, August 26, 2013

SEC Charges San Diego-Based Investment Adviser in Cherry-Picking and Soft Dollar Schemes, SEC, August 30, 2013

UBS to pay hefty settlement over unregistered assistants, Investment News, August 26, 2013

More Blog Posts:
Lloyds, Barclays, to Set Aside Hundreds of Millions of Dollars for Allegedly Mis-Selling to Victims, Stockbroker Fraud Blog, August 27, 2013

Texas Money Manager Sued by SEC and CFTC Over Alleged Forex Trading Scam, Stockbroker Fraud Blog, August 6, 2013

JPMorgan Found Liable in Billionaire’s Subprime Mortgage Lawsuit for Over $50M in Damages, Institutional Investor Securities Blog, August 28, 2013