May 14, 2013

Two Men Sentenced in Texas Securities Case Involving $30 Million Promissory Note Fraud that Bilked Investors Via Ponzi Scam

In Harris County state District Court, two men have received prison terms of a decade each for running a Texas Ponzi scam that involved life insurance policy death benefits. Gregory F. Jablonski and Howard Glen Judah are accused of orchestrating a nearly $30M scam involving their National Life Settlements LLC, which sold securities that weren’t registered and which they falsely claimed were benefits-backed. Both of them pleaded guilty to selling an unregistered security and securities fraud.

Investors with National Life Settlements were paid using the money of new investors. The company made false promises, causing customers that they would get an 8-10% yearly return through the promissory notes. Active and retired state employees were among those targeted, and millions of dollars were taken from retirement plans and invested through the firm.

The National Life Settlements used insurance agents, many of whom did not have securities dealer licenses, as it sellers. The agents would go on to make $4M commissions.

The state says that Judah and Jablonski did not get the life insurance policies they needed so they could investors. They two of them also falsely told investors that the Federal Reserve had given their firm billions of dollars. After an undercover probe led to the placing of National Life Settlements into receivership, investors got 69% of their money back.

Texas Securities Fraud
Our Houston securities lawyers represent investors that have been the victims of Texas financial fraud. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your no obligation, initial case assessment is free.

PROMOTERS OF DEATH BENEFITS FRAUD SENTENCED TO 10 YEARS IN PRISON, Texas State Securities Board, February 20, 2013


More Blog Posts:
Texas Securities Criminal Case Against Oil and Gas Company Executive Can Proceed, Rules Fifth Circuit, Stockbroker Fraud Blog, February 6, 2013

Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Life Settlements , Ponzi Scams , Texas Securities Fraud

March 21, 2013

Massachusetts Ponzi Case Leads to Criminal Charges for Couple that Own Viking Financial Group. Inc.

At his arraignment this week, Steven Palladino, 55, pleaded not guilty to multiple criminal counts of larceny over $250, falsifying corporate books, and loan sharking, as well as one count of uttering. He and his wife Lori, 52, are accused of running a Massachusetts Ponzi scam. The victims of their alleged financial fraud are reportedly business associates and friends. Lori’s arraignment is scheduled for April.

Per the authorities, the couple used their firm, Viking Financial Group Inc. to pay investors interest and support their lavish lifestyle. Palladino allegedly told potential investors that the supposed private lending company had $25 million in assets and had never defaulted on a single loan. A closer look at Viking's books, however, showed close to $2 million in bogus loans and nearly $756,000 in real loans. Also, loans made by the company were often purportedly done at such a high interest rate that the government believes these transactions were illegal.

While Palladino’s defense team claim that none of his clients investors were “out a penny” with everyone having “been paid,” the Suffolk County Prosecutor Benjamin Goldberger said he feared that investors’ losses could be in the millions of dollars. The government claims that between September 2009 and the end of 2012, Viking made $1.6 million in loans while taking in $4.6 million in new investments. Out of the money borrowed, at least $600,000 were allegedly loans made to the couple. (Also, although Palladino did repay one elderly senior, his 94-year-old aunt, whom he previously defrauded of real estate, the prosecution contends that the repayment of $350,000 came from the Ponzi scam.)

W. Roxbury couple charged with multimillion-dollar Ponzi scheme, Boston.com, March 18, 2013

Ponzi Schemes, SEC

More Blog Posts:
Houston-Based Receiver Files $1.8B Class Action Filed Against Law Firms Accused of Helping R. Allen Stanford Carry Out His $7B Ponzi Scam, Stockbroker Fraud Blog, December 5, 2012

Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

December 5, 2012

Houston-Based Receiver Files $1.8B Class Action Filed Against Law Firms Accused of Helping R. Allen Stanford Carry Out His $7B Ponzi Scam

Ralph Janvey, the Stanford receiver based in Houston, has filed a putative class action lawsuit against Hunton & Williams LLP and Greenberg Traurig LLP, two law firms accused of playing roles that allowed R. Allen Stanford to execute his $7B Ponzi scam. The securities complaint, which was filed in the U.S. District Court for the Northern District of Texas, is seeking $1.8 billion in damages and $10 million that it claims Stanford gave to the law firms during their years of working together. The plaintiffs are contending Texas Securities Act violations, aiding and abetting participation in a fraud scam, aiding and abetting breach of fiduciary duty, and conspiracy.

Also named as a defendant is Yolanda Suarez, who was not only a former Greenberg Traurig associate but also she served as Stanford Financial Group’s general counsel and later as chief of staff. Janvey says that Stanford could not have kept his scam going for over 20 years without these parties’ help.

Per the Texas securities case, Carlos Loumiet, an ex-Greenberg Traurig partner who later went to work for Hunton & Williams (he is now a DLA Piper partner and is not a defendant in this lawsuit), had a “very close personal relationship” with Stanford and played a part in helping the now convicted fraudster run his global scam. This included helping him establish sales and marketing offices in the US. Loumiet and Greenberg Traurig also allegedly helped Stanford set up the transactions that would allow the Ponzi mastermind to use the money he took from Stanford International Bank Ltd. in Antigua and invest them in “speculative venture capital” deals and property in the Caribbean. The law firm is also accused of giving Stanford securities law counsel and advice on a regularly basis.

After Louimet wen to Hunton, he and that law firm allegedly continued to help Stanford with the fraudulent activities. Because of Louimet and Suarez, contend the plaintiffs, Stanford was able to operate his scam outside the bonds of government oversight and regulations for over two decades.

Also named as a plaintiff is the Official Stanford Investors Committee, which is tasked with supervising the receivership of Stanford’s properties and assets. Meantime, class certification is being sought for investors that as of February 2009 had purchased or were still in possession of Stanford CDS or had accounts at SIBL. The proposed class wants actual and punitive damages.

Greenberg Traurig says the class action securities claims are “false and baseless.” The firm claims that it was unaware that any illegal conduct was taking place.

The $7B Stanford Ponzi fraud involved the selling of CDs from the Antigua-based bank so that Stanford could fund a number of businesses that failed, support his lavish lifestyle, and bribe regulators. The former tycoon was convicted for his crimes and sentenced to 110 years behind bars.

Receiver for Stanford Ponzi Scam Sues Lawyers, Courthouse News Service, November 16, 2012

Janvey Files $1.8B Class Action Against Law Firms Over Stanford Work, BNA/Bloomberg, November 28, 2012

Texas Securities Act


More Blog Posts:
After SCOTUS Overturns Oklahoma Supreme Court Decision Over Enforceability of an Arbitration Agreement’s Non-Complete Cause, Case Now Goes to Houston, Texas, Stockbroker Fraud Blog, November 30, 2012

SEC Clawback Lawsuit Against Two Former Arthrocare Corp. Executives Over Fraud Scheme Can Proceed, Says District Court in Texas, Stockbroker Fraud Blog, November 24, 2012

SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Fraud Blog, February 10, 2012


 

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Class Action Lawsuits , Ponzi Scams , Stanford Group Co. , Texas Securities Fraud

October 25, 2012

Texas Securities Fraud: Investors Bilked $68M Dallas Ponzi Scam Hoping To Recover Funds Via Rare Guitar Auction

One year after The Rand Family pled guilty to bilking over 200 investors in $68M Dallas Ponzi scam, a number of their expensive instruments are going up for auction. The money from the sales will go towards paying back their victims.

The Rand Family, who owned oil and gas owned Aspen Exploration, scammed investors into financing the operation and drilling of a number of Texas oil wells. At least a 40% return was promised. However, not all of the investors’ monies went to drilling oil. Instead, US Postal investigators discovered that the family was using some of the funds to pay for their expensive lifestyle, which included private jets, yachts, country club membership, and the purchase of real estate, jewelry, musical instruments, and an original Picasso.

Their company, Aspen, sold net revenue interests and working interests in a number of wells in the Rancho Blanco Corporation State Gas Unit in Texas. Prosecutors accused the Rands of making false representations, such as telling them that their money, which would only be commingled when necessary, would go toward testing, drilling, and completion of a well and that they would managerial rights. Instead, the money was moved out of Aspen’s bank accounts as the defendants spent it on personal expenses and to drill and pay for the operation of other wells.

The Rands’ guilty plea agreements for their Texas securities fraud:

William Anthony “Tony” Rand: One count of securities fraud, one count of conspiracy to commit mail fraud.

Greg Rand: Three counts of securities fraud, one county of conspiracy to commit mail fraud.

Bill Rand: Three counts of securities fraud

Mark Rand: Fraud

(Joel Peterson: One count of securities fraud, one count of conspiracy to commit mail fraud. Peterson worked at Aspen in sales.)

Prosecutors claim that Aspen neglected to tell investors that Tony Rand, who was the financial manager of the company, had served time behind bars for securities fraud in the past.

In a separate oil and gas scam, yet another son, Wayne Anthony Rand, pleaded guilty to theft. In that financial scheme, $8M was raised from victims for Black Lake Energy Inc./Rock Wall Oil Co. Also, last month, a fifth son, Jeff Rand, was sentenced to 57 years behind bars for defrauding investors of $7.9 million for another oil and gas scheme.

The auction of the Rand Family’s instruments is scheduled for this weekend. Among the pieces being offered are 1959 Gibson Les Paul Sunburst Left-handed guitar and a 1960 Les Paul, also left-handed, (Only two others were ever made. One is lost and the other belongs to singer Paul McCartney. Also up for offers are two other left handed guitars: a 1965 Strat Sunburst and a 1959 Fender Stratocaster Hardtail.

Rare Guitars Seized In Dallas Ponzi Scheme To Go Up For Auction, Forbes, October 22, 2012

Family members plead guilty in oil and gas scam, Dallas News, January 26, 2011

JEFF RAND SENTENCED TO 57 MONTHS IN PRISON FOR DEFRAUDING INVESTORS OF $7.9 MILLION, US Department of Justice, August 27, 2012


More Blog Posts:
Texas Securities Fraud: District Court Says Houston-Based Private Equity Firm Can Proceed with Claim Over $10M Film Financing Investment, Stockbroker Fraud Blog, October 19, 2012

Texas Securities Fraud: Investor Sues Behringer Harvard REIT I, Stockbroker Fraud Blog, September 26, 2012

Institutional Investment Fraud Roundup: Ex-Analyst Guilty in $61.8M Insider Trading Scheme, SLUSA Precludes Investor Class Action Over Hedge Funds that Failed After Madoff Ponzi, & Dark Pool Operator Settles Subscriber Info. Breach Charges, Institutional Investor Securities Blog, October 18, 2012

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams , Texas Securities Fraud

October 3, 2012

US Supreme Court Considers Hearing Stanford Ponzi Lawsuits

The Supreme Court’s justices are looking to the Obama administration for advice about an appeal made to a ruling allowing the victims of R. Allen Stanford’s $7 billion Ponzi fraud can pursue law firms, insurance brokers, and outside parties for damages. The defendants, third party firms, want the court to stop the securities lawsuits, which are based on Texas and Louisiana law. If the court were to hear the appeals, it would put to test the Securities Litigation Uniform Standards Act, which was enacted so that if a class action lawsuit comes from a misrepresentation issued “in connection” with a covered security’s sale or purchase, investors cannot go to state courts to get around federal limits placed on such claims. The appeals is asking how close that connection has to be for a state lawsuit to be barred.

Investors have been trying to get back the money they lost in Stanford’s Ponzi fraud, which involved the sale of CDs from his Antigua bank. Numerous securities lawsuits have been filed, and at Shepherd Smith Edwards and Kantas, LTD, LLP, our Texas securities fraud lawyers represent victims of the Stanford Ponzi scam and other financial schemes.

Our Texas securities fraud law firm also continues to provide updates on the different Stanford-related securities litigation on our blog sites:

Last month, investor plaintiffs won the first victory against the SEC involving the Federal Tort Claims Act when their lawsuit, Zelaya v. United States, survived a motion to dismiss in the U.S. District Court for the Southern District of Florida. The plaintiffs contend that the Commission was negligent in the way it dealt with the Stanford Ponzi scam, and upon finding out about the fraud should have told the Securities Investor Protection Corporation right away. The government had submitted a motion to dismiss claiming lack of subject matter jurisdiction. Judge Robert Scola Jr., however, agreed with the plaintiffs.

In other Stanford Ponzi fraud news, the Securities and Exchange Commission recently told the U.S. District Court for the District of Columbia that it would appeal a ruling that denied its application to make SIPC protect Stanford investors. The securities case is SEC v. SIPC. While Judge Robert Wilkins rejected the SEC’s application, finding that the Ponzi victims that bought the CDs from Stanford’s Antigua-based bank are not, within the Securities Investor Protection Act’s meaning, clients of US-based broker-dealer Stanford Group Co., the SEC told BNA that it doesn’t agree with this ruling.

SIPC maintains that although it sympathizes with Stanford’s victims, the SEC’s theory clearly conflicts with the duties SIPC was tasked with by Congress. Per SIPA, SIPC must provide reimbursement to clients of brokerage firms that failed. The compensation is for cash or securities that have gone missing from their accounts.

Also related to SEC v. SIPC, the DC district court has denied one investor’s intervention motion to the lawsuit. The court said that not only is investor Richard Cheatham’s motion untimely but also, the SEC has done an adequate job of representing the interest of investors.

Cheatham contends that Stanford Group Co. stole his brokerage funds. He claims his facts are dissimilar from what SEC and SIPC had stipulated in the securities case, and for him to get back his SIPC insurance claim that is his by right, his intervention must be allowed.

Meantime, the SEC continues to go after former Stanford executives. It recently set up administrative proceedings against former Stanford Group president Daniel Bogar, ex-Stanford Group Holdings compliance head Bernard Young, and Stanford Group’s most recent private client group head, Jason Green. The Commission contends that the three of them often went to Antigua to conduct banking due diligence and therefore must have known that certain key misrepresentations about the CD program were being made. However, rather than protect investors, the three of them allegedly encouraged Stanford Group representatives to keep marketing the CDs without the key disclosures, and they received significant compensation following the increase in sales. All three men have denied any wrongdoing.

High Court Seeks Views on Stanford Fraud Lawsuits, NASDAQ, October 3, 2012

Securities Litigation Uniform Standards Act (PDF)

Zelaya v. United States (PDF)

SEC v. SIPC (PDF)

Read the SEC's appeal to the DC District Court's Ruling in SEC v. SIPC (PDF)

SEC Order Names Ex-Stanford Execs, Alleges They Had Role in Ponzi Scheme, Bloomberg/BNA, September 5, 2012


More Blog Posts:
Texas Securities Fraud: Investor Sues Behringer Harvard REIT I, Stockbroker Fraud Blog, September 26, 2012

Texas Securities Fraud: Ex-Stanford Chief Investment Officer Gets 3-Year Prison Term for Her Part in $7 Billion Ponzi Scam, Stockbroker Fraud Blog, September 18, 2012

Institutional Investment Fraud Roundup: Ex-Hedge Fund Managers’ Guilty Plea Over Bilking Investors of Almost $1M Get 3-Year Prison Term, SEC Sues Investment Adviser Over Alleged $37M Ponzi, and SEC Files Lawsuit Over Purported “Fund of Funds” Scam, Institutional Investor Securities Blog, September 26, 2012

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Financial Firms , Ponzi Scams , Stanford Group Co. , Texas Securities Fraud

September 7, 2012

St. Louis Rams Quarterback AJ Feeley and US Soccer Player Heather Mitts Are Among Professional Athletes Allegedly Targeted in Ponzi Scam

St. Louis Rams Quarterback AJ Feeley, US Soccer Player Heather Mitts, Philadelphia Eagles Tight End Brent Celek, and NFL player Kevin Curtis have filed a securities lawsuit against their former financial advisor William Crafton Jr. for allegedly defrauding them in the Westmoore Capital Ponzi scam and other financial schemes and causing them to lose millions of dollars. Crafton controlled and oversaw over $7.5 million of their funds. The plaintiffs are also suing Martin Kelly Capital Management, Suntrust Bank, and CSI Capital Management (as well as 50 John Does) for their negligent hiring and supervision of Crafton at the relevant times material to this lawsuit.

According to their Ponzi scam complaint, Crafton is the financial representative for at least 20 professional athletes, including members of the NFL, MLB, and NHL. The plaintiffs said that he often referred to these relationships to solicit new pro athlete clients. When he became the plaintiffs’ financial adviser, he managed nearly all of their assets and incomes that they’d obtained through their professional contracts until their relationship with him ended. They say that the three defendant firms also affiliated themselves with having professional athlete clients.

The plaintiffs maintain that from the beginning of their working relationship with Crafton, they each made it clear that they wanted to employ a conservative investment approach involving a portfolio of assets that were liquid and would help preserve their money. They claim that while Crafton assured them that he was a low risk taker and conservative money manager, in 2005 he began putting their money in risky, alternative investment that were either Ponzi scams or other fraudulent investments that were created or run by individuals that Crafton knew. These investments were not liquid and unsuitable for the plaintiffs and Crafton allegedly either had a financial stake or undisclosed relationship with each investment that they did not know about.

The plaintiffs are accusing Crafton of knowingly making false and material misrepresentations to them, providing them with poor quality wealth management services, placing their funds in unsafe investments, misappropriating their money for his personal purposes, and taking inappropriate steps to conceal the fraud scams he was committing against them. They believe that the defendant companies failed in their independent fiduciary duty when they let Crafton invest, in some instances, over 60% of the Plaintiffs’ assets in illiquid, risky, Ponzi scams and alternative investments.

The plaintiffs say they were never required to fill out investment objective statements or client profiles and customized investment programs were never developed for them. They also contend that their financial risks were not defined for them and industry standards allegedly weren’t followed to determine their risk tolerances or set up an appropriate plan for them. They are seeking disgorgement of management fees, compensatory damages, punitive damages, and legal fees.

Snookered in a Ponzi, Pro Athletes Say, Courthouse News, August 15, 2012

Read the Complaint (PDF)


More Blog Posts:
Securities and Exchange Commission Charges Former UGA Football Coach Jim Donnan Over Alleged $80M Ponzi Scam, Stockbroker Fraud Blog, August 16, 2012
Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012

Madoff Trustee Files Clawback Lawsuits Collectively Seeking Over $1B For BLMIS Feeder Fund Transfers, Institutional Investor Securities Blog, June 12, 2012


Continue reading "St. Louis Rams Quarterback AJ Feeley and US Soccer Player Heather Mitts Are Among Professional Athletes Allegedly Targeted in Ponzi Scam" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

August 29, 2012

SEC Securities Law Roundup: First Whistleblower Award Under New Program is Announced, Internet-Based Investment Adviser Seeks Regulator’s Recognition, & the Commission Stops Alleged $600M Online Ponzi Scheme

The Securities and Exchange Commission has made its first award to a whistleblower under its new program created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Informants who give the commission “original information” leading to action resulting in $1 million or greater in penalties are entitled to receive 10-30% of whatever sanctions the regulator collects.

The SEC announced that it would pay $50,000 to this particular tipster for assistance provided in stopping a “multi-million dollar fraud.” This person gave “significant information” and documents, which helped speed up the agency’s probe. Now, the defendants in the securities case must pay about $1 million in penalties, of which the Commission has collected about $150,000. The $50,000 is about 30% of that amount. If a final judgment is issued against other defendants, the whistleblower could receive a larger amount.

In other SEC-related news, Larry Eiben the co-founder of Moxy Vote, an investment web site, wants the Commission to put into effect rules that recognize a new investment adviser category. He wants investors to be able to use a “neutral Internet voting platform” to get information about investments, as well as be able to not just vote shares during corporate meetings, but also “designate as the recipient of proxy materials” for transmission by companies with SEC-registered stock.

Eiben believes the rule changes is necessary because under existing regulations, retail investors cannot use the Internet to vote their shares or collect and get information through means that they might find most helpful when determining how to vote. He says the change will tackle what he considers an ongoing issue: “low participation by retail investors in voting shares of their portfolio companies.”

Unfortunately, the Internet continues to prove an effective tool for perpetuating financial fraud. Earlier this month, the SEC obtained an emergency asset freeze order stopping an alleged $600 million Ponzi scam that was about to collapse. The defendants are Rex Venture Group and its owner Paul Burkes, who is an online marketer.

Per the Commission, the two of them raised money from over one million clients on the Internet using ZeekRewards.com. They allegedly gave customers several options for earning money through a rewards program. Two of them involved the purchase of investment contracts. However, none of these securities were SEC registered, which they are required to be under federal securities laws. Meantime, investors were promised up to half of the company’s daily net profits via a profit sharing system. Also, despite the defendants’ allegedly giving them the impression that the company was profitable, investors received payouts that were unrelated to such profits, and instead, in typical Ponzi scam fashion, the money paid to them came from the newer investors.

The SEC said its order to freeze assets will allow the Ponzi scam victims to recoup more of their money so whatever is left of what they invested with ZeekRewards can be used as payouts to them. Burkes has agreed to settle the Commission’s allegations without denying or admitting to wrongdoing. He will, however, pay a $4 million penalty.

Whistleblower Program, SEC

S.E.C. Pays Out First Whistle-Blower Reward, The New York Times, August 21, 2012

Read Eiben's Petition to the SEC (PDF)

MoxyVote (PDF)

Read the SEC complaint in its case against Rex Venture Group (PDF)


More Blog Posts:
Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Majority of Non-Traded REITs Underperform Compared to Benchmarks, Reports New Study, Stockbroker Fraud Blog, August 25, 2012

Ex-Fannie Mae Executives Have to Defend Against SEC Lawsuit Over Their Alleged Involvement in Understating Mortgage Company’s Exposure Risk, Institutional Investor Securities Blog, August 25, 2012

Continue reading "SEC Securities Law Roundup: First Whistleblower Award Under New Program is Announced, Internet-Based Investment Adviser Seeks Regulator’s Recognition, & the Commission Stops Alleged $600M Online Ponzi Scheme " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Investment Advisers , Ponzi Scams , SEC , Whistleblower Lawsuits

August 16, 2012

Securities and Exchange Commission Charges Former UGA Football Coach Jim Donnan Over Alleged $80M Ponzi Scam

The SEC is charging ex-University of Georgia football coach Jim Donnan over his alleged involvement in an $80M Ponzi scam that defrauded nearly 100 investors. Donnan is a College Football Hall of Famer who also coached at Marshall University and has worked as a sports commentator. He, along with Gregory Crabtree, is charged with violations related to the federal securities laws’ antifraud and registration provisions.

According to the SEC, business partners Donnan and Crabtree used GLC Limited to operate the scam. Investors were promised return rates of 50-380%. They were told that the company was into wholesale liquidation and made money by purchasing leftover merchandise from large retailers and reselling what was damaged, discontinued, or had been returned to discount retailers. In truth, contends the Commission, just $12 million of the $80 million from investors was used to buy the merchandise and a lot of what GLC bought ended up dumped in warehouses in Ohio and West Virginia. The rest of the money went toward either paying bogus returns to earlier investors or were used by the two men for other purposes. By the time the Ponzi scam collapsed, the SEC says that Donnan had taken over $7 million from GLC, while Crabtree allegedly misappropriated about $1.08 million of investors’ money.

The SEC’s charges come just a few months after Donnan agreed to a proposed bankruptcy settlement with GLC and investors. He owes the retail liquidation company over $13 million and these investors contended that he owes them approximately $27 million. The ex-college coach has consented to pay back 80% of the losses these clients sustained. Meantime, GLC’s owners are blaming Donnan and his Ponzi scam for the company having to file for bankruptcy. Donnan, too, has sought bankruptcy protection.

The two men are accused of offering and selling short-term investments (ranging from 2 months to 12 months) with a purported high-yield. Investors were to get returns either monthly, quarterly, or as a one-time payment.

The regulator says that the Ponzi scam ran from August 2007 until its demise in October 2010. Donnan allegedly approached contacts he knew through his work as a commentator and coach to recruit investors. In a release announcing the charges, the SE, quotes him as telling one former player that he was doing this for him, his “son.” The player went on to invest $800,000. Donnan is also accused of telling investors that he too was investing in the merchandise deals and that other well-known football coaches had profited from doing the same.

Securities Fraud
Unfortunately, there are people who will not hesitate to use their personal or business or social relationship with you to get you to invest in a financial scam. It can be devastating to discover that someone that you personally know violated your trust to defraud you.

Read the SEC Complaint (PDF)

SEC Charges College Football Hall of Fame Coach in $80 Million Ponzi Scheme, SEC, August 16, 2012


More Blog Posts:
SEC Charges New York-Based Fund Manager and His Two Financial Firms Over Alleged $11M Ponzi Scheme, Stockbroker Fraud Blog, May 28, 2012

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011

Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012

Continue reading "Securities and Exchange Commission Charges Former UGA Football Coach Jim Donnan Over Alleged $80M Ponzi Scam " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

July 25, 2012

Stanford Ponzi Scam Investors File Class Action Lawsuit Suing The Securities and Exchange Commission

Accusing The SEC of negligent supervision and failure to act, a number of Stanford investors have filed a putative class action seeking damages from the Commission. In Anderson v. United States, the plaintiffs submitted an amended complaint to the U.S. District Court for the Middle District of Louisiana earlier this month. They are bringing their securities case under the Federal Tort Claims Act.

They contend that the losses they sustained in Stanford’s $7 billion Ponzi scam occurred because the SEC was negligent in supervising Spencer Barasch, who is the former enforcement director of the SEC’s Forth Worth Regional Office. They also are arguing that there was enough information available about R. Allen Stanford for the SEC to merit bringing an enforcement action or a referral to other agencies. The investors believe that an alleged failure to act by Barasch and the SEC let Stanford’s Ponzi scheme go undetected for years. They especially blame Barasch.

According to an April 2010 report by the Commission’s Office of the Inspector General, although the SEC’s Dallas office was aware as far back as 1997 that Stanford was running a Ponzi scam, it was unable to persuade the SEC’s Enforcement Division to investigate the scheme. The report also concluded that Barasch played a key part in a number of decisions to squelch the possible probes against Stanford.

After Barasch left the SEC, he represented Stanford on more than one occasion until 2006 when the SEC Office of Ethics told him that this was not appropriate. Earlier this year, he settled US Department of Justice civil charges over this alleged conflict of interest restrictions violation by paying a $50,000 penalty and consenting to a yearlong ban from SEC practice. (He did not, however, admit or deny wrongdoing.)


Now, the investor plaintiffs want the government to compensate them for their losses: Reuel Anderson is seeking $1,295,481.37, Timothy Ricketts wants $353,216.31, and Gary Greene is asking for his $443,302.09. The plaintiffs believe their class action securities complaint represents approximately 2,000 members.

This class action case comes more than a year after another group of plaintiff investors brought a similar securities lawsuit in the U.S. District Court for the Northern District of Texas. In Robert Juan Dartez LLC v. United States the plaintiffs sought to hold the government liable for losses they sustained in Stanford’s Ponzi scam. The district court, however, dismissed the case without prejudice due to lack of subject matter jurisdiction in that it found that the plaintiffs’ claims landed in the discretionary function exception of the Federal Tort Claims Act.

Approximately 30,000 investors bought fraudulent CD’s from Stanford International Bank in Antigua. That’s a lot of customers getting hurt financially by one scam.

Stanford Investors Sue SEC Over Losses, Citing Negligent Supervision, Failure to Act, Bloomberg BNA, July 16, 2012

Anderson v. United States (PDF)

Robert Juan Dartez LLC v. United States


More Blog Posts:
Texas Financier Allen Stanford’s Ponzi Scam: SIPC Asks District Court to Toss Out SEC Lawsuit Seeking to Reimburse Fraud Victims, Stockbroker Fraud Blog, March 5, 2012

Texas Securities: SEC’s Bid To Get Stanford Ponzi Scam Victims SIPC Coverage is Denied by District Court, Stockbroker Fraud Blog, July 9, 2012

Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012

Continue reading "Stanford Ponzi Scam Investors File Class Action Lawsuit Suing The Securities and Exchange Commission" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Financial Firms , Ponzi Scams , Stanford Group Co. , Texas Securities Fraud

July 24, 2012

Ex-Stanford Group Compliance Officer, Now MGL Consulting CEO, Says SEC’s Delay Over Whether to Charge Him in Ponzi Scam is Denying Him Right to Due Process

According to Reuters, Bernerd Young, a former compliance officer for the Texas-based Stanford Group. Co., contends that the Securities and Exchange Commission’s lack of decision over whether to charge him in R. Allen Stanford’s $7 billion Ponzi scam is not only a denial of his right to due process but also has hurt his professional life. Young, who is now the CEO of MGL Consulting, also used to work as a regulator with the National Association of Securities Dealers in Dallas. NASD is now the Financial Industry Regulatory Authority.

While Stanford has already been sentenced to 110 years in prison over his use of bogus CDs from his Stanford International Bank in Antigua to defraud his victims, the SEC has been constructing cases against a number of executives and financial advisers that worked for Stanford Group. However, legal disagreements and recusals between SEC officials and commissioners have reportedly caused delays to these probes that have left not just the bilked investors but also certain possible defendants waiting for resolution one way or another.

Young maintains that he didn’t know about the Ponzi scam. He says that the SEC came after him in Houston about one year after he was told by other Stanford executives that the Antigua bank’s portfolio was comprised of at least $1.6 billion in personal loans to Stanford himself. The Commission contended that it had evidence linking his actions to investors who were wrongly led believe that their CD’s were insured. Young received a Wells notice in June 2010 notifying him that the SEC intended to recommend that charges be filed against him.

Although the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act gives the Commission six months to decide on a Wells notice, SEC lawyers are allowed to file extensions, which they have done in their potential case against Young. The Commission’s current extension of 180-days on the case will expire in September.

Meantime, Young believes that MLG Consulting losing 20% of its clients, regulators terminating the firms’ plans to expand, and its need to file for bankruptcy is a result of the stigma associated with the Stanford Ponzi scam probe. As for the investors who were victimized by the fraud and who have expressed dismay at the SEC’s delay in deciding whether/not to charge certain ex-Stanford employees, their worry is that these same individuals could go on to defraud other investors in the meantime.

These Investors have also had to deal with a federal district judge’s recent decision to reject the SEC’s request that the Securities Investor Protection Corporation start liquidation proceedings to compensate Stanford’s victims, some of whom sustained millions of dollars in losses. SIPC had argued that it only protects customers against losses involving missing securities or cash that had been in the in custody of insolvent or failing brokerage firms members of the protection corporation. While Stanford Group was a SIPC member, Stanford International Bank in Antigua was not.

Former Stanford executive says in limbo as SEC case drags, Reuters, July 22, 2012


More Blog Posts:
CFTC Files Texas Securities Fraud Against TC Credit Services and its Houston Owner Over $1.4M Commodity Pool Scam, Stockbroker Fraud Blog, July 17, 2012


Texas Securities: SEC’s Bid To Get Stanford Ponzi Scam Victims SIPC Coverage is Denied by District Court, Stockbroker Fraud Blog, July 9, 2012

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

Continue reading "Ex-Stanford Group Compliance Officer, Now MGL Consulting CEO, Says SEC’s Delay Over Whether to Charge Him in Ponzi Scam is Denying Him Right to Due Process " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams , Stanford Group Co. , Texas Securities Fraud

July 3, 2012

Texas Securities Roundup: Morgan Stanley Smith Barney Sued Over Financial Adviser’s Ponzi Scam, Judge Dismisses Ex-GE Executive Whistleblower’s Lawsuit Over His Firing, & Ex-Stanford Financial Group CIO Pleads Guilty to Obstructing the SEC’s Probe

In Dallas County Court, 11 investors are suing Morgan Stanley Smith Barney and its financial adviser Delsa Thomas for bilking them in an alleged Texas Ponzi scam. They say that Thomas “took advantage of their trust in her when she suggested that they invest in Tejas Eagle Financial LLC. (She gave them the choice of investing $250,000 or $125,000.) They invested hundreds of thousand dollars of their retirement money and savings.

The plaintiffs contend that the financial firm breached its duty of care to them by allowing Thomas to give them unsuitable financial advice that “would destroy their investments.” They are seeking damages for negligent misrepresentation, fraud, negligent supervision, and vicarious liability.

In other Texas securities news, ex-Stanford Financial group chief investment officer Laura Pendergest Holt has pled guilty to charges that she obstructed the SEC’s probe into Stanford International Bank, which was owned by Ponzi scammer Robert Allen Stanford. Holt, who testified before the Commission about SIB's investment portfolio, now admits that she did so as a “stall tactic” to impede the agencies efforts to get key information. Stanford is behind bars for running a $7 billion Ponzi scam.

In Houston, a federal judge has dismissed a lawsuit filed by Khaled Asadi, an ex-General Electric Co. executive. U.S. District Judge Nancy Atlas ruled that the anti-retaliation clauses of the Dodd-Frank financial reform law’s whistleblower provisions don’t apply to claims filed from outside the United States. Asadi, who worked for GE in Iraq, filed a civil suit claiming he was fired and that this violated the anti-retaliation provisions for whistleblowers.

Asadi’s allegations against the company were related to a $250 million, 7-year joint venture contract that company had landed in December 2010. He claims that he was let go after he expressed concerns that GE violated the Foreign Corrupt Practices Act, which doesn’t allow improper payments to be made to foreign officials. Asadi told the company that an Iraqi government source had informed him that GE had retained a woman with close ties to the senior deputy minister of electricity to influence the contract negotiations.

GE has denied Asadi’s claims and said his firing was not tied to his accusations. Contending that Dodd-Frank’s anti-retaliation provisions don’t cover behavior in other nations, it also fought against Asadi's lawsuit, which sought his reinstatement, payment of his attorney fees, twice the back pay, and other relief. Judge Atlas agreed with GE, citing the US Supreme Court’s ruling in Morrison v. National Australia Bank, Ltd., which reaffirmed that Congressional legislation can’t be applied beyond our nation’s borders unless there is “contrary intent.”

Shepherd Smith Edwards and Kantas is a Texas securities law firm that represents both institutional and individual investors throughout the state and the rest of the US.

11 Claim Adviser Put Them Into a Ponzi, Courthouse News Service, July 2, 2012

Ex-Stanford executive pleads guilty to obstruction, Fox News/AP, June 21, 2012

Judge Says Anti-Retaliation Provisions Don’t Cover Foreign, The Wall Street Journal, July 3, 2012


More Blog Posts:
Ponzi Scam Receiver Can Go Forward with Securities Claim Against Texas Investor Who Benefited From the Fraud, Stockbroker Fraud Blog, June 26, 2012

Texas Securities Case: Mark Cuban Asks District Court To Reconsider Compelling the SEC to Produce Documents Related to Insider Trading Allegations Over Mamma.com Stock Offering, Stockbroker Fraud Blog, June 19, 2012

Dallas Man Involved in $485M Ponzi Scams, Including the Fraud Involving Provident Royalties in Texas, Gets Twenty Year Prison Term, Stockbroker Fraud Blog, May 8,

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Financial Firms , Ponzi Scams , Stanford Group Co. , Texas Securities Fraud , Whistleblower Lawsuits

June 30, 2012

Ex-Money Concepts Registered Representative Faces SEC Charges For Running Astrology-Influenced Ponzi Scam

The Securities and Exchange Commission is charging Gurudeo “Buddy” Persaud,” an ex-Money Concepts registered representative, with financial fraud. The SEC alleges that while running a Ponzi scam involving transactions influenced by his astrological beliefs, Persaud lost $400,000 of investor money in trades while diverting at least $415,000 to cover his personal spending. The Commission is seeking Persaud’s alleged ill-gotten gains and wants injunctive relief and financial penalties imposed against him. (A spokesperson for Money Concepts, which is based in Florida, says that none of the investors that were bilked in the scam were its clients at the time.)

According to the SEC, Persaud believes that the gravitational forces of the earth can influence stock prices, while the moon can make people feel like selling their securities. When he made trading decisions between 6/07 and 1/10, he is accused of mainly depended on an online service that offers directional market forecasts according to the earth’s gravitational pull and the moon’s cycles. Clients were not aware that he was using astrology to make trades.

Persaud raised about $1 million from 14 investors, while drawing in investments through White Elephant Trading Co., his now defunct company that sold and offered securities in investment contract form for its supposed private equity fund. The Commission says that to hide his involvement with White Elephant, Persaud appointed two of his sons as its only managing members even though he was the one who ran the company, made all trading decisions, controlled is bank and brokerage accounts, and had contact with its clients.

Persaud’s alleged victims included family and friends, who were told that their money would be placed in stock, debt, real estate markets, and futures and bring in 6-18% percent returns. The Commission says that Persaud used investors’ money to pay other investors while he generated bogus account statements to make clients feel secure and conceal trading losses. He promoted the fund as an investment opportunity that was a risk-free/low risk way to make high returns within a short time frame, while presenting White Elephant as employing strict financial management strategies.

One investor who was allegedly told he would get an 18% return at year’s end gave Persaud $50,000. Another prospective client received a marketing document called the White Elephant Trading Co. LLC, Conservative Fixed Income Fund that said White Elephant planned to raise up to $10 million and built Persaud up as an experienced, licensed certified financial planner. The Commission contends that Persaud violated sections of the Securities Act of 1933, the Securities Exchange Act of 1934, Exchange Act Rule 10b-5, the Investment Advisers Act, and Advisers Act Rules (2) and 206(4)-8(a)(1).

SEC Charges Rep for Running Astrology-Based Ponzi Scheme, Financial Planning, June 21, 2012

Read the SEC Complaint (PDF)


More Blog Posts:
Alleged Ponzi-Like Real Estate Investment Scam that Defrauded Victims of $9M Leads to SEC Charges Against New Jersey Man, Institutional Investor Securities Blog, May 24, 2012

Ponzi Scam Receiver Can Go Forward with Securities Claim Against Texas Investor Who Benefited From the Fraud, Stockbroker Fraud Blog, June 26, 2012

SEC Charges New York-Based Fund Manager and His Two Financial Firms Over Alleged $11M Ponzi Scheme, Stockbroker Fraud Blog, May 28, 2012

Continue reading "Ex-Money Concepts Registered Representative Faces SEC Charges For Running Astrology-Influenced Ponzi Scam" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

June 26, 2012

Ponzi Scam Receiver Can Go Forward with Securities Claim Against Texas Investor Who Benefited From the Fraud

According to the U.S. District Court for the District of Utah, R. Wayne Klein, the receiver of a Ponzi scam involving Winsome Investment Trust and US Ventures can go ahead with his claims to get back money from an investor who received more than she had invested. Judge Dale A. Kimball rejected Houston restaurateur and caterer Nina Abdulbaki’s claims that the fraudulent transfer claims of the receiver were not timely and that she isn’t subject to personal jurisdiction in the district.

Per the court, Winsome sent nearly $25 million to US Ventures, which allegedly bilked investors while claiming to be involved in commodity trading. Robert Andres, who ran Winsome Investment Trust, is accused of soliciting Abdulbaki for money to take part in a commodity futures pool.

She put $65,000 into Winsome and between 6/31/07 and 3/28/08 she received payments of $92,250. However, the court says that during the time that Abdulbaki was paid this amount, Winsome was not solvent because it was being run as a Ponzi scam.

Finding no merit to her claims that she isn’t subject to personal jurisdiction, the court said that federal receiver statutes allow for “nationwide service of process for in personam as well as in rem jurisdiction.” It also found that Abdulbaki's statute of limitations defense does not succeed on a number of grounds, including that for this case equitable tolling is allowed under the doctrine of adverse domination. Per the doctrine, the statute of limitations for an entity’s claim is tolled when the entity is dominated and controlled by individuals taking part in behavior that harms it. The court found that the doctrine applies to this case because Andres had sole control of Winsome until the receiver’s appointment removed him. Therefore, says the court, the statute of limitations was tolled until the appointment of the receiver and his claims are, as a result, timely. (Before Klein’s appointment, receivership entities would not have been able to avail of their legal rights.)

Commenting on the court’s decision, Texas securities lawyer William Shepherd said, “The claw-backs system used in these cases is grossly unfair and treats fraud victims as if they were perpetrators! Money received years ago has been spent on necessities, invested into homes, businesses, or used to pay taxes or make donations. Un-ringing such bells can be very harsh! Innocent persons often receive benefits from others’ wrongdoing. While others die, many who use drugs with unknown dangers receive benefits. Resort owners profit from lavish events to entertain government employees. Crooks pay top dollar for homes and cars and tip excessively. The list of innocent persons who benefit from crimes is very long. At the very least, those who benefit from Ponzi schemes should be allowed to retain the interest they would have earned or profits they could have made if their funds had been properly invested.”

Klein v. Abdulbaki, D. Utah, No. 2:11-CV-0095


More Blog Posts:
Texas Securities Case: Mark Cuban Asks District Court To Reconsider Compelling the SEC to Produce Documents Related to Insider Trading Allegations Over Mamma.com Stock Offering, Stockbroker Fraud Blog, June 19, 2012

Dallas Man Involved in $485M Ponzi Scams, Including the Fraud Involving Provident Royalties in Texas, Gets Twenty Year Prison Term, Stockbroker Fraud Blog, May 8, 2012

Houston, Texas-Based Forethought Financial Group to Purchase The Hartford Financial Services Group’s Annuities Units, Stockbroker Fraud Blog, May 4, 2012

Continue reading "Ponzi Scam Receiver Can Go Forward with Securities Claim Against Texas Investor Who Benefited From the Fraud " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams , Texas Securities Fraud

June 5, 2012

Leave The 2nd Circuit Ruling Upholding Madoff Trustee’s “Net Equity” Method for Investor Recovery Alone, Urges SEC to the US Supreme Court

The Securities and Exchange Commission wants the US Supreme Court to leave standing the U.S. Court of Appeals for the Second Circuit's decision upholding Irving Picard’s “net equity” approach to compensating victims of Bernard Madoff’s Ponzi scam. Picard is the Securities Investor Protection Act trustee of Bernard L. Madoff Investment Securities LLC. Madoff defrauded investors in a multibillion-dollar Ponzi scam.

SIPA lets investors get back their “net equity,” and Picard’s formula for compensation is to calculate a victim’s net losses—how much they put in, minus how much they got from the failed brokerage firm. He then gives these net losers a portion of the available money. Investors that have net gains—meaning they took out more funds than they invested—must wait until the net losers are fully paid. It is these clients with net gains that are appealing the Second Circuit’s decision and contending that their losses should instead be calculated from the last account statement issued by Madoff’s financial firm.

The SEC disagrees with them. In fact, the Commission doesn’t believe that these Madoff investors should be allowed to appeal a decision that won’t let them receive payment for bogus Ponzi profits that were noted on account statements. In its opposition brief to the nation’s highest court, the SEC said the Second Circuit ruling was “correct” and doesn’t conflict with past decisions. It also said that considering the circumstances and the “relevant statutory language,” the “net equity” approach “was legally sound.”

Shepherd Smith Edwards and Kantas Founder and Ponzi Fraud Attorney William Shepherd, however, is not siding with the SEC in regards to Picard’s approach: “This calculation of losses that makes gainers repay losers is outrageous! These people invested in good faith and are not the perpetrators of any fraud. They were persuaded to take money from the bank or from another legitimate advisor to place the money with Madoff. Thus, they were defrauded into giving up annual earnings of – say - 6% with claims of earning perhaps 9%. Meanwhile, the regulators dropped the ball while for years the fictitious returns were reported. The only possible ‘claw-back’ from these innocent investors should be the excess earnings from the fictitious practices, not all the money they received over many years. State securities statutes and other damages models prescribe a reasonable rate of return to victims of investment fraud. Virtually all claims for losses involve paying pre-judgment interest of some type to victims. Robbing Madoff investor-victims of the time-value of their money just so the insurance company did not have to pay so much is simply preposterous!”

Picard has paid investors approximately $330 million since Madoff’s infamous Ponzi scam fell apart almost four years ago. Although his website says he has raised about $9 billion, most of the funds are tied up in court challenges.

Our Ponzi scheme lawyers represent investors throughout the US.

High Court Shouldn’t Hear Madoff Investor Appeal, SEC Say, Bloomberg, May 25, 2012

SEC Opposes High Court Review Of Ruling Affirming ‘Net Equity’ Method, Bloomberg/BNA, May 29, 2012 http://www.madoff.com/

SEC says Madoff victims should not get appeal, Boston.com, May 26, 2012

The Madoff Recovery Initiative

More Blog Posts:
Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam, Stockbroker Fraud Blog, November 23, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011

Alleged Ponzi-Like Real Estate Investment Scam that Defrauded Victims of $9M Leads to SEC Charges Against New Jersey Man, Institutional Investor Securities Blog, May 24, 2011

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

Tags: Madoff Ponzi Scam

May 28, 2012

SEC Charges New York-Based Fund Manager and His Two Financial Firms Over Alleged $11M Ponzi Scheme

The Securities and Exchange Commission has filed charges against fund manager Jason J. Konior and his Absolute Fund Management and Absolute Fund Advisors for running a Ponzi-like investment scheme that was supposed to maximize investors’ profits and instead allegedly funneled $2 million of clients’ money to pay for earlier investors’ redemption requests, as well as business and personal expenses. The SEC is charging Konior and his two firms with violating the Securities Exchange Act of 1934’s antifraud provisions. The Commission is seeking financial penalties, permanent injunctive relief, and disgorgement of ill-gotten gains.

According to SEC, beginning at least last November, Konior and the two firms raised about $11 million from investors by selling them Absolute Fund LP limited partnership interests. Konior allegedly touted this investment vehicle as having $220 million in trading capital. He and his two companies also allegedly made false claims that the fund would contribute millions of dollars as a promised match to clients’ investments (Konior had told investors that Absolute would put in up to nine times what they originally contributed), combine new investors’ money with its principal, and put their cash in brokerage accounts that investors could use to trade securities through. This “first loss” trading program investors was supposed to allow investors to significantly up their potential profits.

Per Absolute Fund Advisors’ marketing collateral, Absolute would give seed capital allocations to emerging and new hedge funds, which would then buy limited partnership interests in the fund. Absolute was supposed to match the investments by an up to 9:1 ratio. This means that if a hedge fund invested $1 million in Absolute then the fund would match it with $9 million, which means there would be $10 million in investment capital.

Absolute was to put this mix of funds in a brokerage firm sub-account to be managed by the hedge fund investor. Per the “first loss model” trading losses in the sub-account would be 100% allocated to the hedge fund investor up to the sum of its capital contribution. The hedge fund investor was then supposed to get 50-70% of trading profits.

Unfortunately, this trading program that was promised never went into operation. The investment fund not only neglected to match investors’ funds but also it failed to return their money when they asked to withdraw their investments.

Last week, the SEC secured an asset freeze order against Konior and his two companies. All three parties have consented to this order without denying or admitting to the securities charges. The Commission says that the current assets of Absolute are only a “fraction” of how much investors are still owed.

SEC Shuts Down $11M Ponzi Scam, May 25, 2012

Read the complaint (pdf)


More Blog Posts:
Dallas Man Involved in $485M Ponzi Scams, Including the Fraud Involving Provident Royalties in Texas, Gets Twenty Year Prison Term, Stockbroker Fraud Blog, May 8, 2012

Texas Securities Fraud: State Law Class Action in R. Allen Stanford’s Ponzi Scam Not Barred by SLUSA, Stockbroker Fraud Blog, March 28, 2012

Alleged Ponzi-Like Real Estate Investment Scam that Defrauded Victims of $9M Leads to SEC Charges Against New Jersey Man, Institutional Investor Securities Blog, May 24, 2012

Continue reading "SEC Charges New York-Based Fund Manager and His Two Financial Firms Over Alleged $11M Ponzi Scheme" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams

May 8, 2012

Dallas Man Involved in $485M Ponzi Scams, Including the Fraud Involving Provident Royalties in Texas, Gets Twenty Year Prison Term

A judge has sentenced Joseph Blimline to 20 years in prison over his involvement in two complex, oil and gas Ponzi scams that took place in Texas and Michigan. The Dallas man, who was sentenced to two counts of conspiracy, was actually sentenced to 240 months behind bars for each count, but U.S. District Judge Marcia A. Crone said the sentences could run concurrently. He also has to pay restitution to his Ponzi scheme victims.

Blimline is accused of working with others to run a Michigan Ponzi scam between November 2003 and December 2005. That financial fraud made more than $28 million before it fell part. The government says that fraudsters promised investors inflated return rates. Blimline would then use payments from newer investors to pay previous investors, while also diverting investor payments for his personal gain.

The scammers then moved the Ponzi scheme to Texas in 2006 where they started running Provident Royalties in Dallas. That fraud eventually made more than $400 million from about 7,700 investors. Blimline was accused of also making materially false representations to Texas and failing to disclose material facts to investors to get them to invest in Provident. Once again, investor money was used to pay other investors. Also, Blimline got millions of dollars in unsecured loans from the investors’ money and directed Provident’s purchase of worthless assets belonging to the Michigan venture.

Blimline would go on to plead guilty to the criminal charges. Although he was not initially named in the securities fraud lawsuit filed by the SEC against Provident Royalties in 2009, the Commission eventually added him following claims by the Ponzi scam’s victims that he had played a key role in defrauding them. The government has described him as a company representative or “control person” who played a huge role in the financial scams.

The SEC’s lawsuit charged Provident Royalties and three founders. The Commission accused them of promising at least 7,700 investors more than 18% and misrepresenting the money’s use.

Also named in the SEC’s lawsuit were broker- dealer Provident Asset Management LLC and 21 entities that sold and offered the securities.
After a court placed an emergency freeze on Provident Royalties’ assets, a receiver was appointed.

Ponzi Scams
Please contact our Texas securities fraud lawyers if you believe you were the victim of a Ponzi scam or any other type of financial fraud. Unfortunately, every year, there are investors who suffer losses because of Ponzi schemes that inevitably fail when it becomes too hard to get enough new investors to pay earlier investors or when too many investors attempt to cash out.

Your first case evaluation with one of our Texas Ponzi scam attorneys is free.

Dallas Man Sentenced in Half-Billion-Dollar Ponzi Scheme, FBI, May 4, 2012

Dallas man pleads guilty in Provident Royalties' oil, gas scam case, Dallas News, August 31, 2010


More Blog Posts:
Provident Royalties Faces $485 Million Texas Securities Fraud, Says SEC, Stockbroker Fraud Blog, July 26, 2009

Sale of Interest in Private Placement Offerings by Medical Capital Holdings, Provident Royalties DBSI Leads to FINRA Order that Investors Get $3.2M in Restitution, Institutional Investor Securities Blog, November 29, 2011

Texas Securities Fraud: SEC Freezes Assets of Fourth Person Involved in Alleged $485 Million Ponzi Scheme, Stockbroker Fraud Blog, December 23, 2009

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams , Texas Securities Fraud

Tags: Provident Royalties

April 20, 2012

Commodities/Futures Round Up: CFTC Cracks Down on Perpetrators of Securities Violations and Considers New Swap Market Definitions and Rules

Rep. John Larson (D-Conn.) and Rep. Chris Murphy (D-Conn.) are calling on the Commodities Futures Trading Commission to crack down on excessive energy market speculation. They believe that this type of speculation on oil that is “based on world events” is “abusive” and has been creating difficulties for Americans.

In their released statement, Murphy said that such speculation ups the price of a gallon of gas by 56 cents. The two lawmakers want the futures and option markets regulator to swiftly implement rules that have already been passed to curb excessive speculation.

In other commodities/futures trading news, last month the U.S. District Court for the Eastern District of Texas ordered two men and their company Total Call Group Inc. to pay over $4.8 million for allegedly producing false customer statements and making bogus solicitations related to an off-exchange foreign currency fraud. In CFTC v. Total Call Group Inc., Thomas Patrick Thurmond and Craig Poe will pay $1.62 million and $3.24 million, respectively. Per the agency, between 2006 through late 2008, the two men solicited about $808,000 from at least four clients for trading in foreign currency options.

Earlier this month, another company, registered futures commission merchant Rosenthal Collins Group LLC, consented to pay over $2.5 million over CFTC allegations that it did not adequately supervise the way the firm handled an account linked to a multibillion dollar Ponzi scam. The account, held in Money Market Alternative LP’s name, experienced “significant change” between April 2006 and April 2009 in how much money it took in. For instance, the CFTC says that even though the account at inception reported a $300,000 net worth and a $45,000 yearly income, deposits varied from $2 million to $14 million a year. RCG is also accused of failing to look into and report excessive wire activity involving the account. As part of the CFTC securities settlement, the financial firm consented to pay a $1.6 million fine and disgorge $921,260, which is how much RCT made in account fees.

Just three days before, the CFTC announced that its swaps customer clearing documentation rule packaging will expand open access to execution and clearing, enhance transparency, lower cost and risks, and generate competition. The rules will not allow arrangements involving swap dealers, designated clearing organizations, major swap participants, and futures commission merchants that would limit how many counterparties a customer can get into a trade with, impair a client’s ability to access a trade execution on terms reasonable to the best terms that already exist, limit the position size a customer can take with an individual counterparty, and not allow compliance for specified time frames for acceptance of trades into clearing. Also, the CFTC is thinking about adopting definitions for swap dealers, major security-based swap participant eligible contract participant, security-based swap dealer, and major swap participant. These entities were created under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Meantime, MF Global Inc. (MFGLQ.PK) liquidation trustee James Giddens reportedly believes that he can make claims against certain company employees. Possible claims again such persons could include allegations of customer funds segregation requirement violations and breach of fiduciary duty. Although MF Global had told regulators that it was unable to account for customer funds of up to $900 million when it filed for bankruptcy protection, investigators are now saying that this figure is closer to somewhere between $1.2 billion and $1.6 billion.

Commodities Futures Trading Commission

Trustee May Sue MF Officials, NY Times, April 12, 2011

CFTC Orders Rosenthal Collins Group, LLC, a Registered Futures Commission Merchant, to Pay More than $2.5 Million for Supervision and Record-Production Violations, CFTC, April 12, 2012

CFTC v. Total Call Group Inc.


More Blog Posts:
CFTC Says RBC Took Part in Massive Trading Scam to Avail of Tax Benefits, Stockbroker Fraud Blog, April 12, 2012

Texas Man Sued by CFTC Over Alleged Foreign Currency Fraud, Stockbroker Fraud Blog, February 23, 2012

CFTC and SEC May Need to Work Out Key Differences Related to Over-the-Counter Derivatives Rulemaking, Institutional Investor Securities Blog, January 31, 2012

Continue reading "Commodities/Futures Round Up: CFTC Cracks Down on Perpetrators of Securities Violations and Considers New Swap Market Definitions and Rules " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: CFTC , Financial Firms , MF Global , Ponzi Scams

March 28, 2012

Texas Securities Fraud: State Law Class Action in R. Allen Stanford’s Ponzi Scam Not Barred by SLUSA

In a reversal of a district court’s decision, the U.S. Court of Appeals for the Fifth Circuit ruled that the Securities Litigation Uniform Standards Act does not bar the investor state law class action lawsuit that was filed by victims of R. Allen Stanford's Ponzi scheme. The case is Roland v. Green.

The appeals court said that the state court securities lawsuits, which are claiming common law and statutory violations, could go forward because the alleged fraud is only tangentially related to the buying and selling of covered securities under SLUSA. Four complaints are on appeal. In each case, investors submitted state court actions that charged a number of defendants with misleading them into using their individual retirement accounts to invest in Stanford International Bank-issued certificate of deposits that have since proved worthless. Investors have lost $7 billion in Stanford’s Ponzi scam.

The defendants had the lawsuits moved to the U.S. District Court for the Northern District of Texas, which found that SLUSA precluded the claims because of their connection to a covered security. Under SLUSA, state class actions claiming fraud related to the sale or purchase of a covered security are barred. The district court judge in Dallas had dismissed the cases because Stanford marketed the CDs as regulated and securities-backed and because certain investors had sold securities to finance their purchase of the CDs, this, placed the CD-related suits under SLUSA.

However, In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, the US Supreme Court determined that seeing as Congress meant for “in connection with” to have the same meaning in both the 1934 Securities Exchange Act Section 10(b) and SLUSA, then it is sufficient for the fraud to allegedly “coincide” with a securities transaction. The fifth circuit, in its decision, adopted the Ninth Circuit’s test for when a security’s purchase or sale and the alleged fraud “coincide” in that a misrepresentation is ‘in connection with’ the selling or buying of securities if there is a relationship wherein the stock sale and fraud are/or “more than tangentially” connected. The court saw no connection between the sale of the covered securities and the alleged fraud. The appeals panel said that the fact that some plaintiffs sold a number of ‘covered securities’ to invest in CDs was only tangentially connected to the Ponzi scam.

Our Texas securities fraud law firm is continuing to cover the developments regarding the efforts by those defrauded by Stanford’s Ponzi scheme to recover their losses. If you are one of those investors you should contact our Houston stockbroker fraud lawyers right away. We represent Ponzi fraud victims throughout the US.

Stanford, who was found guilty of wire fraud and mail fraud by a federal court jury in Houston earlier this month, is scheduled for sentencing on June 14.

Stanford Investor Class Actions Restored by Appeals Court, Bloomberg/Businessweek, March 19, 2012

5th Cir. Rules SLUSA No Barrier To Suits by Stanford Ponzi Investors, Bloomberg/BNA, March 21, 2012


More Blog Posts:
Texas Financier Allen Stanford’s Ponzi Scam: SIPC Asks District Court to Toss Out SEC Lawsuit Seeking to Reimburse Fraud Victims, Stockbroker Fraud Blog, March 5, 2012

SEC and SIPC Go to Court Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012

SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Blog, February 10, 2012

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Class Action Lawsuits , Ponzi Scams , Texas Securities Fraud

March 17, 2012

SEC and SIPC Clash Over Standard of Proof Necessary to Insure Investors For Stanford Ponzi Fraud Losses

The Securities and Exchange Commission and the Securities Investor Protection Corporation are at odds over what the standard of proof should be used for the SEC’s application to make SIPC start liquidation proceedings for Stanford Group Co. The SEC recently sued the non-profit corporation, which is supposed to provide coverage protection for investors in the event that the brokerage firm they are working with fails. The SIPC has so far refused to provide the defrauded investors of R. Allen Stanford’s $7 billion Ponzi scam with any compensation, contending that the Stanford bank involved in the scam was Stanford International Bank Ltd. in Antigua and not SIPC member Stanford Group. Stanford has been convicted on 13 criminal counts related to the financial fraud.

During a U.S. District Court for the District of Columbia hearing, SC chief litigation counsel Matthew Martens said the probable cause standard is sensible in light of the Securities Investor Protection Act’s structure. SIPC lawyer Eugene Frank Assaf Jr., however, contended that the preponderance of the evidence standard is the one that should be used. Assaf said this should be the standard because this is SIPC’s only chance to seriously challenge the “compulsion issue.”

The SEC and SIPC have been battling it out since June 2011 when the Commission asked the latter to start liquidation proceedings on the grounds that individuals who had invested in the Ponzi scam through SGC deserved protection under SIPA. SIPC, however, did not act on this request. So the SEC went to court to get an order compelling the nonprofit organization to begin liquidating. The Commission was granted a partial win last month when the court found that a summary proceeding would be enough to resolve the SEC’s application.

Some 21,000 clients who purchased CD’s through SGC would be able to file claims for reimbursement through SIPA if the SEC prevails in this case.

Earlier this month, SIPC CEO and President Stephen Harbeck stood by the entity’s decision to not provide loss coverage to the victims of R. Allen Stanford’s Ponzi scam. When giving testimony to the House Financial Services Capital Markets Subcommittee, Harbeck noted that Stanford’s investors made the choice to send their assets to an offshore bank that wasn’t protected by the US government.

He pointed to the SEC’s own statements regarding how the CDs these investors purchased paid return rates that were “excessive” and likely “impossible.” He said that SIPA has never been interpreted to “pay back the purchase price of a bad investment. “

SEC Suit Pursues Payouts by SIPC, The Wall Street Journal, December 13, 2011

Securities Investor Protection Corporation


More Blog Posts:

SEC and SIPC Go to Court Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011

SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Blog, February 10, 2012


Continue reading "SEC and SIPC Clash Over Standard of Proof Necessary to Insure Investors For Stanford Ponzi Fraud Losses" »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: Ponzi Scams , SEC

Tags: SIPA, SIPC, Stanford

March 16, 2012

FINRA Fines AXA Advisors $100,000 For Allegedly Not Firing Broker who Ran Ponzi Scam Sooner

AXA Advisors LLC will pay a $100,000 fine to settle Financial Industry Regulatory Authority allegations that it delayed too long before firing a broker who was also the mastermind of a Ponzi scam. The financial firm turned in a Letter of Acceptance, Waiver, and Consent prior to there having to be a regulatory hearing, without denying or admitting to the findings, and without an adjudication of any issue. AXA Advisors is a subsidiary of AXA Financial, Inc., which is an AXA Group member.

Kenneth Neely, a former registered representative, started working with AXA in its Clayton, Missouri office in August 2007. FINRA contends that already by then, Neely had been the subject of four client complaints. Three of these were securities arbitrations over business practices he employed with previous employees. (Prior to working at AXA, he was registered with Stifel, Nicolaus & Co., Inc. and UBS PaineWebber, Inc.) The SRO believes that AXA also knew that Neely was having financial problems at the time.

Neely was permanently barred by FINRA in 2009 for running the Ponzi scam, which bilked its victims of $600,000. Many of the investors he defrauded belonged to his church. According to the SRO, Neely to conceal his financial scheme by having investors pay $2K to $3K to his wife. He also created fake invoices to make them appears as if they were actual ownership certificates. He did pay investors about $300,000. A lot of his investors’ money went toward supporting his extravagant lifestyle. Neely eventually pleaded guilty to the federal crime of mail fraud. He was sentenced to 37 months in months in prison and ordered to pay restitution in the amount of $618,270.

Per the AWC, Neely started running a Ponzi scam in 2001 while he was still working at UBS. He continued his fraud operation while at Stifel and when he went to go work with AXA. He persuaded AXA clients, Stifel customers, and others to take part in the St. Louis Investment Club, which was a fake club and put their money in the St. Charles REIT, which was a bogus real estate investment trust. After he admitted to converting and commingling funds. AXA fired him in July 2009.

However, it was as early as 2008, when AXA conducted its yearly audit of Neely, that a review of his computer brought up an Excel spreadsheet noting eight people’s payment schedules. Per the AWC, these people were investors in Neely’s fraud. An AXA examiner asked Neely to explain the spreadsheet and the broker claimed that the figures were for showing a potential client/friend, who wanted to started a business, how to handle his finances. The AWC alleges that this explanation was a false one.

FINRA found that AXA failed to properly supervise or investigate Neely by not responding appropriately to the spreadsheet, his excuses, or the fact that he had a questionable history. AXA has now been both sanctioned and fined.

AXA Fined $100,000 For Not Axing Ponzi Broker Sooner, Forbes, March 15, 2012

Ex-AXA Broker Barred by Finra After Ponzi Scheme, New York Times, July 28, 2009


More Blog Posts:
Stifel, Nicolaus & Co. and AXA Advisors Broker Charged in Ponzi Scheme Victimizing Church Members, Stockbroker Fraud Blog, November 5, 2009

AXA Rosenberg Entities Settle Securities Fraud Charges Over Computer Error Concealment for Over $240M, Stockbroker Fraud Blog, February 10, 2011


Continue reading "FINRA Fines AXA Advisors $100,000 For Allegedly Not Firing Broker who Ran Ponzi Scam Sooner " »

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: AXA Advisors , FINRA , Financial Firms , Ponzi Scams , Securities Fraud

Call for a Free Consultation
(800) 259-9010

Contact Us

The code above is for the protection of your information.

Browse

  • Topics
  • By Date
  • Search
Topics
By Date
Search

Recent Entries

Legal Blogs