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

August 16, 2013

Two Investors’ Securities Fraud Lawsuit Against SEC Over Stanford Ponzi Scam is Dismissed

A federal judge has dismissed the securities fraud lawsuit filed by two investors against the Securities and Exchange Commission for failing to report that Allen Stanford was running a $7.2 billion Ponzi scam. According to U.S. District Judge Robert Scola, a Federal Tort Claims Act exemption that does not allow claims from deceit or misrepresentation shields the SEC from such a claim.

The plaintiffs are George Glantz and Carlos Zelaya. They contend that they collectively lost $1.6 million because of Stanford and they wanted class action securities status for investors that the latter bilked.

They argued that following four exams between 1997 and 2004 the regulator considered Stanford’s business a fraud yet did not notify the Securities Investor Protection Corp., which provides compensation to those victimized by brokerages that fail. The SEC did not sue Stanford until 2009. While Scola previously had allowed this securities fraud case against the Commission to move forward, finding that the regulator breached its duty to report Stanford’s wrongdoing, now, he says that the FTCA exemption does not give him jurisdiction over this.

Glantz and Zelaya are not the only two investors to sue the regulator over the Stanford Ponzi scam. A Louisiana securities fraud case also was filed against the SEC in 2007 by eight investors who said the fraudster's scheme cost them $18.7 billion. They accused the Commission of “negligence and misconduct” for allegedly allowing Stanford’s activities to go on for years after agency investigators detected warning signs.

Meantime, Stanford is serving 110 years behind bars. His Ponzi scam revolved around CDs sold by his Stanford International Bank that is based in Antigua.

Unfortunately, Ponzi scams continue to bilk investors each year. At our securities law firm, it is our job to help such investors recoup their losses. Contact our Ponzi scam lawyers today.

Stanford victims’ suit against SEC rejected, The Washington Post, August 13, 2013

Allen Stanford Investor Suit Should Be Dismissed, SEC Says, Bloomberg, April 8, 2011

Federal Tort Claims Act, NOLO


More Blog Posts:
US Supreme Court Considers Hearing Stanford Ponzi Lawsuits, Stockbroker Fraud Blog, October 3, 2013

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

Professional Athletes, Celebrities Often Targeted for Securities Fraud, Stockbroker Fraud Blog, August 14, 2013

August 10, 2013

Investors Claim They Lost $300M in Ohio Ponzi Fraud Lawsuit

In Ohio, investors are suing Glen Galemmo for allegedly running a Ponzi scam. The securities fraud lawsuit claims that approximately 100 to 200 investors lost more than $300 million. Galemmo is now named in two complaints related to these claims. His wife, Kristine Galemmo, is also being sued, as are his business partner Edward Blackledge and numerous investment funds, LLC, and companies. Plaintiffs are grouped as the Galemmo Victims Fund I and II.

The Cincinnati money manager ran Galemmo Investment Group, Queen City Investment Fund, and other entities for over a year. However, last month, he sent out a mass email to investors explaining that Queen City Investments, which he owns, was stopping operations. He told them not to come to the building because they would not be let in and that his lawyer had told him to avoid contact with them. He said that their inquiries should go through the IRS.

According to the complaint, Galemmo claimed to have over $20 million in assets under management. When the S & P 500 was declining between ’06 and ’11 he purportedly said that he’d made earning returns of 432% by investing in individual stock.

The plaintiffs say that if Galemmo’s return numbers had been accurate, then his compensation should have been over $60 million yet he wasn’t even able to pay small tax bills. They say that documents never indicated dividend income payments and filings didn’t state how much of the fund investors held.

Galemmo previously explained his strategy in a media interview with the Cincinnati Business Courier in 2001 as concentrating on stock that were undervalued but showed “potential for runups” and he allegedly told customers that he would purchase low, sell high, and respond fast to changes in the market. He also purportedly hid the Ponzi Scam via a number of actions, including having different brokers invest assets so it would be hard to get a grasp of his holdings or the performance of investments.

Most of the victims are from Cincinnati. They contend that as part of the Ohio Ponzi scam, Galemmo paid some investors’ money to pay earlier investors and that the money manager and his associates bilked them.

They are alleging misrepresentations and omissions, the making of false statements, failure to disclose material facts, failure to exercise reasonable care, breach of fiduciary duty, failure to invest funds in the manner purported, using funds for unapproved purposes, violating the Ohio Revised Code’s Chapter 1707, and other allegations. They want damages and a declaration by the court that laws were violated, a temporary restraining order of the defendants’ funds, and well as preliminary and permanent injunction.

If you suspect that you were the victim of stockbroker fraud, contact our Ponzi fraud lawyers today and ask for your free case assessment.

Cincinnati money manager accused of 'elaborate Ponzi scheme', Cincinnati Business Courier, July 24, 2013

Read the Complaint (PDF)


More Blog Posts:
Texas Securities Case: SEC Alleges Ponzi Scam Involving Virtual Currency Bitcoin, Stockbroker Fraud Blog, July 28, 2013

Courts Nationwide Dismiss More Securities Actions: Madoff Trustee’s Case, Equinox Investor’s Class Lawsuit, K-Sea Transportation Litigation, & Shareholder Derivative Complaint is Thrown Out, Stockbroker Fraud Blog, June 21, 2013

Citigroup Must Pay $11M Claimant for Royal Bank of Scotland Investment Losses, Says FINRA Arbitration Panel, Institutional Investor Securities Blog, August 7, 2013


July 28, 2013

Texas Securities Case: SEC Alleges Ponzi Scam Involving Virtual Currency Bitcoin

The Securities and Exchange Commission is suing Trendon Shavers and his company Bitcoin Savings & Trust, accusing the two of them of running a Ponzi scam involving Bitcoin. In its Texas securities fraud case, the regulator contends that Shavers offered and sold the denominated investments online with the use of the names “pirateat40” and “Pirate,” purportedly raising at least 700,000 Bitcoin in BTCST investments.

Bitcoin is a virtual currency that is traded on online exchanges. Based on its average price in 2011 and 2012 when Bitcoin was on the market, the virtual currency at issue was worth over $4.5 million. Today, their value is greater than $60 million.

The SEC believes that Shavers told customers they could make up to 7% weekly interest due to BTCST's “Bitcoin market arbitrage activity,” when actually BTCST was a Ponzi scheme that involved Shavers using Bitcoin from new investors to cover purported investor withdrawals on outstanding investments and interest payments. He also allegedly used investors’ Bitcoin to engage in day trading in his account while trading in some of their Bitcoin for US dollars to cover his own expenses.

The Commission said that Shavers took advantage of investors online by pretending that investing in Bitcoin came with big profits and no risk. The regulator says he was motivated by greed. It is charging him and BTCTS with antifraud and registration violations. The SEC wants the U.S. District Court for the Eastern District of Texas to grant an asset freeze, disgorgement, injunctions, prejudgment interest, and civil penalties.

Bitcoin
Bitcoin isn’t run by a government or any company. It exists via an open-source software program. Users can purchase Bitcoin through exchanges that turn real money into virtual currency.

Earlier this year there were concerns after Bitcoin became subject to virtual attacks on two servers: Mt.Gox and Instawallet. Critics have said that because the virtual currency doesn’t have a central issuer and not that many businesses accept it, Bitcoin makes a great candidate for money laundering. A Pyramid scam-like effect is also possible, with the earliest investors benefiting the most.

Now, the SEC is warning investors about Ponzi scams involving virtual currencies. One reason that fraudsters are drawn to virtual currencies is that such transactions are supposedly more private and there is less regulatory oversight than when conventional currencies are involved. That said, any investment in securities in this country are subject to SEC jurisdiction even if the currency is virtual.

In April, over two days, Bitcoins’ price dropped over 70%, inciting a wave of activity that trading platforms found overwhelming.


Red Flags that You May Be Looking at A Possible Ponzi Scam (From the SEC):

• Supposed none or little risk for high returns
• “Guaranteed” returns
• Promises of consistent returns despite changing market conditions
• Investments are not registered with the SEC or state regulators
• Unlicensed/unregistered sellers (individuals or firms)
• Complex or “secret” fee structures or strategies
• Lack of “accredited investor” criteria
• Account statement mistakes
• Inadequate or confusing paperwork
• Nonpayment
• Problems with being able to cash out
• “Affinity” connection, such that the investment opportunity came from someone in a group or community or affiliation to which you belong

Our Texas securities law firm represents investors throughout the state. Contact our Bitcoin fraud lawyers and ask for your free case assessment.

The SEC's Complaint (PDF)

Bitcoin bubble may have burst, CNN, April 12, 2013

Ponzi schemes using virtual currencies, SEC (PDF)

Fears for virtual currency after cyber attacks on Bitcoin systems, The Telegraph, April 5, 2013


More Blog Posts:
Texas Judge Throws Out Verizon Retirees’ Class Action Lawsuit Over $8.4B Pension Sales to Prudential, Stockbroker Fraud Blog, July 9, 2013

Texas Securities Fraud?: Death of Private Wealth Manager with Invesco Ltd. Reveals that Millions of Dollars May Be Missing, Stockbroker Fraud Blog, July 3, 2013

UBS to Pay Fannie Mae and Freddie Mac $885M to Settle RMBS Lawsuit, Institutional Investor Securities Blog, July 27, 2013

June 21, 2013

Courts Nationwide Dismiss More Securities Actions: Madoff Trustee’s Case, Equinox Investor’s Class Lawsuit, K-Sea Transportation Litigation, & Shareholder Derivative Complaint is Thrown Out

Trustee Can’t Sue Investment Banks for Aiding Madoff Ponzi Scam
The U.S. Court of Appeals for the Second Circuit affirmed a lower court ruling that trustee Irving Picard cannot sue the investment banks accused of allegedly aiding and abetting the Madoff Ponzi scam for billions of dollars because the doctrine in pari delicto bars him. Per the doctrine, one wrongdoer can’t recover from another wrongdoer.

Picard sued UBS AG (UBS), JPMorgan Chase & Co. (JPM), HSBC Bank plc, and UniCredit Bank Austria AG, claiming they disregarded warning signs of Madoff’s fraud as they received significant fees. Because Picard is now in “Madoff’s shoes” as the debtor’s representative of Bernard L. Madoff Investment Securities, the court said that he cannot proceed with lawsuits against the parties that took part in the fraud.

The trustee also wanted contribution for payments—about $800 million—that Madoff investment firm customers received under the Securities Investor Protection Act because he says defendants are joint tortfeasers with BLMIS under the law of New York. The 2nd circuit, however, says that SIPA doesn’t give that the right to contribution.

Equinox Investors’ Securities Action Dismissed Again
For the third time, a putative securities class action lawsuit over the customer pricing and financial forecasts of Equinox Inc. and two of its officers has been dismissed. This dismissal, in U.S. District Court for the Northern District of California, is without prejudice.

Per the court, the July 2010 financial forecasts of the court aren’t actionable under the Private Securities Litigation Reform Act’s safe harbor regarding forward looking statements. The court said that the plaintiffs failed to show that defendants were aware that they would not hit revenue targets by percentage points. Per PSLRA, a forward-looking statement falls under that harbor if it is identified to do so and comes with relevant, careful language or the plaintiff doesn’t succeed in proving that the person who issued the statement actually knew it was false. The court also determined that the plaintffs’ allegations of customer pricing don’t support a securities fraud claim.

Securities Lawsuit Against K-Sea Transportation Thrown Out
The U.S. District Court for the District of New Jersey has dismissed a securities class action accusing K-Sea Transportation Partners LP of taking part in accounting improprieties and misleading investors about a changing regulatory environment. Judge William Walls said the plaintiffs knew about the risks involved in investing in the marine transport concern and now cannot claim that they were misled because the economy and K-Sea’s business both didn’t get better.

Plaintiffs had argued that during the period at issue, there had been a shifting regulatory system and K-Sea misled clients about the lessened demand for ships that were single-hull while purportedly violating accounting principals when it didn’t document an asset impairment loss involving its fleet. The court, however, said that defendants did notify investors about the industry’s shifting landscape, as well as the economic lull, and they were not obligated to offer additional grim specifics while disclosing 2009 fiscal year results.

Shareholder Derivative Lawsuit’s Dismissal is Affirmed
The U.S. Court of Appeals for the Ninth Circuit is affirming the tossing out of a shareholder derivative case against a number of International Game Technology Inc.(IGT) officials. The plaintiffs claimed federal securities law violations, breach of fiduciary duty, corporate assets waste, and poor enrichment.

The district court had found that contrary to what the plaintiff asserted, the board of IGNT “did not refuse” the latter’s presuit demand. Affirming, the 9th circuit said that IGT’s chairman sent the lawyers of the plaintiffs a letter via fax informing of the board’s request that he conduct a review of the demand and let them know what he recommended in terms of next steps. The court said this supports the inference that the Board did not reject the demand outright.

Banks Knock Out Madoff Trustee Claims at Second Circuit, AM Law Litigation, June 20, 2013

Cement Masons & Plasterers Joint Pension Trust v. Equinix Inc.

Rescue Mission of El Paso Inc. v. K-Sea Transportation Partners LP

Sprando v. Hart


More Blog Posts:
“Ask and It Shall Be Received": Securities Brokers Can Wipe Complaints and Even Legal Claims Off Their Public Records, Stockbroker Fraud Blog, June 20, 2013

Former Broker Claims He is the Reason FINRA’s Regional Director Resigned, While Ex-JP Morgan Broker Files Arbitration Claim Against His Former Employer, Institutional Investor Securities Blog, June 18, 2013

Securities Lending Trial Against Wells Fargo & Co. is Underway, Institutional Investor Securities Blog, June 21, 2013

June 18, 2013

Ponzi Scam Result in SEC Charges For Two Dallas-Based Broker-Dealers

The Securities and Exchange Commission has filed charges against two Global Corporate Alliance executives based in Dallas for running an alleged $10 million Texas Ponzi scam and defrauding at least 80 investors. The regulator claims that Gloria Solomon and Duncan MacDonald promoted the medical insurance company as a solid investment when actually GCA was a start-up that had practically no revenue and no operating history. They are charged with securities fraud, acting as unregistered broker-dealers, and conducting an unregistered securities offering. Meantime, the U.S. Attorney’s Office for the Northern District of Texas has opened a parallel criminal case against the Solomon and MacDonald.

Per the SEC’s securities complaint, MacDonald founded Global Corporate Alliance. When he couldn’t find a large investor, he then went after individual investors, misrepresenting his company’s business and financial state, as well as fabricating enrollment numbers.

Proceeds from new investors were purportedly used to pay off older investors. When the number of new investors dried up, MacDonald and Solomon are said to have employed stall tactics to delay payments due. In the process, contends the SEC, the two of them raised closed to $10 million in investor funds. Of that money, about $2 million went back to these investors as their “payments,” while Solomon and MacDonald pocketed a million each and used the rest to cover business expenses. They then spent a year holding off investors who expected payments while they alternative sources of cash.

If you are an investor that has suffered financial losses in a Ponzi scam or any other financial scheme, do not hesitate to contact our Texas securities fraud law firm today.

SEC Charges Two Executives in Ponzi Scheme At Dallas-Based Medical Insurance Company, SEC, June 17, 2013

SEC Complaint (PDF)


More Blog Posts:
Texas Federal Agents Pursue Largest Forfeiture Cases To Date, Stockbroker Fraud Blog, June 8, 2013

Stock Trader Faces Front Running Charges In Alleged $1.7M Texas Securities Fraud, Stockbroker Fraud Blog, June 1, 2013

Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2013

June 7, 2013

Securities Criminal Roundup: Mail Fraud Charges Against Investment Company Owner, Ex-Bank of the Commonwealth Execs Convicted, Broker’s Elder Financial Fraud Sentence is Affirmed, and Ex-Fund President Goes to Prison for Ponzi Scam

Flatiron Systems LLC Owner Pleads Guilty to Mail Fraud
In United States v. Howard, investment company owner David Eugene Howard has pleaded guilty to mail fraud charges. He is accused of engaging in a financial scam that obtained about $1.8 million from investors.

Prosecutors say that Howard, who owns Flatiron Systems, used operating agreements, letters, and account statements to make false representations that his company used a proprietary system named “Pathfinder” to trade pooled equity accounts. The Securities and Exchange Commission has submitted an enforcement action against Howard.

Three Ex- Bank of the Commonwealth Executives Get Fraud Conviction
Edward Woodard, his son Troy Woodard, and Stephen Fields, three former Bank of the Commonwealth executives were convicted on charges related to their alleged scam many believe was the cause of the bank’s demise in 2011. Convicted along with them is Dwight Etheridge, a favored borrower.

The federal government says that starting in 2006 the bank took on high-risk deposits to try to expand the business’s geographic base. By 2008, a lot of the banks’ loans were purportedly administered and funded in a manner that ignored the bank’s internal controls, as well as industry standards. Edward and Fields are accused of disguising the bank’s financial state.

Ex-MetLife Broker’s Criminal Sentence for Elderly Fraud is Affirmed by 7th Circuit
An appeals court has affirmed the 210-prison sentence that Victoria McGee Harris, an ex- MetLife Inc. (MET) broker, received after pleading guilty to criminal charges accusing her of stealing millions of dollars from her clients (primarily elderly seniors). Harris diverted these investors’ funds eighth years, purportedly using the money for her personal spending. MetLife settled with Harris’s clients by paying them over $7 million.

Appealing her prison sentence, Harris had said that its duration was unreasonable and that the district court acted improperly by counting married couples as two separate victims for the purposes of determining her prison term. The 210-month sentence she received is at the top of the guideline ranges. However, the Seventh Circuit found that the district court did not err when determining the sentence length.


Ex- Wasson Capital Ltd. Present Gets 30 Months in Prison for $2.3M Ponzi Scam

In United States v. Sekaran, the U.S. District Court for the Southern District of New York sentenced ex- Wasson Capital Ltd. president Anand Sekaran to 30 months behind bars for his involvement in a $2.3 million Ponzi scheme. Sekaran must pay $2.26 million in restitution, $2.3 million in forfeiture, and a $200 special assessment fee.

Sekaran is accused of soliciting about $6 million from clients for call and put options. However, when the investments began failing, he didn’t tell investors. The government said that instead, he misrepresented the health of the investments, misrepresented to clients how their money was being used, misappropriated approximately $500,000 and caused investors to lose some $2 million. In addition to entering a guilty plea, Sekaran and his firm settled the related civil case against them.

The SEC's Order Against Howard
(PDF)

Ex-Virginia bank executives guilty in financial crisis case, Reuters, May 24, 2013

US v. Harris

Wasson Co-Founder Sekaran Gets 30 Months for Fraud, Bloomberg, May 29, 2013

May 21, 2013

Texas Securities Roundup: $10M Ponzi Scheme, Foreign Note Sale Fraud, Promissory Note Scam, and Money Laundering Lead to Indictments, Criminal Sentences

$10M Texas Ponzi Scam Solicited Over 100 Investors
Austin resident Robert Roland Langguth is sentenced to four years in federal prison for running a $10 million Texas Ponzi scam that solicited over 100 investors to become involved in real and bogus construction projects and investments. Often, the money brought in would go toward supporting the 71-year-old’s extravagant lifestyle.

Monthly dividends paid to investors were actually payments from newer investors, which is typical for a Ponzi scam. Last year, Langguth pled guilty to money laundering and wire fraud charges. Aside from prison time, he will pay more than $10 million in restitution to investors that were defrauded.

$5M Texas-Based Foreign Note Sale Scam Leads to 80-Year Prison Term
After being convicted of theft of property in a North Texas-based foreign notes scheme, Karen P. Bowie is now sentenced an 80-year state prison term. Bowie was involved in a $5 million financial fraud involving Titan Wealth Management LLC, which sold bogus high-yielding "European Mid-Term Notes.”

Bowie is said to have benefitted from $2 million of investor funds, even buying a coastal home with some of the money. The Securities and Exchange Commission in a related, but separate civil action in 2009 sued her, along with Titan Wealth, its owner Thomas Lester Irby, and others.

San Antonio Man Must Pay $1.1M Restitution Over Texas Promissory Note Fraud
After pleading guilty to two counts of mail fraud, The Wealth Building Club of San Antonio owner Tony Anthony Cruz Jr. is sentenced to 10 years probation and must now pay $1.1 million in restitution. Cruz sold bogus promissory notes through his company to investors in Eagle Pass, San Antonio, and Richmond, Texas.

As part of his Texas promissory note scheme, he told investors that because of his experience and knowledge as a successful currency trader, WBC notes would be able to pay monthly returns of 2 to 6%. The State Securities Board investigated this case.

Former NFL Kicker Russell Erxleben Faces Securities Fraud Charges Again
Ex-pro football player Russell Erxleben has been indicted on charges of Texas securities fraud, wire fraud, and money laundering. Erxleben is accused of selling post-WWI reconstruction bonds that were German government-issued and of questionable debt, as well as interests in a painting he says was made by artist Paul Gauguin.

Both investment scams were allegedly fraudulent. Instead, Erxleben allegedly used investors’ funds to perpetuate a Ponzi scam and support his lifestyle. This is the second securities fraud case against the former NFL player, who was previously sentenced to prison previously for a bogus $35 foreign currency trading scam.

Texas State Securities Board

Texas Securities Board Bulletin: Russell Erxleben stays put, The Potpourri, May 23, 23013

Charges Against Langguth (PDF)

US v. Cruz (PDF)


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

Alleged Houston, Texas Affinity Fraud Scam Targeting Druze and Lebanese Communities Leads to SEC Charges Against Day Trader, Stockbroker Fraud Blog, January 28, 2013

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

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

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

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



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