January 23, 2012

Jury Trial Begins in Ponzi Scammer Allen Stanford’s Criminal Case

Two-and-a-half years after he was arrested for allegedly running a $7 billion Ponzi scam, the criminal trial of Allen Stanford has begun. The Texas financier is charged with 14 counts of fraud, conspiracy to commit money laundering, and conspiracy. He denies any wrongdoing.

Stanford is accused of issuing $7 billion in fraudulent CDs through his Antigua-based Stanford International Bank to investors in over a hundred nations. He then allegedly defrauded them.

Even since his arrest these investors have not recovered any of their money. According to Reuters, a guilty conviction won’t necessarily help his Ponzi victims recoup their losses. Hopefully, however, the Securities and Exchange Commission’s lawsuit against the Securities Investor Protection Corp. will remedy this.

The SEC wants SIPC, the broker industry-funded fund, to accept the securities claims made by Stanford’s victims. Meantime, SIPC maintains that it has no jurisdiction over the Stanford case. (Also, this week, arguments over that lawsuit will begin in federal court, and Judge David Hittner, who is presiding over the criminal case against Stanford has overruled a motion by the government to keep the decision in the SIPC v. SEC case off-limits.)

The prosecution says that Stanford promised investors that they would get higher returns if they bought CDs through the Antigua bank (compared to the returns coming from US bank CDs). The money from these CD sales was then used pay off earlier investors and financially support Stanford’s other businesses. He also allegedly used investors’ money to pay for expensive vehicles, luxury residences, and women.

Stanford and three of ex-company executives are accused of trying to cover up their wrongful actions through bogus bank records and with bribes to auditors and regulators in the form of Super Bowl tickets, other perks, and money (over $3 million). The Ponzi scam collapsed in 2008 when his bank ran out of funds and investors stopped receiving payments.

Meantime, Stanford’s defense attorneys are arguing that he wasn’t running a Ponzi scam. They claim that Stanford’s investment operation was legitimate.

His legal team is instead blaming the financial scheme on former Stanford International Bank CFO James M. Davis, who has already pleaded guilty to charges of securities fraud, wire fraud, conspiracy to commit mail fraud, and conspiracy to obstruct a SEC investigation. Davis, who struck a plea deal in his criminal case, is expected to testify for the prosecution during Stanford’s trail.

Stanford, who has been behind bars for the last two-and-a-half years, was declared fit for trial in December. His case had been delayed so he could recover from a medication addiction and from injuries he sustained after he was involved in a jail brawl.

If you are an investor that suffered losses as a result of the Stanford Ponzi scam or any other financial scheme, do not hesitate to contact our securities fraud lawyers right away.

Prosecutors say Texas financier Stanford, stole investors’ money in $7 billion Ponzi scheme, The Washington Post, January 24, 2012

Stanford trial starts, cold comfort for investors, Reuters, January 24, 2012


More Blog Posts:
Multibillion-Dollar Stanford Securities Fraud Scam Has Investors Contacting Houston Stockbroker Fraud Lawyers for Help, Stockbroker Fraud Blog, February 19, 2009

Ex-SEC Lawyer to Settle DOJ Charges Accusing Him of Inappropriately Representing Ponzi Fraudster Allen Stanford, Stockbroker Fraud Blog, January 12, 2012

Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam, Stockbroker Fraud Blog, January 10, 2012

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

January 19, 2012

TD Bank Ordered to Pay Texas-Based Coquina Investments $67M Over $1.2 Billion Ponzi Scheme

A jury has decided than TD Bank must pay Coquina Investments $67M for playing an assisting role in attorney Scott Rothstein’s $1.2 billion Ponzi scam. Coquina Investments is located in Corpus Christi, Texas. TD Bank is the US arm of Toronto-Dominion Bank.

The Texas securities lawsuit, filed by Coquina, contends that TD Bank officers had an “active role” in the Ponzi scam. They allegedly helped keep the fraud going by meeting with victims to make it appear as if legitimate business was actually taking place. For example, investors would meet with Frank Spinosa, who was then a TD Bank vice president.

Rothstein would tell investors that they were purchasing stakes in settlements involving sexual and employment discrimination cases that his law firm Rothstein Rosenfeldt Adler, PA had already gathered evidence for or confronted potential defendants. Apparently, the cases and the settlements were all bogus.

Per the Texas Ponzi fraud complaint, Rothstein would use TD Bank to pay investors their money from the bogus settlements and provide them with documents used to hide the truth, keep them involved in the scam, and get them to reinvest. Documents were also used to bring in new investors. Meantime, earlier investors were paid with the money brought in by new investors. Coquina’s legal team maintains that the Ponzi scam could not have existed without TD Bank’s help.

Shonda Smith, the foreman of the jury that issued the verdict, said that jury members were surprised at how much the bank allowed to go through it without doing anything to put a halt to the different transactions. TD Bank, however, maintains that it did nothing wrong. It is adamant that even though it served as Rothstein Rosenfeldt Adler’s bank it was Rothstein that actually bilked investors.

Of the $67 million verdict, $32 million is for compensatory damages and $35 million is for punitive damages. Meantime, there are groups of investors that have filed their securities fraud cases against TD Bank over its involvement in Rothstein’s Texas Ponzi scam.

Rothstein pleaded guilty to racketeering, money laundering, and fraud in 2010. He admitted to running the Ponzi scam between 2005 and 2009. He has also said that Level 3 Capital Fund, Centurion Structured Growth LLC, and Platinum Partners Value Arbitrage helped keep his financial scheme afloat during the last few months by agreeing not to disclose to potential investors that he hadn’t made payments to the three hedge funds (that were planning to give him and his team a positive credit rating.) Rothstein then used new investors’ funds to pay back the hedge funds.

The funds are disputing Rothstein ‘s claims and are suing TD Bank. Rothstein has been sentenced to 50 years behind bars for his crimes.

To schedule your free case evaluation to find out whether you have grounds for a Texas securities fraud lawsuit, contact our Ponzi fraud attorneys today. Shepherd Smith Edwards and Kantas, LTD LLP represents investors throughout the state.

Toronto-Dominion Loses $67 Million Jury Verdict Over Rothstein Fraud Role, Bloomberg, January 18, 2012

TD Bank Aided Rothstein Fraud, Investors’ Lawyer Tells Jury, BloombergBusinessweek, January 17, 2012

Rothstein pleads guilty, South Florida Business Journal, January 27, 2010


More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011

Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 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

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

Posted In: Ponzi Scams , Texas Securities Fraud

January 12, 2012

Ex-SEC Lawyer to Settle DOJ Charges Accusing Him of Inappropriately Representing Ponzi Fraudster Allen Stanford

Spencer Barasch, a former Securities and Exchange Commission attorney, will reportedly settle the civil charges filed against him by the Department of Justice by paying a $50,0000 fine. He is accused of inappropriately representing Allen Stanford, the ex-billionaire who is facing trial for masterminding a $7B Ponzi scam. Per the planned settlement, Barasch will settle the DOJ charges by paying a $50,000 fine.

It was in 2010 that SEC Inspector General David Kotz issued a report finding that while Barasch was still at the commission he played a part in decisions that were made to quell investigations of Stanford. After Barasch vacated his post at the SEC, he made several attempts to try to represent Stanford. Although the SEC refused each request, Barasch eventually ended up providing Stanford with about seven billable hours in legal counsel.

Federal conflict of interest laws permanently bar ex-government lawyers from appearing in front of or communicating with the US government in certain situations. However, to bring a criminal conflict-of-interest case prosecutors have to prove that the ex-employee contacted the government on behalf of the defendant. As there has been no evidence that this occurred in the matter of Barasch representing Stanford, this is likely why the DOJ opted to pursue a civil case.

Barasch is also expected to settle the Security and Exchange Commission’s disciplinary action against him by consenting to a 6-month ban from being able to practice in front of the commission. He will likely settle this without admitting to or denying wrongdoing.

Meantime, prosecutors are continuing to prepare their criminal case against Stanford, who allegedly bilked thousands of investors when he persuaded them to purchase CDs from his bank in Antigua. He was arrested in 2009. Stanford continues to deny the charges.

Jury selection is scheduled to begin later this month in the criminal trial against him. This week, however, two of Stanford’s lawyers asked a judge to let them quit the ex-billionaire’s case. Robert Scardino and Ali Fazel say that budget limitations are preventing them from doing their job as his defense team. A court has frozen Stanford’s assets.

In addition to the criminal case filed case against Stanford, he also faces SEC civil charges, along with Stanford International Bank (SIB), investment adviser Stanford Capital Management, investment adviser and broker-dealer Stanford Group Company (SGC), Stanford Financial Group (SFG), and two senior company officials. According to regulators, the defendants misrepresented certain CDs as safe investments. Meantime, client’s money was placed in illiquid equities and real estate instead of diversified liquid assets.

Exclusive: Ex-SEC lawyer said to settle Stanford-linked case, Chicago Tribune, January 10, 2012

Ex-SEC Enforcer Settles Stanford Ethics Dispute With U.S., Bloomberg, January 13, 2012


More Blog Posts:
Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam, Stockbroker Fraud Blog, January 10, 2012

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

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011

Continue reading "Ex-SEC Lawyer to Settle DOJ Charges Accusing Him of Inappropriately Representing Ponzi Fraudster Allen Stanford" »

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Posted In: Ponzi Scams

January 10, 2012

Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam

A Minnesota securities fraud lawsuit, filed by court-appointed receiver R.J. Zayed, contends that because NRP Financial Inc. allegedly failed to properly supervise former broker Jason Bo-Alan Beckman, the brokerage firm ended up assisting in one of the largest Ponzi scams that the state has ever experienced. The $150M financial fraud raised $47.3M from at least 143 clients. Over 900 investors sustained losses as a result of the scam.

Beckman worked as an NRP rep between 2005 and 2008. Last year, he was charged with 13 felony counts related to the alleged financial scheme, including the criminal charges of conspiracy to commit mail and wire fraud, mail fraud, aiding and abetting wire fraud, mail fraud, and money laundering. He also is accused of stealing $7M from Global Advisors LLC, which he owns.

Minneapolis money manager Trevor Cook is the supposed chief architect of the Minnesota Ponzi scam. (He is serving a 25-year prison after pleading guilty to tax evasion and mail fraud.) Involving foreign currency arbitrage, investors were allegedly told that yearly returns of up to 12% would be earned with little, if any, risk to their principal if they bought into the program. Beckman made representations about the currency program between 2006 and 2009.

Per the Ponzi fraud lawsuit, the scam would have ended sooner if only NPR Financial had properly supervised Beckman, denied transfer of investors’ funds to bank accounts maintained on behalf of shell entities, looked into improper transfers of clients’ monies that Beckman had made, and refused to let him hide his actions behind its name and reputation. A lot of the parties that invested were clients of Oxford Private Client Group LLC, which is not only a NRP Financial branch, but also it is partly owned by Cook and Beckman.

Oberlin Financial, which preceded NRP, is accused of having known
way back in April 2006 that Beckman had another business involving trading currencies. NPR also allegedly was aware that Beckman used marketing collaterals that made an inflated claim that there was $3.5B in assets under management.

National Retirement Partners Inc., which is NRP Financial’s parent, sold its assets to LPL for $27M. When the deal was taking place, LPL touted the buy as a way to get into the retirement and pension market. However, according to an LPL Investment Holdings spokesperson, the company is not named in the securities complaint and has not been liable in this case. The broker-dealer was not one of the assets that LPL Holdings bought from NRP.

B-D that sold assets to LPL played role in $150M scam: Lawsuit, Investment News, January 6, 2012

Patrick Kiley, two others indicted in Trevor Cook ponzi scheme, CityPages, January 6, 2011


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

SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments, Stockbroker Fraud Blog, December 15, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011

Continue reading "Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam" »

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Posted In: Financial Firms , NRP Financial Inc. , Ponzi Scams , Securities Fraud

December 20, 2011

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts

In its latest effort to help investors that lost money in the $7 billion Stanford Financial Group Ponzi scam recoup their losses, the Securities and Exchange Commission is suing the Securities Investor Protection Corporation. Both have been in disagreement over whether Stanford investors qualify for protection against SIPC rules, which are supposed to back brokerage firm client accounts against failure and cover investors for up to $500,000 in losses.

The SEC has said that this coverage should apply to Stanford investors because not only was broker-dealer Stanford Group Company a part of Stanford Financial, but also clients had to set up brokerage accounts to buy the certificate of deposits that their money was placed in. Upon purchase of their CD’s, they were given papers noting that the transaction was SIPC-covered. However, the SIPC, which is not in charge of regulating brokerage firms, contends that because clients’ money was placed in supposedly safe CDs sold by Stanford Financial, investors do not get to avail of this protection.

Now the Commission is seeking a court order that would compel the investor protection corporation to start liquidating Stanford Group Company. This filing is a key step in allowing customers to start getting their money back.

The SEC claims that it is solely authorized to decide whether SIPC should get involved. This is the first time the Commission has pulled rank to force the SIPC to take specific action. If the court grant’s the SEC’s order, SPIC plans to appeal.

Federal authorities seized Stanford Financial in 2009. R. Allen Stanford is accused of running the Ponzi scam and using the money belonging more than 21,000 clients to fund his expensive lifestyle. Investors were promised improbable interest rates that were supposedly spurred by a unique investment strategy.

This week, a hearing to determine whether R. Allen Stanford is fit to stand trial is scheduled to take place. The SEC has sued R. Allen Stanford for securities fraud and he is charged with 23 criminal counts of wrongdoing. Although he remains in federal custody, his criminal trial was delayed to allow him to go into detox for his addiction to anti-anxiety meds and anti-depressants.

One of his defense attorneys claims that the medications and a traumatic brain injury that he sustained when he was beaten in jail have caused him to develop amnesia. Meantime, prosecutors are expected to argue that Stanford is pretending that he severe memory loss.

Allen Stanford's Move to Trial or Treatment Argued in Court, SF Gate, December 20, 2011

SEC, SIPC ready to rumble over Ponzi payouts, Investment News, December 20, 2011

S.E.C. Files Suit to Recoup Losses in Stanford Case, New York TImes, December 12, 2011


More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011

Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 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

Continue reading "SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts" »

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Posted In: Ponzi Scams , Texas Securities Fraud

December 15, 2011

SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments

The SEC has charged Wendell A. Jacobson and his son Allen R. Jacobson with securities fraud. The two men allegedly ran a $220M Ponzi scam under the guise of selling investments in their real estate business. The Commission claims that father and son violated sections of the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

The Jacobsons are accused of presenting investors with a chance to place their money in LLC in return for partial ownership in apartment communities that were located in a number of states. The two men, who belonged to Church of Jesus Christ of Latter-Day Saints, solicited other members to invest.

The father and son claimed to have bought apartment complexes at discount prices. They said they would renovate the units, enhance management, and resell properties in 5 years. Investors were told they would be paid their shares in monthly rentals and the future resales.

Per the securities complaint, the father and son team got over $220M from about 225 investors. Securities were sold as investment contracts. No registration statement was submitted to the SEC, which is required under federal securities law.

The Utah securities scam was operated under the umbrella company Management Solutions, Inc. The SEC says the two men behaved as unregistered brokers who made false claims when they told investors that their investment’s principal was safe. They also allegedly misrepresented how the money would be used. Meantime, investors were told that they would get 5-8% annual returns and resale profits.

In fact, says the SEC, not only were the LLCs sustaining major losses, but also the Jacobsons were using investor money to pay for their personal and business expenses. They were also using new investors' money to and pay earlier investors. The Jacobsons used the Ponzi scam to cause investors, who were getting “returns,” to think that the LLCs were making a profit.

Beginning last year, investors were told that properties were sold and they had made a profit when no sales actually occurred. Instead, the “sales” were used to move investors from and into specific properties.

The SEC is seeking disgorgement of ill-gotten gains, financial penalties, and prejudgment interest.

SEC Halts Father-Son Ponzi Scheme in Utah Involving Purported Real Estate Investments, SEC, December 15, 2011

Mormons fleeced in $220M investment scam: SEC, Investment News, December 16, 2011


More Blog Posts:
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011

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

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Fraud, October 13, 2011

Continue reading "SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments" »

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Posted In: Affinity Fraud , Ponzi Scams

December 9, 2011

Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam

The Securities and Exchange Commission says that it has resolved its Colorado securities fraud lawsuit against Universal Consulting Resources LLC (UCR) and the financial firm’s owner, Richard Dalton. Per the agreement, both will pay $15,842,948, including a $7,549,458 penalty, over allegations that investors were given materially misleading and false information about the Diamond Program and the Trading Program, which are investment contracts.

According to the United States District Court for the District of Colorado, which is where the judgments were entered, Dalton told investors they would get yearly profits of 48-120%. In actuality, he was running a Ponzi scam.

The SEC contends that Dalton raised about $17 million from 130 investors located in 13 US states. He told Trading Program investors that their money would be held in an escrow account with an American bank and that a European trader would use the account’s value to get leveraged funds to buy and sell bank notes. Under the Diamond Program, profits were supposed to come from the trading of diamonds.

In actuality, Dalton used $2.5 million of investor funds for personal expenses. New investors’ money was also used to pay existing investors their investment “profits.”

UCR and Dalton are permanently enjoined from further violations of:

• Securities Act of 1933, sections 17(a) and 5
• Securities Exchange Act of 1934, section 10b
• Rule 10b-5 thereunder

Dalton also is enjoined from violating Exchange Act Section 15(a).

Named as a relief defendant is Marie Dalton, who is Richard’s wife. The SEC claims that she used more than $900,000 in investor money to buy a home in Colorado. The court has ordered her to disgorge $115,000 in investor money.

A few months ago, the couple was charged in criminal court with conspiracy, interstate transportation of stolen funds, and wire fraud.

Ponzi Scams
With hardly (if any at all) actual earnings made, Ponzi scams can collapse suddenly when the money from new investors starts to dry up or too many current investors decide to pull out. Most Ponzi schemes work for as long as they do because investors believe that they are making a real profit rather than just being given other people’s investment money.

According to the SEC, the Daltons stopped issuing payments to investors when they found out they were under investigation. They then continued to tell investors that their payments were coming but had been delayed. For example, investors were led to believe that a plane transporting diamonds was forced to land Holland. Another excuse that investors were given is that 18,000 diamonds turned out to be fake.

SEC RESOLVES FRAUD-BASED LAWSUIT AGAINST DENVER-AREA COMPANY AND ITS OWNER, SEC, December 2, 2011

Golden couple accused of Ponzi scheme, arrested, Business Journal, September 30, 2011


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

SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011

Continue reading "Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam " »

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Posted In: Ponzi Scams , Securities Fraud

November 23, 2011

Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam

David Kugel, who was a long time Bernard L. Madoff Investment Securities LLC (BMIS), has been charged by the Securities and Exchange Commission with fraud. Kugel is accused of making fake trades to keep Madoff’s multi-billion dollar Ponzi scam running. He has consented to settling the securities fraud charges.

The SEC claims that Kugel, who worked for Madoff for nearly 40 years, was asked by the Ponzi mastermind to turn backdated arbitrage trade information into fake trades. Kugel’s own BMIS account included backdated trades. While some of the trades imitated successful ondx made by Kugel for BMIS, others were founded on historical facts that he got from old newspapers.

Over a number of years Kugel even withdrew almost $10 million in profits from these bogus trades in his own BMIS. SEC New York Regional Office George S. Canellos claims that Kugel knew such profits were fake.

Two other people accused of setting up fake trades from the information that Kugel provided were Joann Crupi and Annette Bongiorno. Both allegedly asked him for backdated data about trades that added up to millions of dollars. They would then take the information and design trades that equaled those figures. These bogus trades showed up as trade confirmations on investors’ account statements.

The SEC filed securities charges against the two women last year. The Commission claims that Bongiorno regularly set up bogus books and records and misled investors via phone calls, trade confirmations, and account statements. She also is accused of setting up false trades in her own BMIS counts that allowed her to cash out millions of dollars more than what was put in. Meantime, Crupi was accused of deciding what accounts to cash out and which investors should receive checks as Madoff’s scam stood on the brink of collapse. The two women are facing criminal charges over their alleged involvement. They have denied any wrongdoing.

Prosecutors have filed parallel criminal charges against Kugel. On Monday, he pleaded guilty to six criminal counts, including securities fraud, conspiracy, and bank fraud. He will be sentenced in May.

Meantime, Irving Picard, who has been appointed as the trustee in charge of helping Madoff’s Ponzi victims from recouping their losses, is seeking at least $22.2 million from Kugel and his family.

Ponzi Scams
A Ponzi scheme can be described as a multi-level marketing operation. The director solicits investments while promising clients a given return rate. However, rather than paying investors from real profits, the principal from new investors is used to compensate earlier investors. Ponzi scams can result in devastating losses for investors once the money dries up.

SEC Charges Longtime Madoff Employee With Creating Fake Trades, SEC, November 21, 2011

Read the SEC Complaint (PDF)

Bernie Madoff Cronies Arrested, ABC News, November 18, 2010

More Blog Posts:
SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 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

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011

Continue reading "Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam" »

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Posted In: Bernard L Madoff Investment Securities , Ponzi Scams , Securities Fraud

November 21, 2011

SEC Files Charges in $27M Washington DC Ponzi Scam

The Securities and Exchange Commission has charged Garfield M. Taylor and a number of his relatives and friends with running a DC-area Ponzi scam. The more than $27 million financial fraud targeted investors in the area.

Taylor and his partners allegedly defrauded about 130 investors between 2005 and 2010. The scam fell apart when the money dried up as a result of trading losses and the interest payments that were made to investors.

According to the Commission, Taylor convinced mainly middle-class clients to refinance their houses and use their money, including their retirement and savings, to invest in promissory notes that were put out by his two companies, which were supposedly taking part in low-risk trading options. He touted returns of up to 20% and provided investors with false assurances that their investments were protected by either a “covered call” trading strategy or a “reserve account.”

To keep new investor money coming, Taylor is said to have persuaded current investors and others to refer prospective clients to him in exchange for commission fees that were calculated according to how much the new investors put in. Although he is not a licensed securities broker, Taylor convinced a number of investors to give him access to their brokerage accounts and he used this privilege to make trades. He promised them a portion of the profits.

The SEC contends that contrary to his promises, Taylor actually was taking part in risky options trading, which then resulted in the financial losses. He also allegedly took $5 million to pay relatives and friends and cover his kids’ education.

Also charged with securities fraud bu the SEC (allegations against the parties vary, but include: violation of federal securities’ laws anti-fraud provisions, offering registration requirements, and broker-dealer registration requirements):

• Gibraltar Asset Management Group LLC
• Garfield Taylor Inc.
• Maurice G. Taylor. He is Taylor’s sibling and is Gibraltar’s chief investment officer
• Randolph M. Taylor. Taylor’s sibling who was Gibraltar’s VP of organizational development.
• Benjamin C. Dalley. He formerly served as VP of operations at Gibraltar.
• Jeffrey A. King. Taylor’s brother-in-law and Gibraltar’s former COO and President.
• William B. Mitchell. He was a senior executive at both companies

These individuals and entities, along with Taylor, are accused of jointly putting together a Gibraltar PowerPoint presentation that contained false and misleading statements and giving these to prospective clients. The SEC says the documents misrepresented the financial firm’s options trading strategy, the protections offered, the expected return rate, and degree of risk involved. Institutional investors and charities, including a Baptist church, were even pursued as prospective clients.

The SEC is seeking enjoinment from future violations, the payment of penalties, and disgorgement.

SEC Charges Perpetrator of Washington-Area Ponzi Scheme, SEC, November 18, 2011

Read the SEC's Complaint


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

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011

Continue reading "SEC Files Charges in $27M Washington DC Ponzi Scam" »

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Posted In: Ponzi Scams , SEC Enforcement

Tags: Washington DC

November 11, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme

The CFTC has been able to get a permanent injunction and default judgment against former Houston resident Jeffery Alan Lowrance and First Capital Savings and Loan. As restitution for their involvement in an alleged off-exchange foreign currency Ponzi scam, both will pay $1.2 million in restitution and a civil monetary penalty of $3.3 million. They have been permanently banned from commodity-related activities.

According to the order, Lowrance and First Capital Savings and Loan fraudulently solicited at least three dozen to get involved in forex trading. The two of them allegedly falsely claimed that they were successful traders and promised up to 4.15% monthly returns on their investments. They also are accused of publishing bogus client account statements that showed supposed monthly profits on the financial firm’s Web site. The court said that not only did both Lowrance and First Capital fail to put the money clients gave them into forex trading accounts, but also, they allegedly misappropriated the funds to set up a religious newspaper, support Lowrance’s personal expenses and the expenses of his family members, and pay supposed profits to existing investors. The order mandates that any entity or person that provided Lowrance and his company with domain registration or web hosting services now pull offline any of their Web sites that are soliciting clients to trade forex or commodity futures.

It was the U.S. Attorney’s Office for the Northern District of Illinois that indicted Lowrance for running a $25 million financial scam. In July, the SEC charged him with running a multimillion-dollar Ponzi scheme that defrauded hundreds of investors. Lowrance allegedly raised about $21 million. The investors he targeted lived in over two dozen US states. He enticed investors by claiming to share their Christian values and government views.

The SEC complaint contends that Lowrance and his financial firm told investors they were guaranteed a “predictable” income each month, along with returns as high as 7.15%. Certain clients even received bogus credit letters. Even though by 2008 Lowrance and his company had lost all of the investors funds, between June 2008 and February 2009 he still solicited at least another $1 million from at least three dozen investors.

The SEC is alleging violations of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and the Securities Act of 1933. It is seeking penalties, disgorgement, and other relief.

Court Orders Jeffery A. Lowrance and His Company to Pay More than $4.5 Million for Operating Foreign Currency Ponzi Scheme, CFTC

SEC CHARGES OPERATOR OF $21 MILLION FOREX PONZI SCHEME, SEC, July 15, 2011

Read the indictment (PDF)


More Blog Posts:
Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M, Stockbroker Fraud Blog, October 28, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Continue reading "Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme" »

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Posted In: CFTC , Ponzi Scams , Texas Securities Fraud

October 10, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative

Two years after San Antonio broker was sentenced to prison for Texas securities fraud, FINRA has fined Merrill Lynch $1M for not properly supervising its former employer. These failures allegedly allowed Bruce Hammonds to run a Ponzi scam that defrauded investors of $1.4M.

Hammonds persuaded 11 people to invest in the Texas Ponzi scam, which he operated under the name B&J Partnership. It was supervisors at Merrill Lynch that gave the green light for him to open an account for B & J. The supervisors also are accused of not monitoring the funds that moved between customers and Hammonds.

Rather than putting investors’ money in a Merrill Lynch fund, he put $1.4 million of their funds in his working capital account. He even gave clients charts showing how the B & J fund was performing even though the fund wasn’t real. Hammonds used the money to pay for his personal spending, including a supposed house-flipping business.

He later pleaded guilty to federal securities charges. In addition to five years behind bars and three year supervised release. Hammond has been barred from the securities industry. All investors have been paid back in full for their losses.

In deciding to fine Merrill Lynch, FINRA found that the financial firm did not have a supervisory system that did a satisfactory enough job of monitoring accounts of employees for signs of possible misconduct. The system was only able to immediately capture accounts opened by an employee if he/she used his/her social security number as the main tax identification number. The SRO also said that between 1/06 and 6/10 Merrill Lynch did not monitor another 40,000 employee/employee-interested accounts.

By agreeing to settle, Merrill is not denying or admitting to the charges.

Failure to Supervise
It is a brokerage firm’s responsibility to establish written procedures for how to properly supervise its employees' activities. These procedures must then be implemented to prevent broker fraud. When misconduct does arise and failure to supervise played a role in allowing the incident to happen, the financial firm can be held liable for securities fraud.

Brokerage companies have to supervise every broker that they license to work for them. Even if an accused broker is later found not liable, there is still a possibility that the brokerage firm or supervisor can be held liable for failure to supervise and be ordered to pay damages. For example, a broker may not have received the proper training or was given the wrong information by the financial firm, and this resulted in Texas securities fraud that caused an investor to suffer losses.

FINRA Fines Merrill Lynch $1 Million for Supervisory Failures That Allowed a Registered Representative to Operate a Ponzi Scheme, FINRA, October 4, 2011

Shepherd Smith Edwards & Kantas LTD LLP is Investigating Merrill Lynch in Light of Recent FINRA Fines Against the Firm for Failure to Supervise, MarketWatch, October 5, 2011

More Blog Posts:
Former Merrill Lynch Employee, Guilty of $1.4 Million Texas Securities Fraud Scheme, Receives Prison Term, Stock Broker Fraud Blog, October 5, 2009

Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stock Broker Fraud Blog, August 31, 2011

Actions of Former Ferris, Baker Watts, Inc. General Counsel Accused of Supervising Rogue Broker to be Reviewed by SEC, Institutional Investors Securities Blog, December 9, 2010

Continue reading "Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative" »

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Posted In: FINRA , Financial Firms , Inadequate Supervision , Merrill Lynch , Ponzi Scams , Texas Securities Fraud

August 29, 2011

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees

The Securities and Exchange Commission has filed securities charges against James Davis Risher and Daniel Joseph Sebastian. The two men are accused of running a Ponzi scam that raised over $22 million from over 100 investors. Many of the victims were Florida retirees and teachers that entrusted the two men with their life savings.

Charges against Sebastian and Risher include two counts of fraud in the sale or offer of securities, unregistered securities sales, fraud related to the sale or purchase of securities, investment adviser fraud, and violations of aiding and abetting. This would include alleged violations of the Securities Act of 1933, the Investment Advisers Act of 1940, and the Securities Exchange Act of 1934.

According to the SEC, the two men ran a bogus private equity fund and lured people in by promising 14-124% investment gains. The fake account was called "The Preservation of Principal Fund." Investors fake bogus account statements claiming high returns. Also, money being brought in from new investors was used to pay the older investors. The names that Sebastian and Risher used to market the fund were Safe Harbor Private Equity Fund, Preservation of Principal Fund, and Managed Capital Fund.

From January 2007 through July 2010, Sebastian allegedly gave out materials to potential investors. $100,000 was the supposed minimum that one could invest. Even though only $3.8 million of the money they raised was actually invested, the two men allegedly paid themselves more than $16 million in bogus performance and management fees.

RIsher, who is accused of spending over $140,000 of the money on designer jewelry, cars, and artwork, allegedly told investors that he was experienced in wealth and asset management and trading equities when, in fact, he did not have this experience and had spent 11 years of the last two decades behind bars.

Meantime, Sebastian allegedly approached former customers that he worked with when he was an insurance broker. In addition to seniors and teachers, he also targeted church members, as well as investors outside Florida and in Canada.

The SEC is accusing the two men of making misrepresentations and omissions to clients about the fund’s investment strategy, returns, risks involved, audited financial statements, and Risher’s criminal past. Sebastian allegedly even told investors that they couldn't lose their principal investments and gave some of them written guarantees that any losses would be reimbursed.

The FBI, the IRS, the Florida Department of Law Enforcement, the US Postal Inspection Service, and the State of Florida Office of Financial Regulation all investigated this Florida financial scam. In the related criminal case, Risher has pleaded guilty to money laundering and mail fraud. He faces up to 50 years in prison. However, because he cooperated with federal authorities on this case, his punishment may not be so severe.

Risher also has prior criminal convictions for securities fraud, mail fraud, and money laundering. In 1990, he pleaded guilty to violating Georgia’s securities act, as well as multiple counts of theft.


Related Web Resources:
SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees, SEC, August 29, 2011

James Risher pleads guilty in $21 million Florida Ponzi scheme, WTSP, August 30, 2011

Two named in $22 mil. ponzi scheme case, News Chief, August 31, 2011


More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011

Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Stockbroker Fraud Blog, May 12, 2011

Continue reading "SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees" »

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

Posted In: Ponzi Scams , Securities Fraud , Senior Investors

August 22, 2011

Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions

Kurt Branham Barton, the former CEO, president, and founder of Triton Financial, has been convicted of running a $50 million Ponzi scam that bilked over 300 investors across the country, including former Heisman Trophy winners Ty Detmer, Chris Weinke, and Earl Campbell, NFL Kicker David Akers, and ex-NFL quarterback Jeff Blake. Barton could be sentenced to life in prison for the Texas securities fraud.

A jury convicted Barton on almost 39 criminal counts, including numerous counts of wire fraud, conspiracy to commit wire fraud, making false statements to financial institutions in order to get loans, money laundering, and one count of securities fraud. The Ponzi scam ran for four years through 2009.

According to prosecutors, Barton lied to investors, including relatives, business leaders, pro football players, and Church of Jesus Christ of Latter Day Saints members, when he said that his financial firm was using their money to invest in business, real estate, and short-term business loans. In fact, Barton was taking their funds to cover personal expenses, including luxury football tickets, expensive clothes, and sports cars. He deceived potential investors, commercial lenders, and financial institutions by presenting them with bogus monthly account statements.

Examples of those hit hard by Barton’s Texas securities scam is Detmer, who, during his testimony, admitted that he lost approximately $2 million—that’s the majority of his life savings—in the Ponzi scheme. The former NFL quarterback, who is now a coach in Austin, says he has been forced to liquidate accounts that were supposed to go to his daughters’ college education. He also had to put up his house for sale. Detmer thought Barton was his best friend. The two met at church. Detmer says that he even brought new investors to Barton. Another pro football player, David Akers, now of the San Francisco 49ers, lost over $3 million because of Barton's scam. There are also many investors that aren’t famous who sustained significant losses because of the Texas Ponzi scam, including Diane Gordon, who lost her husband’s entire life insurance payment of approximately $850,000.

In 2009, the Securities and Exchange Commission filed a securities fraud lawsuit against Barton and two of his businesses. The SEC accused Barton of using famous celebrity athletes, stockbrokers, and others to promote Triton securities to new investors. Without denying or admitting to the SEC's allegations, all defendants agreed to permanent injunctions from securities fraud violations in the future, appointment of a receiver, prohibition of the destruction of documents, and orders freezing assets.

Ty Detmer testifies at Ponzi fraud trial, UPI, August 9, 2011

Austin investment broker convicted of using NFL stars, churches to defraud clients, The Washington Post, August 17, 2011

The SEC's Complaint (PDF)

More Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Continue reading "Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions" »

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

Posted In: Financial Firms , Ponzi Scams , Texas Securities Fraud , Triton Financial

August 9, 2011

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M

A 76-year-old Amarillo insurance agent has pleaded guilty to 15 counts of Texas securities fraud over the sale of bogus investments and unregistered securities that resulted in over $5 million in losses for primarily elderly investors. The Texas State Securities Board won’t sentence John F. Langford until next month, but he faces up to 100 years in prison for running this Ponzi scam.

Meantime, Langford’s business partner, Jimmy Don King, has been indicted on 10 criminal counts, including selling securities despite not having a license, selling unregistered securities, and acting as an agent/dealer but without the appropriate registration. King was the voice and face of Langford & Associates’ commercials on TV and commercials guaranteeing “not to make you poor.” (Langford also did business as Langford Funding and Langford Investments.)

The two men came under suspicion after an elderly woman sued them for securities fraud. She said that they persuaded her to invest $941,756 in private annuities. Later, a court found that the woman who suffered from dementia had been incompetent and therefore wasn't fit to make a decision about whether investing in bogus annuities that weren’t going to be due until her 90’s—a decade from when she signed on—was a good decision to make.

Many investors gave Langford their life savings in exchange for the promise of windfalls over several years. While private annuities were supposed to pay out up to 8%, promissory notes were supposed to pay out 9%. Langford paid King 5% of the investments. Investors’ money were used to pay for principal payments to prior investors, interest, as well as Langford’s personal expenses.

According to state documents that were confiscated from his office, the insurance firm had a negative cash flow. Between 2005 and 2007 Langford's property business never made over $10,000. Documents showed that he owed investors over $1 million.

Because Langford filed for Chapter 7 bankruptcy protection two years ago, many investors have had to file their claims in bankruptcy court. Claims there have totaled approximately $7 million.

Investment Fraud Against Seniors
Unfortunately there are professionals out there determined to bilk investors of their life savings. Elderly seniors, who may not be as alert or as informed as younger investors, are a prime target of financial scammers wishing to make a quick buck without regard to how victims are impacted.

According to the American Association of Retired Persons, persons over the age of 50 are easy targets for financial abuse because they:

• Expect that they will be dealt with honestly
• Are less likely to act when defrauded
• Are not as familiar with their rights in regard to the marketplace
• May have certain health issues, such as Alzheimer’s and Dementia that can allow them to be more easily duped than other people

Our Texas stockbroker fraud lawyers have seen the devastation that can be wreaked on the lives of elderly investors who’ve watched their retirement money disappear because they trusted people who purposely scammed them. There may be a way to recoup your investment losses.


Related Web Resources:
Insurance agent to face 99 years in prison for selling phony annuities, Investment News, July 29, 2011

Langford signs confessions in fraud cases, Amarillo Globe-News, July 26, 2011

Elder Abuse: Financial Scams Against Seniors, Nolo

Fraud Target: Senior Citizens, FBI

For Seniors, SEC

American Association of Retired Persons (AARP)


More Blog Posts:
Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Institutional Investors Securities Fraud, May 12, 2011


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

Posted In: Ponzi Scams , Senior Investors , Texas Securities Fraud

August 3, 2011

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M

An El Paso man accused of running a Texas Ponzi scheme may in fact be a man who was convicted of fraud in Maryland more than 10 years ago. Scott Lindemann is now charged with wire fraud for allegedly defrauding at least 25 investors of $2 million.

Prosecutors say that Lindemann’s real name may actually be Scott Yermish, who left Maryland after serving time in jail. He left the state without finishing his probated time for a theft conviction.

It is in El Paso that Lindemann is accused of using his hedge fund to set up his Texas securities fraud scam. Per court records, he gained the trust of one person, who then assisted him in bringing in more investors. Lindemann allegedly gave some of the investors money so they would think they’d earned a profit. He also generated bogus documents that caused them to believe that their investments had grown substantially.

According to the San Antonio Express-News, one victim of the alleged Texas securities fraud says that she and her husband lost over $250,000. She also claims that other investors took out mortgages on their houses to invest with Lindemann.

The FBI is calling this a “quick investigation.” Lindemann was arrested a week after the complaint was made.

Ponzi Scam
This type of investment fraud generally involves investors receiving purported returns except that the money they are "making" is actually from new investors who think that these funds are being invested. To keep the scheme going, new investors must keep joining up so that scammers can use their money to pay the earlier-stage investors. Ponzi scams can collapse when too many investors ask to cash out or bringing in new investors starts to prove challenging.

Every year, there are investors that lose money because they placed their money in a Ponzi scam. Fortunately, there may be a way to recoup your losses. It is important that you speak with a Texas securities fraud law firm about your case.

Warning Signs that You May Be Investing in a Texas Ponzi Scheme:
• Watch out for “guaranteed” investment opportunities or the promise of high investment returns with little or no risk.
• Returns are too consistent. It is natural for investment returns to go up and down—especially if there is the hope of high returns.
• The investment that isn’t registered with the state or the SEC.
• The investment professional you are working with isn’t registered or licensed.
• The investment strategy involved is too complex for you to understand or you can’t get complete information about it.
• There isn't enough information about your investment that can be found in writing.
• Account statement errors.
• You aren’t getting promised payments.
• Cashing out on your investment is proving to be a challenge.
• Your financial adviser tries to get you to “roll over” payments that are owed to you with the promise of even higher returns.

Many Ponzi scam victims have lost their life savings, retirement, and/or kids’ college fund because they placed their trust and their money in the hands of the wrong people.

Related Web Resources:
Man arrested by FBI may have scammed millions, San Antonio Express-News, August 2, 2011

Accused Texas Ponzi Schemer May Be Fugitive Md. Fraudster, FinAlternatives, August 3, 2011

Ponzi Scams, SEC

Ponzi Scams, FBI


More Blog Posts:
Houston Securities Fraud: Ex-Citigroup Broker Accused of Stealing Millions from Wealthy Mexican Investors is Barred from FINRA, Stockbroker Fraud Blog, July 29, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011

Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam, Stockbroker Fraud Blog, March 30, 2011

Continue reading "Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M" »

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

Posted In: Hedge Funds , Ponzi Scams , Texas Securities Fraud

July 19, 2011

Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead

David Salinas, a well-known University of Houston and Rice athletics benefactor, was found dead in his home over the weekend. The Galveston County medical examiner’s office is calling the 60-year-old’s death a suicide. Salinas’ death comes amidst allegations of Texas securities fraud, including his suspected involvement in a Ponzi scam that allegedly victimized high-profile athletics coaches. Select Asset Management, a Houston financial services firm that worked with Salinas, notified its clients that the US Securities and Exchange Commission has subpoenaed information from its files, as well as from those of J. David Financial Group, which is a Salinas business.

Coaches that invested with or gave testimonials to Salinas include Baylor coach Scott Drew, ex-Rice coach/current Texas A & M- Corpus Christi coach Willis Wilson, ex-Arizona coach Lute Olson, Texas Tech coach Billy Gillispie, Nebraska coach Doc Sadler, and others. According to Chron.com, one ex-NCAA coach is claiming that Salinas asked him for a “significant” amount of money to invest. In return, Salinas would direct players from Houston Select to the coach’s school. The former coach says he refused to get involved.

Salinas is the founder of Houston Select Basketball. Players that have contributed include Joseph Jones from Texas A & M, Dexter Pittman from Texas and NBA’s Miami Heat, Demetri Goodson from Gonzaga, Jawann McClellan from Arizona, and Cartier Martin from Kansas State and the Washington Wizards.

J David Insurance Group, which is also a Salinas business, is associated with Select Asset Management. The latter company’s CEO Brian Bjork is a Houston Select Founder, while its vice president Greg Muse is secretary of Houston Athletics Foundation, which is a nonprofit corporation that raised donations for University of Houston Athletics. Salinas served as the foundation’s director.

Our Houston securities fraud lawyers represent investors throughout Texas who have lost money in Ponzi scams and as a result of other kinds of financial fraud.

Related Web Resources:
Basketball benefactor found dead, Chron.com, July 19, 2011

Tom Penders talks about Salinas scandal, ESPN, July 19, 2011

Houston Select Basketball


More Blog Posts:
Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area, Stockbroker Fraud Blog, March 2, 2011

Texas Congressmen Seek Answers from SEC Chairwoman Regarding Conflict of Interest Related to Madoff Debacle, Stockbroker Fraud Blog, March 8, 2011

Michael Kenwood Capital Management, LLC Principal Pleads Guilty to Securities Fraud Involving Ponzi Scam, Institutional Investor Securities Blog, March 17, 2011

Continue reading "Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead" »

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Posted In: Ponzi Scams , Texas Securities Fraud

March 30, 2011

Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam

Our Stockbroker Fraud Blog and our Institutional Investor Securities Blog have been following the story of Michael Kenwood Capital Management, LLC principal Francisco Illarramendi, who recently pleaded guilty to securities fraud, investment adviser fraud, and conspiracy to obstruct justice, and wire fraud. Now, news that the Ponzi scam, which targeted clients overseas, may be impacting workers in Venezuela.

Illarramendi is Venezuelan-American. According to National Public Radio/AP, he was in charged of investing hundreds of millions of dollars from a state oil workers’ pension fund. Now, the Venezuelan government is attempting to recover what it can from the employee retirement fund for Petroleos de Venezuela, which put forth about 90% of the investment. Rafael Ramirez, Venezuela’s oil minister, says that any pension fund losses would be made up by the oil company. Per The Wall Street Journal, officials from the petroleum workers union are claiming that about $500 million was invested.

The monetary scope of the Ponzi scheme has not been verified. The Securities and Exchange Commission, however, has said that at one point Illarramendi gave over a bogus letter from an accountant in Venezuela in an effort to verify some $275M in nonexistent assets.

Prosecutors claim that Illarramendi transferred money between investment accounts without notifying clients, as well as falsified documents to fool his clients.
While all his investors are located abroad, the financial fraud scam has impacted startup technology companies in the US that depended on Investments from Illarramendi’s group.

If convicted, Illarramendi could end up serving up to 70 years behind bars.

Venezuelan Workers Caught Up In Conn. Ponzi Scheme, NPR/AP, March 30, 2011

Venezuela Oil Min: Working With US To Recover Pension Fund Money, The Wall Street Journal, March 27, 2011


Related Web Resource:
Petroleos de Venezuela


More Blog Posts:
Michael Kenwood Capital Management, LLC Principal Pleads Guilty to Securities Fraud Involving Ponzi Scam, Institutional Investors Securities Blog, March 17, 2011

Order to Freeze Assets in $53M Fund Fraud Allegedly Involving Michael Kenwood Asset Management LLC Obtained by SEC, Stockbroker Fraud Blog, February 21, 2011

Continue reading "Venezuelan Workers Fall Victim to Francisco Illarramendi's Ponzi Scam" »

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

Posted In: Ponzi Scams

March 8, 2011

Texas Congressmen Seek Answers from SEC Chairwoman Regarding Conflict of Interest Related to Madoff Debacle

Texas Congressman Jeb Hensarling is one of four Republican members of the House Financial Services Committee wanting to know more about Securities and Exchange Commission Chairwoman Mary Schapiro’s role in managing the conflict of interest presented by appointing David M. Becker as the SEC’s general counsel. Becker, who is no longer in this post, is with someone with a financial interest in a Bernard Madoff investment account. As a senior policy director for the SEC involved in dealing with Madoff Ponzi scam, he played a role determining how victims would be compensated.

Becker’s ties with Madoff didn’t come to light until trustee Irving H. Picard sued him and his two brothers to get back more than $1million of the $2 million they had inherited from their late mother’s Madoff investment. The former SEC general counsel claims that he told Schapiro and the chief ethics officer of his Madoff-related financial interest. Now, however, SEC inspector general H. David Kotz says he wants to probe possible conflicts of interest related to Becker’s role with the SEC as someone who stood to benefit from decisions involving Madoff Ponzi scam victims. According to the New York Times, two unnamed sources say while the SEC agreed to return to investors only the funds they had placed in their Madoff accounts, Becker had pushed for allowing the victims to keep some of their investment gains.

Lawmakers say they want details of Schapiro’s talks with Becker about his Madoff ties. They also want to know whether she followed all the steps delineated in government ethics rules. Also getting into the mix is Texas Representative and Republican Randy Neugebauer, who is quoted in the New York Times as stating that he believes the SEC should be held to the same high standard of “transparency and disclosure” as it holds other companies.

Shepherd Smith Edwards and Kantas founder and Texas securities fraud lawyer William Shepherd also wants to know, “Why was Ms. Schapiro not questioned about her own role as the former head regulator at the NASD – now known as the Financial Industry Regulatory Authority (FINRA)? She held that position for almost a decade just prior to her appointment as SEC Chairwoman. As Madoff defrauded thousands of investors, FINRA/NASD has the primary duty to regulate securities dealers, including the Madoff securities firm, which reportedly had a substantial role in activities related to Madoff’s advisory firm, as it perpetrated the massive Ponzi scheme.”


Related Web Resources:
S.E.C. Chairwoman Under Fire Over Ethics Issues, The New York Times, March 8, 2011

SEC’s Top Lawyer Becker Sued for Inheriting Madoff Ponzi Profits, Bloomberg, February 23, 2011


More Blog Posts:
Texas Securities Commissioner Not Convinced SEC Has Reformed Itself Since Madoff Ponzi Scam, Stockbroker Fraud Blog, December 5, 2009

SEC, NASD, FINRA & SIPC: New SEC Report Card on Madoff Catastrophy Further Reveals How Investor Protection Is Severely Flawed!, Stockbroker Fraud Blog, September 3, 2009

Madoff Investors Who Were Victims of “Ponzi” Scam Contact Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP to Explore Recovery Options, Stockbroker Fraud Blog, December 17, 2008

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

Posted In: Madoff Ponzi Scheme , Ponzi Scams , SEC Enforcement , Texas Securities Fraud

March 2, 2011

Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area

A judge has granted the US Securities and Exchange Commission’s request to stop an alleged Ponzi scam in the Dallas-Fort Worth area. Accused of masterminding this Texas securities fraud is 31-year-old Christopher Love Blackwell. The SEC claims that the hedge fund trader almost $3 million of investor funds on business and personal expenses.

Per the SEC, since 2007 Blackwell has offered and sold several fraudulent investments that have included hedge funds, fixed-income trading programs, movie distribution investment contracts, and related advisory services. However, instead of buying or trading actual securities, Blackwell used $720,000 to pay for travel, entertainment, child support, office equipment, utilities, food, supplies, office rent, and motor vehicles. He allegedly directed over $900,000 to himself, friends, family, and associates and used more than $1 million for questionable business activities. He spent another $500,000 on Ponzi payments.

The investigation into Blackwell’s activities began because of his large cash transactions and wire transfers. An undercover agent that he thought was a potential investor recorded Blackwell promising risk-free returns of 25-30% a month. He also made false claims that the profits were possible because of his extensive experience a trader, connections he made while working for The Bank of Madrid and Goldman Sachs, and the Master’s degree and Ph.D. he earned from prestigious universities. None of these “facts” are true.

A judge granted the SEC’s request to freeze Blackwell’s assets and temporarily restrain him from further violating antifraud provisions. A request for emergency relief was also granted.

Unfortunately, it is the investors who suffer financial losses as a result of investment fraud.

Related Web Resources:
Hedge Fund Fraud: Texas Traders Assets Frozen, February 25, 2011

SEC Looking for Alleged Ponzi Man, Courthouse News, February 25, 2011


More Blog Posts:
Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam, Stockbroker Fraud Blog, February 27, 2011

Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Continue reading "Texas Securities Fraud: SEC Halts Alleged Ponzi Scheme in the Dallas-Fort Worth Area " »

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

Posted In: Ponzi Scams , SEC Enforcement , Texas Securities Fraud

February 27, 2011

Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam

Joseph Shereshevsky, the ex-COO of Wextrust Capital LLC (Wextrust), has pled guilty to securities fraud, conspiracy and mail fraud charges over his involvement in a $255 million dollar affinity fraud scam. Shereshevsky entered his guilty plea in the U.S. District Court for the Southern District of New York.

He and codefendant Steven Byers, the private equity concern’s ex-CEO and president, diverted millions in investor funds in a Ponzi scam that took place between 2003 and 2008. Many of the approximately 1,200 investment fraud victims belong to the Orthodox Jewish Community.

Shereshevsky and Byers allegedly made misrepresentations by making it appear as if the investors’ money would go toward the purchase and operation of several commercial properties that the federal government had leased. In fact, the properties were never bought and investors’ funds were put to other uses. Byers and Shereshevsky, who are accused of using about $3 million and $9 million raised in a private placement for purposes that weren’t articulated to investors, also allegedly conspired together to “fabricate a story” about why the deal failed.

Byers pleaded guilty to the securities fraud and conspiracy charges against him last year. The two men, Wextrust, and a number of Wextrust entities, including Wextrust Development Group, LLC (WDG), Wextrust Equity Partners, LLC (WEP), Axela Hospitality, LLC (Axela), and Wextrust Securities, LLC (Wextrust Securities), face SEC civil charges over their alleged misconduct related to the affinity fraud scam.

Related Web Resources:
Ex-WexTrust Exec Shereshevsky Pleads Guilty to Fraud, Conspiracy, The Wall Street Journal, February 3, 2011

Financier Admits He Stole From Investors, Courthouse News Services, February 4, 2011


More Stockbroker Fraud Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011

Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011

CFTC Files Charges in Alleged California Ponzi Scam Involving the Fraudulent Solicitation of $14 million in Commodity Futures, Stockbroker Fraud Blog, January 18, 2011

Continue reading "Ex-Wextrust Capital COO Pleads Guilty to Role in $255M Affinity Fraud Scam " »

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

Posted In: Financial Firms , Ponzi Scams , Wextrust Capital

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