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

April 2, 2014

$550M Securities Fraud Case Between Texas’ Wyly Brothers & SEC Goes to Trial

The civil trial is underway between the Securities and Exchange Commission and brothers Sam and Charles Wyly (The latter is deceased after he died in a car crash in 2011). The regulator is accusing the Texas siblings of using offshore trusts to hide over $750M of stock sales in companies in which they are board members and engaging in a $550M securities fraud.

In its Texas securities case, the SEC claims that between 1992 and 2004 the Wylys concealed stock trading in Sterling Software Inc., Sterling Commerce. Inc., Michaels Stores Inc., and Scottish Annuity & Life Holdings Ltd. by using entities and offshore trusts. The brothers also are accused of making $31.7 million in insider trading profits involving Sterling Software after the company was sold in 1999.

At issue is whether the Wylys were in control of the offshore trusts and if so then they may have also violated US tax laws. That said, the statute of limitations for charges involving tax evasion is six years.

The brothers denied any wrongdoing. They claim they weren't the beneficial owners of the stock in the trust. They said their lawyer told them that they did not need to reveal the sales and holdings of the trusts and they were given no indication that their activities were illegal.

Last month, ex-Wyly lawyer Michael French settled with the SEC by admitting to helping the two brothers in their alleged breach of securities disclosure rules. French will pay close to $795,000 and is serving as a witness for the agency in their cases against the brothers. Signing an admission of facts, French acknowledged that he “acted intentionally or recklessly” in relation to the violations described. The SEC is also accusing him of using his positions to establish and trade in offshore entities of his own. Also reaching a settlement related to the SEC case is Louis Schaufele, a former stockbroker for the Wylys.


The Texas securities case has been going on for so many years that the law under the SEC has changed. Last year, the US Supreme Court ruled that the regulator could no longer go after civil penalties for most of the time period under dispute. Because of this, the case is now in two parts.

A jury will rule over one part—regarding the Wylys' alleged failure to disclose the trust and trading in them—and a judge will decide on the insider trading allegations and whether the jury verdict merits a penalty.

This is the second securities case between Sam and the SEC. In 1979 he settled allegations involving undisclosed payments to encourage Wyly Corp. bond purchases. In this latest securities case, the regulator intends to pursue hundreds of millions of dollars in disgorgement of purportedly ill-gotten gains and penalties.

Our Texas securities lawyers represent investors that have sustained losses because of fraud. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Civil Trial to Start of Wyly Brothers in SEC Tax-Haven Case, The Wall Street Journal, March 30, 2014

Wyly brothers' ex-lawyer settles SEC fraud case, admits errors, Reuters, March 20, 2014


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

In Alleged $400M Texas Securities Fraud Medical Device Maker Pays Over $30M Settlement, Stockbroker Fraud Blog, January 13, 2014

FBI Probes Possible High-Speed Trading, Insider Trading Link, Institutional Investor Securities Blog, April 1, 2014

February 19, 2014

Mixed Securities Verdict Reached in SEC Case Against Texas-Based Life Partners Holdings

Even though jurors rendered a mixed verdict in the Securities and Exchange Commission’s financial fraud lawsuit in Texas against Life Partners Holdings Inc. (LPHI), the company still may have ended up with the better outcome because the Texas life-insurance investments seller won some of the bigger claims. Still, Even as Life Partners is declaring the securities case outcome a victory, Andrew Ceresney, the Commission’s enforcement director, said the agency was pleased that the defendants were found liable for defrauding shareholders and submitting SEC filings that were false.

In U.S. District Court in Austin, Texas, the regulator had accused Life Partners of disclosure and accounting fraud that purportedly went on for years and were related to misleading marketing practices that allegedly occurred during the sale of life-insurance investments to customers. While jurors turned down the SEC’s primary insider trading and fraud allegations, they found the company and two of its executives liable in a securities fraud violation of a narrower scope involving revenue-recognition practices. Also, Life Partners’ CEO Brian D. Pardo and general counsel R. Scott Peden were were found liable for their role in the filing of false reports, and Pardo also was found to have falsely certified company filings.

Meantime, Life Partners continues to be the defendant in a number of Texas securities cases, including one involving 207 plaintiffs in Dallas who went through the company to invest in life policies. State regulators also have a separate Texas securities fraud lawsuit against Life Partners they are appealing in the wake of the decision by a state judge to turn down some of the main claims it made in 2012. The Texas State Securities Board has been looking into allegations that the life settlement provider misled investors of life insurance policies.

Please contact our Texas securities fraud law firm today. Shepherd Smith Edwards and Kantas, LTD LLP represents investors throughout the state.

Mixed Verdict in SEC Suit Against Life Partners, The Wall Street Journal, February 4, 2014

Jury delivers mixed verdict on U.S. SEC case against Life Partners, Reuters, February 4, 2014

Texas State Securities Board

More Blog Posts:
In Alleged $400M Texas Securities Fraud Medical Device Maker Pays Over $30M Settlement, Stockbroker Fraud Blog, January 13, 2014

SEC Stops Texas Securities Scam Involving Oil and Gas Investments, Stockbroker Fraud Blog, January 6, 2014

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

January 13, 2014

In Alleged $400M Texas Securities Fraud Medical Device Maker Pays Over $30M Settlement

Austin-based medical device manufacturer ArthroCare Corporation (ARTC) will pay $30 million to settle allegations that its senior executives were involved in a Texas securities scam that caused shareholders to lose over $400M. The company’s former senior VPs, David Applegate and John Raff, have already pleaded guilty to conspiracy to commit wire fraud and securities fraud over the financial scam.

As part of the deferred prosecution settlement, the US Justice Department has filed a complaint in the Western District of Texas charging the company with one count of conspiracy to commit securities fraud. The medical device maker will continue to cooperate with the government in its ongoing probe and pursuit of the individuals involved in the financial fraud. ArthroCare’s ex-CEO and CFO are scheduled to stand trial later this year.

In this Texas securities settlement, the company admitted that its executives inflated its revenues by tens of million of dollars, hid the nature and financial importance of its relationship with certain distributors, and engaged in bogus transactions to manipulate earnings and revenue. ArthroCare also acknowledged that these executives caused it to “park” millions of dollars worth of medical devices at distributors during the end of each relevant quarter to make it appear as if these were shipments (meaning supposed sales).

Shareholders lost over $400M when the company’s stock dropped from $40.03/share to $23.21/share in 2008. This happened after ArthroCare announced that because of the findings of an internal probe, its earlier reported financial results from 2006’s third quarter through 2008’s third quarter would have to be restated.

If you suspect that you’ve been the victim of Texas securities fraud, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Austin-based ArthroCare to pay $30 million to end fraud inquiry, Statesman.com, January 7, 2014

ArthroCare signs deal to end fraud prosecution, to pay $30 million fine, Reuters, January 7, 2014


More Blog Posts:
SEC Stops Texas Securities Scam Involving Oil and Gas Investments, Stockbroker Fraud Blog, January 6, 2014

Ex-NFL Running Back Ricky Williams Files $6M Texas Securities Fraud Case Against His Financial Adviser, December 18, 2013

US Will Likely Arrest Two Ex-JPMorgan Chase Employees Over Trading Losses Related to the London Whale Debacle, Institutional Investor Securities Blog, August 10, 2013

January 6, 2014

SEC Stops Texas Securities Scam Involving Oil and Gas Investments

The Securities and Exchange Commission has filed securities charges and ordered an asset freeze against Janniece S. Kaelin and Robert A. Helms, who are both accused of running a Texas-based Ponzi scam involving purported investments in oil and gas projects. The regulator contends that Kaelin and Helms misled investors about their industry experience, even as they raised close to $18 million for what was supposed to be royalty interests in oil and gas. The SEC says that the two of them used most of the money to run a Ponzi scam and pay for business costs and personal spending.

Per the Commission’s complaint, Helms and Kaelin started offering investments through Vendetta Royalty Partners in 2011. They brought in at least 80 investors from numerous states.

In offering documents, they promised that over 99% of investment proceeds would be used to obtain a solid portfolio filled with oil and gas royalty interests. Instead, claims the regulator, the Kaelin and Helms put in only 10% of this money in the projects. The result was very small returns.

The Commission is taking issue with the offering documents, saying they were fraudulent and misleading and misrepresented Helms and Kaelin’s experience in the oil and gas industry. The agency also says that the two of them did not disclose that there was litigation against them and their companies or that Vendetta Royalty Partners was running behind on its credit line. (The company later defaulted.)

The regulators says that Kaelin and Helms ordered Vendetta Royalty Partners to make about $5.9 million in partnership income distributions to investors. New investors’ funds were used to make distributions to investors who had put their money in earlier.

The SEC complaint is also charging individuals Deven Sellers and Roland Barrera with illegally selling these investments (hey weren’t registered with the SEC) and misleading investors about the referral fees and sales commissions they would receive. Although they claimed that the fees would be small, each of them was paid over $200,000 for just one of the investments.

Now, the court has issued a temporary restraining order to prevent the defendants from committing more violations, as well as frozen their assets, forbidden any document destruction, and mandated for proper accounting. The SEC wants disgorgement of ill-gotten gains in addition to penalties and prejudgment interests and permanent injunctions.

Please contact our Texas securities fraud law firm if you suspect that your investment losses are do to misconduct, negligence, or fraud.

Oil and Gas Fraud
The SEC recently noted while oil and gas fraud has been a problem for a long time, with reports of new finds in Texas and North Dakota, the number of related securities fraud cases are going up. The government agency is now filing about 20 oil and gas fraud cases annually.

SEC Stops Texas Securities Scam Involving Oil and Gas Investments, SEC, December 6, 2013

Read the SEC Complaint (PDF)

SEC's Investor Alert (PDF)

Investment fraud is booming along with oil and gas drilling, SEC says, Dallas News, January 4, 2014


More Blog Posts:
Ex-NFL Running Back Ricky Williams Files $6M Texas Securities Fraud Case Against His Financial Adviser, Stockbroker Fraud Blog, December 18, 2013

Texas Securities Fraud: SEC Accuses Two Houston-Based Advisory Firms of Making Thousands of Transactions That Clients Didn’t Know About, Stockbroker Fraud Blog, November 27, 2013

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

December 18, 2013

Ex-NFL Running Back Ricky Williams Files $6M Texas Securities Fraud Case Against His Financial Adviser

Ricky Williams, the ex-NFL and University of Texas running back, is suing Peggy Fulford and King Management Group & Associates for securities fraud. He says that he and his wife were bilked of $6 million. Now, Williams wants an injunction, a restraining order, and damages for breach of contract, theft, and breach of fiduciary duty.

Williams claims that Fulford has been in control of most of his approximately $11 million fortune since 2007 when he and his wife went into an oral agreement with the financial adviser and King Management to have them manage their assets. He says that Fulford told them she had graduated from both Harvard Law School and Harvard Business Law School and that she was licensed to practice law in Texas. Williams is now saying that no record exists of Fulford attending either graduate program or having been admitted to the State Bar of Texas. Fulford lived in Houston between 2011 and 2013 before moving out of state.

Williams says that he and Fulford established a joint checking account at SunTrustBank and that without his knowing or consent she obtained and used a debit card linked to the account. It wasn’t until last year when the IRS called him to ask about his 2010 tax return that Williams discovered that Fulford had removed $6 million from his account via debts, wire transfers, cash withdrawals, and checks and that the money was used for mortgage payments, retail purchases, credit card bills, other debts, transfers to other accounts, and other purposes. She also purportedly pretended to be his wife when she spoke to the government agency.

The ex-pro football player claims that because she gave him no way to substantiate nearly $800,000 in deductions she had claimed, he was forced to pay the IRS a $350,000 penalty for just that year. He also says that all Fulford left them with is $1.9 million in a private equity fund that they cannot draw on for four more years. Williams’ legal team says that although their client has other sources of income, he relies on Fulford to issue a stipend to cover monthly expenses and these payments have not been consistent.

Williams contends that Fulford and her management group gave him “potentially falsified statements” of his finances and that these were sporadic at best. He says they never gave him full reports even though he repeatedly asked for them.

Athletes and Securities Fraud
Unfortunately, because of their fast wealth, professional athletes are favorite targets of financial fraudsters. Over the years, Shepherd Smith Edwards and Kantas, LTD LLP has represented professional athletes and other celebrities with securities fraud cases. Contact our Texas securities law firm today.

Ex-NFL star Ricky Williams suing financial adviser for impersonating his wife to IRS, UPI, December 17, 2013

Ricky Williams Claims Adviser Took Millions, Courthouse News, December 17, 2013

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

US Will Likely Arrest Two Ex-JPMorgan Chase Employees Over Trading Losses Related to the London Whale Debacle, Institutional Investor Securities Blog, August 10, 2013

November 27, 2013

Texas Securities Fraud: SEC Accuses Two Houston-Based Advisory Firms of Making Thousands of Transactions That Clients Didn’t Know About

According to the SEC, Houston-based advisory firms Tri-Star Advisors and Parallax Investments LLC made thousands of principal transactions through the broker-dealer they are affiliated with but did not disclose that they were doing this to clients even though they are obligated to notify customers/get their permission beforehand. Also facing Texas securities charges over the transactions are three executives: John P. Bott II, who owns Parallex, and Jon C. Vaughan and William T. Payne, who are Tri-Star officials.

The regulator’s orders of administrative proceedings say that Bott made a minimum of 2,000 undisclosed principal transactions without the permission of Parallex clients. Meantime, for each one (executed between 2009 to 2011) its affiliate broker-dealer Tri-Star Financial employed its inventory account to buy bonds backed by mortgages for these clients and moved the bonds into the accounts of clients. Bott received close to half of the $1.9 million in sales credits that Tri-Star Financial received on the transactions.

Vaughan and Payne are also accused of making over 2,000 undisclosed principal transactions during the same timeframe without the permission of their Tri-Star Advisor clients. The same broker dealer provided similar third-party services as it did for Parallex, and Vauhan and Payne got close to half of the $1.9 million in gross sales credits. SEC Enforcement Division's Asset Management Unit co-chief Marshall S. Sprung says that Tri-Star and Parallex prevented clients from knowing that their advisers could benefit from “running the trades through an affiliated account.”

Principal transactions typically involve an investment adviser acting on behalf of its account via an affiliate brokerage firms. Because conflicts of interest can arise between the client and adviser, the latter must provide written disclosure about any conflicted role or monetary interest when offering advice to the client involved in the trade, as well as obtain their permission.

Failure to disclose and failure to obtain consent can be grounds for Texas securities claims if a client sustains investment losses. Contact our Houston securities fraud lawyers at Shepherd Smith Edwards and Kantas, LTD LLP today.

SEC charges advisory firms and executives with not disclosing transactions, InvestmentNews, November 26, 2013

SEC Announces Charges Against Two Houston-Based Firms for Engaging in Thousands of Undisclosed Principal Transactions, SEC, November 26, 2013


More Blog Posts:
Supreme Court to Hear Texas-Based Halliburton’s Class Action Securities Fraud Case Again, Stockbroker Fraud Blog, November 18, 2013

Texas Jury Clears Billionaire Mark Cuban of Insider Trading Charges, Stockbroker Fraud Blog, October 31, 2013

Lawmakers & Industry Folk Address the DOL Amending the Definition of Fiduciary, Reg A Plus Offerings, Oversight, Rogue Brokers, and Expungement Rules, Institutional Investor Securities Blog, November 7, 2013

November 18, 2013

Supreme Court to Hear Texas-Based Halliburton’s Class Action Securities Fraud Case Again

The US Supreme Court has agreed to hear Halliburton v. Erica John Fund. In it, the Texas-based multinational corporation is appealing a class action securities lawsuit that tests the fraud-on-the market theory. That doctrine became part of securities law in 1988 after the highest court’s ruling in Basic v. Levinson.

The fraud-on-the-market theory is premised upon the efficient markets hypothesis, which is that the price of a stock is a reflection of all public data. This makes it possible for plaintiff attorneys to set up a class action for all the buyers of a stock without having to first prove in court that these purchasers depended upon untrue information from the company and that this caused their losses.

Instead, the doctrine assumes that a company’s stock price can reflect corporate assertions even if they are misleading. As a result lawyers are able to submit securities fraud classes while blaming corporate executives for certain changes in the market value of a company’s stock.

In the Erica John case, the plaintiffs, who purchased Halliburton stock between 1999 and 2001, claim that the company issued false statements to inflate the price of its stock. Meantime, Halliburton is challenging their class certification and it wants the fraud-on-the-market doctrine overturned. The company contends that class actions allow investors that purchased high and sold low to get reimbursement. It says that many investors buy stock because they believed the market price was wrong.

This is not the first time Halliburton brought this securities case to the US Supreme Court to challenge the investors’ class certification. Even then the company claimed that the plaintiffs failed to prove that it was a specific announcement made by Halliburton that caused their losses. The court, however, turned down that argument and sent the class action securities case back for more proceedings.

The Fifth Circuit Court of Appeals then reaffirmed the class certification and Halliburton once more appealed. This time, however, the Texas-based company posed the argument that it should be allowed to challenge the rebuttal presumption of reliance established in Basic. The Supreme Court granted cert.

Could the Supreme Court justices overturn the fraud-on-the-market theory? It is possible. Earlier this year in Amgen v. Connecticut Retirement Plans and Trust Funds, Justice Samuel A. Alito Jr. wrote in a concurrence that there is recent evidence to show that the theory may “rest on a faulty economic premise” and it might be “appropriate” to reconsider the presumption made in Basic.

As Shepherd Smith Edwards and Kantas, LTD LLP, our Texas securities fraud lawyers represent individual investors and institutional investors. We believe that investors stand a bigger chance of recovering more if not all of their investment losses when they decide to pursue their own securities case rather than being part of a class action lawsuit. Contact our securities law firm today.

A Supreme Reckoning for Securities Class Actions, Bloomberg/Businessweek, November 18, 2013

Justices to hear case on shareholder lawsuits, USA Today, November 15, 2013

Halliburton v. Erica John Fund


More Blog Posts:

Texas Jury Clears Billionaire Mark Cuban of Insider Trading Charges, Stockbroker Fraud Blog, October 31, 2013

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

Stakeholders With $55M Securities Fraud Case Against Government Over AIG Bailout Get Class Action Certification, Institutional Investor Securities Blog, March 19, 2013

October 31, 2013

Texas Jury Clears Billionaire Mark Cuban of Insider Trading Charges

A jury in Texas cleared Mark Cuban of insider trading charges. The Securities and Exchange Commission accused him of using a private tip to avoid losing money when selling his shares of Internet company Mamma.com. Following the court victory, the owner of the Dallas Mavericks, an NBA basketball team, spoke out against US government over the case.

The U.S. Securities and Exchange Commission said Cuba traded on non-public information when selling 600,000 shares—a $7.9 million value—so he wouldn’t lose $750,000. A judge dismissed the insider trading case in 2009 but the Texas securities lawsuit was revived by an appeals court in 2012. The billionaire chose not to settle and the case went to trial.

Prosecutors claimed that Cuban sold his stake after discovering that Guy Faure, the head of Mamma.com, intended for a private placement that would dilute his company holdings. When Mama.com’s shares fell 9.3% the morning after the announcement of the offering, Cuban’s shares were already sold.

Following the jury’s decision, a spokesperson for the SEC said they respected the ruling but that they would still continue to bring civil cases against defendants that they think have violated securities laws. According to The New York Times, insider trading cases are usually “safe bets” for the government.

If Cuban had been found guilty, he would have had to pay approximately $2 million in fines. Cuban says he has already paid around that much in legal fees because he wanted to clear his name. He maintains that it was wrong for prosecutors bring a case against him.

Our Texas securities fraud lawyers represent investors seeking to recoup losses caused by stockbroker fraud, insider trading, Ponzi scams, and other types of financial fraud. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Billionaire Mark Cuban cleared of insider trading; blasts U.S. government, Reuters, October 16, 2013

Mark Cuban Cleared of Insider Trading, NY Times, October 16, 2013


More Blog Posts:

Galleon Group Founder’s Brother Pleads Not Guilty to Insider Trading, Institutional Investor Securities Blog, April 2, 2013

SEC Reaches $600M Insider Trading Settlement with SAC Capital Advisors-Affiliated Hedge Fund Advisory Firm, Stockbroker Fraud Blog, March 29, 2013

$5M Texas-Based Securities Fraud Scam Pursued Foreign Investors Wanting US Residency Via EB-5 Program, Stockbroker fraud Blog, October 1, 2013

October 1, 2013

$5M Texas-Based Securities Fraud Scam Pursued Foreign Investors Wanting US Residency Via EB-5 Program

The SEC has filed fraud charges against a couple over a Texas securities scam that allegedly targeted foreign investors wanting to become American residents. Bebe and Marco Ramirez and three of their companies—USA Now LLC, Now Co. Loan Services, and USA Now Energy Capital Group LP—are accused of fraudulently raising at least $5 million from customers who were falsely promised that their cash would be invested in EB-5 Immigrant Investor Pilot Program.

Investors in Mexico, Egypt, and Nigeria were reportedly targeted. None of the investors ever received green cards let alone conditional visas from investing with the Ramirez’s and their companies.

The actual program allows foreign investors to receive conditional visas and later green cards if they invest in US economic development projects that help preserve or create a certain number of jobs for our nation’s workers. However, contends the regulator, rather than investing the money into the program, the Ramirezes moved investor funds to other businesses or used the money for their personal spending. Also, at least once, the couple allegedly used new investors’ money to pay existing investors in Ponzi scheme-fashion.

The SEC’s complaint says that as early as 2010, the Ramirez’s pursued approval from the U.S. Citizenship and Immigration Service to register USA Now as an EB-5 regional center that could receive and direct foreign investors’ investments into investment opportunities that were supposed to meet visa requirements. Yet before USCIS had made a decision, the Ramirezes and their employees began pursuing investors.

The couple supposedly told investors that the company would keep their investments in escrow until the government had approved their request. The two of them then went on to misappropriate the funds, including opening up a Cajun-themed restaurant.

Our Texas securities fraud law firm represents investors in the US, as well as foreign investors that have suffered investment fraud losses perpetrated by a US-based financial firm, representative, or broker. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. We can help you determine whether you have grounds for a securities case.

The SEC's complaint against the Ramirezes (PDF)

Investor Alert: Investment Scams Exploit Immigrant Investor Program, SEC


More Blog Posts:

Texas Man gets 40-Year Prison Sentence for Phony Annuity Scam That Targeted Elderly Women, Stockbroker Fraud Blog, September 23, 2013

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

GAO Wants SEC to Look At Other Criteria for Who Qualifies As An Accredited Investor, Institutional Investor Securities Blog, July 31, 2013

September 23, 2013

Texas Man gets 40-Year Prison Sentence for Phony Annuity Scam That Targeted Elderly Women

An Allen, Texas man is sentenced to 40-years behind bars for bilking elderly women out of close to $500,000 in a phone annuity scam. Robert Mangiafico Jr. pleaded guilty to money laundering and theft related in the Texas securities fraud case.

According to prosecutors, Mangiafico persuaded a number of widows to liquidate holdings and securities in brokerage accounts and other assets and he was supposed to use the money to buy annuities for them. Instead, after he had them move the funds to him or to Security Financial Services LLS, which was set up by Thomas Grimshaw of Dallas, the cash went to bank accounts for him and Grimshaw. The two men used the money for personal spending and to scam their investment victims.

Prosecutors say that $655,000 was stolen from four victims, who sustained $458,361 in losses. According to a 2011 indictment, the appropriations were made without the women’s consent because they were of advanced age and their capacity to make rational and informed choices was diminished.

The criminal charges against Grimshaw are pending.

Elder Financial Fraud
Unfortunately, elder financial fraud is a serious problem. Many elderly seniors have lost their ability to make sound investment choices and there are those who choose to take advantage of this, bilking them of their retirement and other savings. This can lead to serious consequences for the investors, who may need these funds to take care of their medical and living expenses—especially if they have no one to turn to for help. A lot of elderly investors may be too scared to report when they’ve been victimized by fraud or they may have lost the ability to do so.

At Shepherd Smith Edwards and Kantas, LTD, LLP, our elder financial fraud lawyers are here to advocate for our senior investor clients and fight for their right to recover their investment fraud losses. We handle securities cases via mediation, arbitration, or in the courts.

Contact our Texas securities fraud law firm today and ask for your free case consultation.

Texas man gets 40 years for phony annuities scheme, InvestmentNews, September 20, 2013

Fraud Target: Senior Citizens, FBI

Seniors, Securities and Exchange Commission


More Blog Posts:

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

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

GAO Wants SEC to Look At Other Criteria for Who Qualifies As An Accredited Investor, Institutional Investor Securities Blog, July 31, 2013

August 6, 2013

Texas Money Manager Sued by SEC and CFTC Over Alleged Forex Trading Scam

The Securities and Exchange Commission and the Commodity Futures Trading Commission have filed separate yet parallel securities fraud lawsuits against a Texas money manager accused of bilking investors in a foreign-exchange trading scheme. Kevin G. White allegedly took approximately $1.7 million of the $7 million of investor funds he raised by making false claims that his currency trading strategy had brought about returns of over 393% since it was first implemented in January 2009.

The Commission filed its Texas Securities case in federal court early last month. The regulator believes that White and his companies used bogus credentials and its “can’t miss trading strategy” to reel investors into its scam when, in reality, the money manager was experiencing forex trading losses and misappropriating customer funds.

The CFTC’s action seeks to freeze White’s assets, as well of those of RFF GP LLC, Revelation Forex Fund LP, and KGW Capital Management LLC. Like the SEC, this regulator wants trading bans, financial penalties, and disgorgement of ill-gotten gains.

Forex Scams:
According to the North American Securities Administrators Association, forex scams are usually promoted via sophisticated-sounding ads in media and online. Promoters may claim that investors get leverage via “control” of foreign currency with a payment that is just a fraction of total cost along with the likely possibility of currency price rises and the promise of huge returns with little (if any) risks.

Signs You May Be Looking at a Forex Trading Scam:
• It sounds “too good to be true.” I.e.: Promises of big profits fast coupled with low risks, ‘get rich quick” enticements.

• Investments were promoted via unsolicited phone calls, especially from unfamiliar companies or sales persons not in state.

• High-pressure, “buy immediately” sales tactics.

Our Texas securities fraud lawyers represent investors of forex trading scams, penny stock schemes, Ponzi scams, elder financial fraud scams, CDO fraud, MBS fraud, and other types of financial scams. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.

Texas Money Manager Sued by Regulators Over Forex Fraud Claims, Bloomberg, July 12, 2013

SEC Folds Forex Fraud, The Street, July 16, 2013


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

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

GAO Wants SEC to Look At Other Criteria for Who Qualifies As An Accredited Investor, Institutional Investor Securities Blog, July 31, 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

July 9, 2013

Texas Judge Throws Out Verizon Retirees’ Class Action Lawsuit Over $8.4B Pension Sales to Prudential

In Dallas, Chief Judge Sidney A. Fitzwater of the U.S. District Court for the Northern District of Texas has thrown out the class action lawsuit filed by Verizon Communications (VZ) management retirees looking to stop their ex-employer from selling $8.4 billion of their pensions to Prudential Insurance Company of America (NYSE: PRU) . However, Fitzwater said that the plaintiffs can re-plead their case and they have 30 days to do so from June 24. He dismissed their Texas lawsuit per the federal Employee Retirement Income Security Act’s Section 404 (a) and noted that Verizon choosing to amend its management pension plan was not a fiduciary function.

Per the ruling, Verizon Communications and Prudential went into an agreement together last year involving the former’s pension plan agreeing to buy the latter’s premium group annuity. This would settle about $7.4 billion in liabilities. Also, Verizon would be handing over to Prudential the responsibility of giving pension benefits to approximately 41,000 retired employees. These transferred retirees are no longer part of the plan, while the about 50,000 beneficiaries and participants not included in the transaction are still part of the plan. The federal court in Texas had certified each group as a transferee class and the other as a non-transferee one, respectively.

According to the transferee class, Verizon didn’t reveal in the summary plan description that the annuity transaction might happen, which violates ERISA, breaches the company’s fiduciary duty, and discriminates against class members. Despite observing that choosing an annuity provider is a function that is a fiduciary one, Judge Fitzwater said that amending a plan is not a fiduciary function. He did say, however, that elements of the way Verizon executed the direct of the amendment might be considered fiduciary functions. (It was Fitzwater who earlier this year gave the 41,000 Verizon management retirees class status after he found that there were too many plaintiffs for them to each have their own lawsuit.)

The retirees believe that the transaction between Verizon and Prudential replaces their pensions with protected insurance annuities that are not protected by ERISA, which causes them to lose their federal law protections and does them irreparable damage. They contend that if Prudential or a successor were to suffer an asset shortfall or default, previous Pension Benefit Guaranty Corporation (PBGC) protections will get overridden by insurance industry controlled state guaranty associations, many of which aren’t satisfactorily funded. Their legal team said especially in states that don’t have the best protection levels retirees and their husbands/wives could end up with as few as two years worth of pension replacement.

This is the first time that a corporation has moved already retired persons belonging to a PBGC- guaranteed pension plan that is ERISA protected into an insurance annuity group while allowing the plan to continue for others. The employee benefits industry is watching the outcome of this case with bated breath, which could impact ERISA protected pension assets, clarify plan participants’ rights, and get more definite about plan fiduciary and sponsor duties.

SSEK is a Texas securities fraud law firm. Our law office is in Houston and we represent investors throughout the state.

Texas Judge Dismisses Verizon Retirees' Class Action Involving $8.4 Billion Sale of Pensions to Prudential, Verizon, Ambest, July 8, 2013

ERISA, US Department of Labor

More Blog Posts:
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

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

Stakeholders With $55M Securities Fraud Case Against Government Over AIG Bailout Get Class Action Certification, Institutional Investor Securities Blog, March 19, 2013

July 3, 2013

Texas Securities Fraud?: Death of Private Wealth Manager with Invesco Ltd. Reveals that Millions of Dollars May Be Missing

The passing of S. Mark Powell, who runs Invesco Ltd.’s (IVZ) Atlantic Trust Private Wealth Management, has exposed the vulnerabilities of some of the wealthiest members of Texas’s investment community. Powell was found dead in May, and, since then, investors have been stepping forward to say they lent him millions of dollars, some of which seem to have disappeared.

A spokesperson for Invesco issued a statement after Powell’s passing saying that the company now knows about “unusual transactions” that the fund manager seems to have been involved in outside his work with the fund management company, and it has notified the authorities of the possible Texas securities fraud. However, Invesco says that it has no reason to think that its clients’ accounts were impacted.

The Wall Street Journal says that a number of wealthy Texas investors have said that they know of dozens of others like them that had entrusted Powell to invest their money. Powell reportedly offered different kinds of private ventures while offering large guaranteed returns. One downside of investing in such ventures is that they can come with some significant risks. Investors in Dallas, Austin, Houston, and other Texas cities may be affected. Please contact our Texas securities lawyers at Shepherd Smith Edwards and Kantas, LTD, LLP to request your free case evaluation.

Atlantic Trust, which Powell ran, manages approximately $22 billion assets for investors in 12 American cities. Per recent financial results, at the end of March 2013, its owner Invesco was in possession of approximately $729 billion assets under management. Atlantic Trust, which is being sold to Canadian Imperial Bank of Commerce, works with foundations, individuals that are affluent, and endowments. Clients need to have no less than $5 million of assets under management.

Powell, who lived in West Austin, was a board member for several charities, including the First Tee of Greater Austin and the Dell Children's Medical Center of Central Texas. He also was a member of a number of golf clubs. Previous jobs included serving as a Morgan Keegan & Co. managing director.

At SSEK, we are a Texas securities law firm that represents investors in Austin, Dallas, Houston, and cities throughout the state. Our clients are both institutional investors and individual investors who have sustained financial losses because of inappropriate and improper recommendations, misconduct, criminal securities fraud, negligence, inadequate supervision, misrepresentations and omissions, and other types of securities fraud. Do not hesitate to reach out to us if Mr. Powell handled your investments and you are questioning why you sustained related financial losses. Also, it is the responsibility of financial service companies to properly supervise their representatives and employees to make sure they refrain from wrongdoing.

Manager's Death Shakes Texas Investors, The Wall Street Journal, June 30, 2013

Austin financial adviser’s death sparks inquiry into loans he solicited from wealthy investors, My Statesman, May 28, 2013


More Blog Posts:
Ponzi Scam Result in SEC Charges For Two Dallas-Based Broker-Dealers, Stockbroker Fraud Blog, June 18, 2013

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

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 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 8, 2013

Texas Federal Agents Pursue Largest Forfeiture Cases To Date

Federal agents in Texas are playing part in a number of the biggest forfeiture cases in the history of US law enforcement. However, the details of cases, which have involved the seizure Caribbean bank accounts, luxury condominiums, and stud racehorses purportedly linked to drug dealers and organized crime, money launderers, and Ponzi scammers, are generally kept secret. Many of the cases are a result of probes that haven’t been revealed in public records or looked at in court.

Two reasons for the secrecy are strategy and legal purposes. Sources and witnesses are generally kept confidential and protected, property connected to alleged crimes are preserved before public criminal actions are filed, and investigators are provided with the court authority that they need to freeze and trace criminals’ assets. However, civil rights advocates and defense lawyers are asking, does the secrecy surrounding forfeiture cases protect the government from having to reveal mistakes they’ve made in the investigations?

One of the largest successful forfeiture cases thus far involved Osiel Cardenas Guillen, a Mexican cartel leader. In exchange for a plea agreement with prosecutors in Houston, as part of his sentence the 42-year-old head of the Gulf Cartel agreed to fork over $50 million in assets.

Meantime, it is not uncommon for organized crime members to try to launder money by gifting family and connections or borrowing their names. Because of recent attempts by investigators to find and grab assets in Texas purportedly connected to Mexican crime groups, protests have resulted over the debate about how much friends, relatives, and associates of suspects should contend with the US government’s enforcement forces.

Just this past year, investigators from Brownsville, Corpus Christi, and San Antonio identified properties in Texas with values ranging between $4 million and $20 million linked to four individuals accused of acting as straw buyers for Tomas Jesus Yarrington Ruvalcaba, the former governor of a Mexican border state. Per affidavits and federal civil lawsuits, after he left office Yarrington allegedly used corporate names and straw buyers to buy Texas property to allegedly launder cartel funds. (Yarrington faces criminal charges in his homeland but not in the US. His Houston-based lawyer claims that Yarrington doesn’t own property in Texas but that the government is using the forfeitures to get potential witnesses to come forward.)

Although federal forfeiture cases used to just target mafia bosses and drug runners, these actions are now being applied as a strategic tool to combat global crimes, including fraud and human trafficking. According to DOJ records, just 19% of the 8,700 forfeiture cases that were processed in Texas between the 2010 and 2012 fiscal years directly involved criminal cases. A judge or a jury did not review 72%. 9% involved government-filed civil lawsuits.

Shepherd Smith Edwards and Kantas, LTD, LLP is a Texas securities fraud law firm that represents clients throughout the state and the US. As for your free case assessment with one of our Houston securities lawyers today.

Federal forfeitures cloaked in secrecy, My San Antonio, June 1, 2013


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

Texas Securities Roundup: $10M Ponzi Scheme, Foreign Note Sale Fraud, Promissory Note Scam, and Money Laundering Lead to Indictments, Criminal Sentences, Stockbroker Fraud Blog, May 21, 2013

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

June 1, 2013

Stock Trader Faces Front Running Charges In Alleged $1.7M Texas Securities Fraud

The SEC has filed Texas securities fraud charges against Daniel Bergin, a Dallas-based Cushing MLP Asset Management LP senior equity trader. Bergin is accused of front running, insider trading, and failing to notify his employer of certain trades.

According to the regulator, Bergin, who was a primary equity trader at the Swank Capital-owned registered investment advisory firm), allegedly made at least $1.7 million in profits in trading securities before making large orders of the same securities for Cushing customers. He purportedly used accounts that were registered in the name of Jacqueline Zaun, his wife, to make the personal trades. The Commission has named her as a relief defendant.

SEC Enforcement Division's Asset Management Unit Marshall S. Sprung says that Bergin breached clients’ trust by secretly using data about their trades to garner an unfair advantage for himself and make massive profits. (As a Cushing, employee, Bergin had access to information about the trades (and their timing) that the RIA made for clients.

Per the agency’s complaint, over $520,000 of Bergin’s profits was made through Zaun’s accounts involving 132 instances of front running client orders. Bergin also allegedly used privileged information to trade securities in his wife’s accounts at least 400 times.

The SEC has obtained a court order to freeze the assets of Bergin and Zaun. It wants disgorgement of “illicit trading profits, fines, and interest. It is also pursuing a permanent injunction against Bergin. The Commission’s complaint is alleging Securities Exchange Act of 1934 and Rule 10b-5 violations and the Investment Company Act of 1940 and Rule 17j-1 violation.

Meantime, Swank Capital has fired Bergin, noting that it has a zero tolerance policy for illegal trades. Also, per internal policy, its employees are not allowed to engage in personal securities trading within seven days of a client’s trades.

Front Running
Front running is illegal. It is the term given to when a trader takes a position in an equity before an action that his/her financial firm will take. This can move the equity’s price in a predictable manner. Another term for front running is forward trading.

Traders that engage in front running usually have insider information about their firms’ trades. Front running is often done to personally benefit the trader.

At Shepherd Smith Edwards & Kantas, LTD, LLP, our Dallas securities lawyers know that choosing who will help you invest your money is an important decision. When that trust is breached and your money is negligently mishandled and you find yourself suffering investment losses rather than gains, it is time to contact an experienced front running fraud law firm to explore your legal options. Even if you are resolving your claim via FINRA arbitration, you cannot go wrong by working with an experienced securities arbitration lawyer.

Read the Complaint (PDF)

Stock trader at RIA charged with front running, Investment News, May 24, 2013


More Blog Posts:
Texas Securities Roundup: $10M Ponzi Scheme, Foreign Note Sale Fraud, Promissory Note Scam, and Money Laundering Lead to Indictments, Criminal Sentences, Stockbroker Fraud Blog, May 21, 2013

Two Men Sentenced in Texas Securities Case Involving $30 Million Promissory Note Fraud that Bilked Investors Via Ponzi Scam, Stockbroker Fraud Blog, May 14, 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 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