Articles Posted in Ponzi Scams

In a subpoena enforcement action, the US Securities and Exchange Commission is ordering 235 LLCs in Colorado and Delaware to provide documents related to its probe into whether Woodbridge Group of Companies, LLC, a California-based real estate and investment company owned and run by its president Robert Shapiro, engaged in a $1B financial fraud. All of the entities, plus another LLC, are affiliated with Woodbridge. The regulator had subpoenaed the 236 of them for the documents in August. Only one LLC responded by the deadline.

Now, the Commission wants a federal district court to make the rest of the LLCs comply with the subpoenas. Meantime, Shapiro has invoked his Fifth Amendment right. However, he maintains that his company did not commit fraud.

SEC Has Been Probing Woodbridge Since 2016
For the past year, the regulator has been looking into looking into possible securities fraud by Woodbridge and others involving more than $1B that was provided by thousands of investors throughout the US. The alleged fraud may include unregistered securities sales, including securities sales by brokers who were not registered, and other fraud.

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Brian R. Callahan, a former investment fund manager, has been ordered to serve 12 years in prison and three years of supervised release for his role in a $96M Ponzi scam. He also must pay $67.6M in restitution. Callahan pleaded guilty to wire fraud and securities fraud in 2014.

Between 12/2006 and 2/2012, Callahan raised over $118M from at least 40 investors related to four investment funds he oversaw. He told investors that their money would be placed in different securities, such as hedge funds and mutual funds. What happened instead was that the former investment manager misappropriated about $96M in a Ponzi scam.

Callahan is accused of diverting millions of dollars toward an unprofitable beachfront residence and resort development named Panoramic View that he co-owned with his brother-in-law, Adam Manson. The latter is a co-defendant in the Ponzi fraud.

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In US district court in Oregon, siblings Gary Holcomb and Michael Holcomb pleaded guilty to money laundering and felony conspiracy in a $40M Ponzi fraud that bilked approximately 40 investors. The brothers were formerly executives at financing company Berjac. The insurance business went bankrupt in 2012.

Berjac was supposed to issue loans to small businesses so they could pay their insurance premiums. The loans were considered low risk, with Berjac getting to keep an interest in the part of the insurance premium that went unused should a business default on a loan.

Investors were told they’d get quick returns by investing in Berjac, and as borrowers repaid the loans with interest. The financing company made it appear as if that were the case by instead paying investors with funds given to them by other investors in Ponzi-like fashion. Meantime, the Holcombs would issue quarterly statements that contained false information to investors, even as the brothers used the money to pay down their debt, purchase a vacation home, and get involved in speculative real estate projects. When Berjac failed, investors lost their principal investments.

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NJ Investment Adviser Accused of Stealing Over $1M from Clients
The US Securities and Exchange Commission has brought investment adviser fraud charges against Scott Newsholme, a New Jersey-based financial adviser and tax preparer, accusing him of stealing over $1M from clients so he could support his lifestyle and support his gambling. According to the regulator, Newsholme generated fake account statements and “doctored stock certificates and forged promissory notes.”

Prosecutors have filed a parallel criminal case against him. Rather than invest clients’ funds in different securities as promised, Newsholme allegedly went to a check-cashing store to cash their checks and then kept their money for himself to cover his own expenses and gambling activities, as well as make Ponzi-like payments to the clients who wanted their money back.

Radio Host Accused of Stealing Millions of Dollars in Concert Ticket Scheme
Craig Carton, a sports radio host, is accused of running a concert ticket scam to bilk investors. According to the SEC’s complaint, he and Joseph Meli, another man whom the regulator had already filed charges against earlier this year, touted blocks of face value tickets to concert performances that were in demand and promised investors high returns that would come from ticket resales and their accompanying price markups.

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The US Securities and Exchange Commission has filed charges against ex-financial adviser Dawn Bennett accusing her of bilking investors, making Ponzi-like payments, and spending clients’ funds on herself. According to the regulator, Bennett and her DJB Holdings LLC raised over $200M through the sale of notes issued to at least 46 investors by the luxury sports apparel company. Many of her victims were unsophisticated and older investors.

During the sales, Bennett allegedly claimed that the notes were safer than they actually were, as well as that her firm could pay yearly returns of up to 15%. Investors were purportedly told that their money would go toward company use but instead she paid back earlier investors in a Ponzi-like manner and used some of the funds to pay for her expenses. Meantime, contends the SEC’s complaint, Bennett hid the alleged fraud, lied to regulators, used sham promissory notes instead of actual convertible notes, and inflated her net worth.

Now, the Commission has charged Bennett and her company with violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The regulator wants disgorgement, interest, and penalties for the alleged senior financial fraud.

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Federal Judge Orders Tim Durham to Pay $1. 3M in Securities Fraud Case

Five years after he was convicted of securities fraud, businessman Tim Durham has been ordered by a federal judge to pay $1.3M in the US Securities and Exchange Commission’s civil case against him. Durham bilked over 5,000 investors in his Ponzi Scam involving his company Fair Finance. He is serving 50 years behind bars.

The Commission had wanted the judge to order Durham to pay back over $200M in ill-gotten gains. Instead, Judge Jane Magnus-Stinson ordered him to pay a $130K penalty for each criminal conviction, of which there were 10. After Fair Finance shut down in 2009, its bankruptcy trustee repaid investors $18M.

Ex-ArthroCare CEO is Convicted in $750M Scam For a Second Time
Michael Baker, the ex-CEO of ArthroCare Corp., has been convicted once again in a $750M securities fraud. An earlier conviction for the same scheme was vacated last year by the 5th U.S. Circuit Court of Appeals.

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Haena Park, the Harvard-educated financier who pleaded guilty to the commodities fraud that bilked over 40 investors of more than $23M, is sentenced to three years in prison. Park defrauded friends and family over six years, beginning in 2008, by soliciting investments in different commodities and securities, including equities, futures, and forex transactions.

Even after she lost investors’ money, Park continued to solicit new investors, claiming up to 50% yearly returns and generating false monthly statements that concealed the large losses. Among her victims were immigrants who worked multiple jobs, older investors who saw their life savings disappear, and a paraplegic who suffered $4M in investment losses.

After Park pleaded guilty early this year, then-US Attorney Preet Bharara said that Park was not just admitting to the fraud, but also acknowledging that she lied about her trading expertise, as well as return rates, to draw in investors.

Oil Well Company and Founders Accused In $2.4M Offering Fraud
The SEC has filed offering fraud-related charges against Kentucky-Tennessee 50 Wells/400 BBLPD Block, Limited Partnership, its founders, and three members of its sales team over a $2.4M offering fraud. According to the US Securities and Exchange Commission’s complaint, the oil well company fraudulently offered and sold unregistered securities to investors through a boiler room operation. They raised about $2.4M from 41 investors.

Carol J. Wayland and her son John C. Mueller founded K-T 50 Wells. They are accused of misappropriating investor funds for purposes not disclosed in the private placement memorandum, including taking more than $871K for their own expenses and making Ponzi payments to some investors.

Real Estate Agent Allegedly Sold Unregistered Securities as Part of Brother’s Ponzi Scam
Cheryl L. Jones is accused of defrauding investors by helping her brother, Mark Jones, recruit investors for his Ponzi scam. The Commission contends that Jones brought in associates and friends to buy unregistered promissory notes and personal guarantees that her brother was involved in.

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Investment Advisory Firm Founder Gets 2-Year Prison Term, Will Pay $1.3M for Fraud
Michael J. Breton, a Massachusetts investment adviser, has been sentenced to two years behind bars for running a cherry picking scam that allowed him to bilk clients. Breton, the founder of Strategic Capital Management, admitted to keeping profitable trades for himself while making unprofitable ones for customers. Breton has been ordered to pay them $1.3M in restitution.

The cherry picking scheme went on for six years, bilking 30 investors. According to regulators and prosecutors, when certain companies were slated to announce earnings announcements, Breton would purchase securities through a master account or via block trading. When the earnings news would raise a stock’s price, Breton would keep the trades. When an earnings announcement would cause a stock’s price to go down,
he would disburse these trades to clients.

Jury Convicts Indiana Investment Advisor of Securities Fraud
This week in Pittsburgh, a jury convicted Bernard Parker of mail fraud, securities fraud, and of filing false tax returns. Parker, who was the principal of Parker Financial Services, is accused of bilking 22 clients of over $1.2M and falsifying his US tax returns by not including over $790K in income.

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Stephen J. Hatch, the mastermind of a $70M Arizona Ponzi scam, has been sentenced to five years in prison. Hatch, who pleaded guilty to fraud, targeted Christian investors, causing many of them to lose their life savings.

As part of his plea deal, the Texas man agreed to pay back $1M to investors. Meantime, prosecutors agreed to not file criminal charges against Hatch’s children.

Many of his victims were family members and friends. Hatch persuaded 110 investors to back various real estate properties by promising double digit returns on land deals.

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