Ponzi Scams

Securities Fraud News: SEC Charges NY Firm With Stealing Investor Funds, Stock Promoter Accused of Bilking Clients Over Twitter, Facebook Pre-IPO Shares, and NY Lawyer Under Fire for Alleged Ponzi Scam

Published on: December 31, 2014 | by Shepherd Smith Edwards & Kantas, LLP

SEC Charges NY Firm, Fund Managers With Securities Fraud

The Securities and Exchange Commission is charging VERO Capital Management, its CFO Steven Downey, President Robert Geiger, and General Counsel George Barbaresi with secretly taking investor money to support a side business. The three men ran funds with offering documents that touted their objective as making good returns via mortgage-backed securities investments. Instead, after winding down the funds, the officers allegedly diverted around $4.4 million to undocumented bridge loans to an affiliate company that was supposedly in risk management. Investors and the funds’ directors were purportedly not notified that these unauthorized loans were taking place.

The SEC Enforcement Division also claims that VERO Capital and the three men compelled the funds to buy three notes totalling $7 million from an affiliate, which is a principal transaction that requires written notice and consent of a client before the transaction can be finished. The division claims that no attempt was made to get this mandatory notice. The regulator is alleging multiple violations of the Investment Advisers Act of 1940 and other rules.

Ex-California Insurer Charged with Running $11M Ponzi Scam

Published on: December 8, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Joseph Francis Bartholomew is charged with 30 felony counts related to his alleged operation of an $11 million Ponzi scheme. The 75-year-old former licensed insurance agent has been called Orange County, Ca.’s Bernard Madoff, after the financier who ran a multibillion-dollar Ponzi scam for decades. Bartholomew allegedly bilked over 27 investors.

According to the California State Department of Insurance, he used his insurance business, MBP Insurance Services, to get people to trust him. Those involved reportedly included a number of family trusts, a church, an ex-baseball player, and senior citizens.

The Orange County Register said that Bartholomew made false promises to investors telling them that they could earn fast returns of up to 40%. For example, he is accused of offering one investor an unsecured investment while making the claim that the customer would get $10,000 a month if he invested $500,000. Bartholomew allegedly gave fraudulent assurances that the investment on third party life insurance policies was a legitimate one. He also made other misrepresentations, including claiming that over the last decade there had been no problems getting payments to investors.

Madoff Ponzi Scam Victims Recover Over $10 Billion

Published on: December 5, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Six years after the collapse of Bernard Madoff’s multi-billion dollar Ponzi scam, over $10 billion has been recovered—that’s close to 60% of the principal that went missing after his arrest in 2008. Nearly $6 billion has been paid back to investors. Trustee Irving Picard recently provided these figures in an interim report.

Thousands of investors lost $17.5 billion in principal because of Madoff’s scheme. Even as a significant amount of the money has been returned to them, billions of dollars are being kept in reserve until the securities fraud lawsuits filed by victims wanting bigger payouts are resolved.

The Securities Investor Protection Corp. has spent over $1 billion to facilitate the recovery process. Picard was tasked with recovering investors’ funds. He has worked with forensic accountants, lawyers, and others to figure out who was owed money and who should be sued for benefiting from Madoff’s Ponzi scam. He has even able to recover investor funds via hundreds of lawsuits involving the Madoff clients and banks that didn’t know they were benefiting from the fraud.

Securities Fraud Headlines: ConvergEx Group Subsidiary Gets Criminal Sentence for Fraud, Ohio Man Gets Prison Term for Scam, Two Men Face Charges Over Predictive Software, and Fund Manager Admits to $17M Ponzi Scam

Published on: November 28, 2014 | by Shepherd Smith Edwards & Kantas, LLP

CGM Limited Pleads Guilty to Securities Fraud

CGM Limited, a subsidiary of ConvergEx, must pay a criminal penalty and restitution of $26 million for conspiracy to commit both securities fraud and wire fraud, as well as for wire fraud. The U.S. Department of Justice says that CGM limited charged clients millions of dollars in hidden and unwarranted fees. CovergEx is a global trading and brokerage firm. CGM Limited pleaded guilty to the criminal charges.

The government says that CGM Limited and certain traders and executives bilked clients by lying to them and taking the money in the form of fees. CGM Limited admitted that there were ConvergEx Group broker-dealers that regularly sent over securities trade orders so a mark-up could be taken when the orders were executed.

SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims

Published on: September 11, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has said that it no longer intends to continue trying to get the Securities Investor Protection Corporation to pay back investors the losses they sustained in R. Allen Stanford’s $7 billion Ponzi scam. The decision comes after the U.S. Court of Appeals for the District of Columbia Circuit ruled that the regulator failed to prove that the scheme’s victims were “customers” eligible for compensation by the SIPC. That decision upheld an earlier ruling by a district court in 2012.

Even though the SEC is no longer seeking to compel the brokerage industry insurance fund to pay the investors, the agency says it is committed to the victims and will keep working with the U.S. Department of Justice, the Stanford Receiver, and others in an effort to maximize investor recovery.

SIPC keeps a special fund to pay back investors if their securities and cash were lost when a brokerage failed. The agency, however, said it couldn’t compensate the Stanford Ponzi scam victims because their losses were not a result of a broker-dealer failing but due to their purchase of CDs from a foreign bank-assets that they are still holding and now have no value.

Ponzi Scams: FINRA Bars Ex-Raymond James Broker Over $3M Ponzi Scam, Expels Success Trade Securities, Inc. for Bilking NFL and NBA Players

Published on: June 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Success Trade Securities Inc. and its President and CEO Fuad Ahmed to pay 59 investors, mostly current and ex-NBA and NFL players, about $13.7 million in restitution for losses they sustained in a Ponzi scam. Success Trade is now expelled from FINRA membership and Ahmed is also barred.

According to a FINRA hearing panel, between 2/09 through 3/13, the firm and Ahmed sold $19.4 million in bogus promissory notes to investors while omitting or misrepresenting material facts. These facts would have revealed that parent company Success Trade Inc. was in financial trouble.

Ahmed and the firm are also accused of misrepresenting that the funds would go toward costs for marketing and growing the businesses of the parent company. The SRO says that the funds instead went toward went toward unsecured loans to Ahmed for his personal spending and to pay interest payments to note holders.

Man Convicted in $46M Michigan Ponzi Scam

Published on: May 20, 2014 | by Shepherd Smith Edwards & Kantas, LLP

David McQueen, of Byron Township in Michigan, was found guilty of 15 felony charges, including those involving money laundering, mail fraud, and failure to file taxes. McQueen is accused of running a $46 million Michigan Ponzi scam that bilked over 800 victims. Many of them gave him their retirement money, cashed in IRAs, and mortgaged their homes so they could invest.

McQueen, a former insurance salesperson, began investing people’s money in Multiple Return Transactions, which promising investors 10% returns. It wasn’t until later that he found out that the MRT was actually a Ponzi scam. However, instead of telling investors in his company, Accelerated Income Group, that MRT was a scam, he told them their funds were secure and growing. He then found new investors and took their money to pay off earlier investors.

According to Assistant U.S. Attorney Matthew Borgula, McQueen paid himself a salary of $100,000 from investor funds. He also gave these customers bogus account statements to make them think that their investments were profitable. The government said that when McQueen discovered that his Michigan Ponzi scam was about to fail, he took 30% of the investors’ money and placed them in highly speculative investment and other scams.

DOJ’s Fund for Madoff Victims Has Received 51,700 Claims Worth $40B

Published on: May 14, 2014 | by Shepherd Smith Edwards & Kantas, LLP

According to Richard C. Breeden, who is overseeing the US Department of Justice’s Madoff Victim Fund, he has received some 51,700 claims worth approximately $40 billion from Ponzi scam victims seeking to recover their losses. That amount is three times more than the claims submitted during the bankruptcy proceedings for Bernard L. Madoff’s firm.

The fund is responsible for giving back $4 billion in forfeited assets to claimants, including those who were indirectly impacted by the Madoff Ponzi scam, such as ” feeder funds,” banks, hedge funds, and other entities that trustee Irving Picard has denied recovery. Picard is only compensating direct investors who were harmed.

Breeden says that the amount of investors seeking recovery are twice as many as previously estimated and their claimed losses are billions of dollars greater than what was documented. Prior to an April 30 deadline, he received over 43,500 claims from those who did not submit to the bankruptcy case. More than 36,000 claims were from those who said they haven’t gotten any of their losses back.

Texas Man Gets 25 years in Prison for $11M Ponzi Scam

Published on: April 21, 2014 | by Shepherd Smith Edwards & Kantas, LLP

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.

Ex-Merrill Lynch Adviser, Already Jailed for Massachusetts Securities Fraud, Now Indicted Over Ponzi Scam

Published on: March 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Even as she serves her 33-month sentence for securities fraud, Jane O’Brien, a former Merrill Lynch (MER) broker, has now been indicted for her alleged involvement in a Ponzi scam that purportedly ran for nearly two decades. The U.S. Attorney’s Office for the District of Massachusetts says that O’Brien is facing criminal charges for mail fraud, investment adviser fraud, and wire fraud involving the misappropriation of $1.3 million in client monies.

Per the indictment, between 1995 and 2013 and while she worked at Citigroup (C)’s Smith Barney and then later with Merrill, O’Brien persuaded a number of clients to withdraw money from brokerage accounts and their banks. She got their permission to invest the funds in private placements. However, instead, the 61-year-old allegedly used the money to repay other investors and cover her personal expenses.

O’Brien is also accused of making misrepresentations to clients, providing them with materially false statements, “making lulling payments,” and offering false assurances that their money was secure. She even in one instance, allegedly, got a client to invest in “Crooked Arrows,” a Hollywood film, in return for a promised 25% return, which did not happen.