Archive for the ‘Ponzi Scheme’ Category

The Securities and Exchange Commission today obtained an emergency court order to halt an alleged ongoing $7.54 million Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles.

The Commission alleges that for the past two years, Shervin Neman raised money from investors by claiming to be a hedge fund manager. Neman told investors that his purported hedge fund, Neman Financial L.P., invested in foreclosed residential properties that would be quickly flipped for profit, in Facebook shares obtained in private transactions, and highly anticipated initial public offerings, including Groupon, Inc., and LinkedIn Corp., and Angie’s List, Inc. Although Neman promised investors exorbitant returns resulting from his investing acumen and access to pre-IPO shares of well-known companies, what they actually received was simply other investors’ monies, the hallmark of a Ponzi scheme.

The Honorable Jacqueline H. Nguyen for the U.S. District Court for the Central District of California granted the Commission’s request for a temporary restraining order and asset freeze against Neman and the entities he controlled.

According to the Commission’s complaint, Neman raised funds from at least 11 investors in the fraudulent securities offering. Most of these investors were members of the Los Angeles Persian-Jewish community, of which Neman is also a member.

The Commission alleges that more than 99% of the money Neman raised was used either to pay returns to existing investors, or to fund his lavish lifestyle. According to the Commission, Neman spent nearly $1.6 million of investor funds to buy jewelry, pay for his wedding and honeymoon, as well as high-end cars, VIP tickets to sporting events, and vacations.

Steven Lippman, 49, of Plantation, was charged with conspiracy to violate the Federal Election Campaign Act, to defraud the U.S., and to defraud a financial institution.

Prosecutors said Lippman, a shareholder in Rothstein’s now defunct law firm, Rothstein, Rosenfeldt and Adler (RRA), was illegally reimbursed by RRA for certain political contributions he made including the presidential campaign of John McCain.  The indictment claims Rothstein enlisted Lippman and others to contribute tens of thousands of dollars to the McCain campaign and RRA would unlawfully reimburse them.

In one instance, prosecutors said, Lippman made a $67,800 contribution to McCain-Palin Victory 2008. Lippman, in turn, received a check from RRA in the amount of $77,500, which constituted reimbursement of the funds he used to make the contribution.

Lippman also allegedly took part in a bank fraud scheme with Rothstein that made it appear RRA was an affluent and successful law firm and to gain additional time to meet the financial obligations of RRA. Prosecutors claim he did this in a scheme called “check kiting,” which is floating checks between accounts to inflate posted balances.

Lippman was also charged with tax fraud for failing to report certain expense reimbursements and other income from RRA.

A former NBA player has been indicted in New Jersey on federal charges he ran a more than $2 million Ponzi scheme.

Prosecutors say C. Tate George used The George Group to run the investment fraud scam. The indictment on four counts of wire fraud was announced Friday.  Prosecutors say George persuaded people, including former professional athletes, to invest in what he promised would be high-return real estate projects.  The U.S. attorney’s office says George instead used some of the money to pay existing investors and personal expenses.

The 43-year-old George played for the New Jersey Nets and the Milwaukee Bucks. The former University of Connecticut player is perhaps best known for hitting a buzzer beater in the 1990 NCAA Tournament.

US Attorney Anne M Tompkins made the announcement in conjunction with Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Jeannine A Hammett, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division (IRS-CI).

According to the criminal indictment, the defendants operated “hedge funds” as part of a conspiracy that took in $40 million from victims for a Ponzi scheme operating under the name Black Diamond Capital Solutions (Black Diamond). The indictment alleges that the conspiracy lasted from about October 2007 through about April 2010. The indictment alleges that the defendants lied to get money from their victims by claiming, among other things, that they had done due diligence on Black Diamond and were operating legitimate hedge funds with significant safeguards, when in reality, neither claim was true. The indictment also alleges that, as Black Diamond began collapsing, the defendants and others created a new Ponzi scheme and with a separate Ponzi account that Davey administered. Thereafter, new victim money was deposited into the Ponzi account and used to make Ponzi payments to other victims and to fund the defendants’ lifestyles.

 Over two grueling weeks, convicted Florida Ponzi schemer Scott Rothstein laid out in incriminating detail how far the tentacles stretched in his $1.2 billion fraud, pointing the finger at numerous lawyers, bankers, business people, relatives, friends and unnamed law enforcement officials and politicians.

The testimony, made public in hundreds of pages of transcripts, could form the outline of another wave of indictments that federal prosecutors have been promising for months. Rothstein, a 49-year-old disbarred lawyer, was questioned in December by about 30 attorneys representing investors who lost money and some people who could face charges.

Rothstein, whose scam involved supposedly lucrative investments in phony legal settlements, was testifying in several lawsuits arising from the implosion of his Ponzi scheme and bankruptcy of the once high-flying law firm Rothstein Rosenfeldt Adler.

He insisted throughout the deposition that he was telling the complete truth in hopes that a federal judge will shave time off his 50-year prison sentence. Rothstein initially fled to Morocco with $15 million when the scam imploded in fall 2009 and considered suicide, but said he had a change of heart.

“I made a decision to come back, turn myself in, go to prison and tell the government everything I knew about everyone else that had committed crimes,” Rothstein testified. “And everything about my crimes.”

The Securities and Exchange Commission has decided to take the unprecedented step of suing the agency that insures U.S. brokerage accounts to force it to pay victims of Allen Stanford’s  alleged $7 billion Ponzi scheme.

The SEC plans to sue the Securities Investor Protection Corp. as early as Monday or Tuesday to compel a liquidation to compensate Stanford customers, according to the Wall Street Journal.

The lawsuit would be the first ever by the SEC against SIPC, according to officials from both agencies, and would come just days after negotiations between the agencies appear to have reached an impasse.

The Securities and Exchange Commission charged a Bethesda, Md. man and several family members and friends with conducting a multi-million dollar Ponzi scheme targeting investors in the Washington D.C. metropolitan area.

The SEC alleges that Garfield M. Taylor lured primarily middle-class residents in his community with little to no investing experience to invest in promissory notes issued by his two companies that engaged in purportedly low-risk options trading. Taylor urged investors to refinance their homes and use any available means to invest, including their personal savings and retirement funds. The SEC alleges that he promised returns as high as 20 percent per year and falsely assured investors that their investments would be protected by a “reserve account” or that he would employ a “covered call” trading strategy that would not touch the principal amount of their investment.

According to the SEC’s complaint filed in federal court in Washington D.C., Taylor and his companies instead engaged in very high-risk, speculative options trading and suffered massive losses. Taylor relied upon money from new investors to pay returns to earlier investors in typical Ponzi scheme fashion. The SEC’s complaint also alleges that he siphoned off $5 million in investor funds to pay family and friends and for other personal uses, including $73,000 to the private school his children attended.

The SEC alleges that the Ponzi scheme defrauded more than $27 million from approximately 130 investors from 2005 to 2010. The scheme ultimately collapsed in the fall of 2010 when the companies’ accounts were depleted by the trading losses and interest payments to investors.

A Philadelphia estate lawyer accused by New Jersey of heading an $8.5 million Ponzi scheme that targeted retirees has been charged with money laundering in a separate case.

An indictment unsealed Monday alleges that Michael Kwasnik stole more than $1 million from a client whose trust he was overseeing, using the money instead to pay investors and his law office’s operating expenses.

Prosecutors allege that instead of depositing his client’s money into the client’s family trust, Kwasnik put the funds into a general account for his law firm.

Last week, the 42-year-old Kwasnik was sued in civil court by the state, which asked for restitution and a court order to stop him and others associated with him from selling investment securities in New Jersey.

Kwasnik, who has a law office in Cherry Hill but also practices in Pennsylvania, has previously denied any wrongdoing. Kwasnik sold investments through Liberty State Financial Holdings Corp. and its subsidiary, Liberty State Benefits of Pennsylvania. The companies, which specialize in buying life insurance policies at a discount from retirees, filed for bankruptcy in July.

In the civil case, the government alleges Kwasnik headed a Ponzi scheme involving the sale of so-called “life settlements,” which ostensibly offered retirees lump-sum payments for part of the policies but in many cases cost them much or all of their investment. Life settlement companies typically buy life insurance policies from elderly policyholders, with a purchase price based on the policyholder’s life expectancy.

A purported New Jersey real estate investor was charged in an indictment with leading a $200 million Ponzi scheme that initially targeted fellow Orthodox Jews.

Eliyahu Weinstein, 36, was accused by a federal grand jury in Newark, New Jersey of using sham real estate deals to bilk investors — some of them while he was out on $10 million bail after his arrest in August 2010. Prosecutors said he spent his stolen money on jewelry, art, gambling, cars and legal bills.

An investor identified as H.D.W. sunk $70 million into Weinstein projects, including $5.4 million to buy property for a project in Trotwood, Georgia. Prosecutors say the town doesn’t exist. An H.D.W. representative met with Weinstein, according to the indictment. Weinstein asked what he and the man’s wife had in common. The representative said he didn’t know.

Weinstein, of Lakewood, New Jersey, was charged with one count of conspiracy, 29 counts of wire fraud, two counts of wire fraud while on pretrial release, one count of bank fraud and 12 counts of money laundering. He faces as long as 30 years in prison on three of the counts.

The long-time director of operations for convicted Ponzi schemer Bernard Madoff’s defunct firm was arrested and charged criminally Thursday with allegedly directing that false accounting entries be made in the firm’s books to conceal Mr. Madoff’s fraud.

Prosecutors from the U.S. Attorney’s Office in Manhattan charged Daniel Bonventre, former operations director at Bernard L. Madoff Investment Securities LLC, with conspiracy, securities fraud, falsifying books and records of a broker-dealer, false filings with the U.S. Securities and Exchange Commission and four counts of filing false federal tax returns.

A lawyer for Mr. Bonventre declined to comment Thursday.

Bonventre, 63 years old, is expected to appear before a U.S. magistrate judge in Manhattan later Thursday. He faces as much as 20 years each on the fraud, falsifying-books-and-records and false-filings charges.

He is the sixth person to be charged criminally in the case, including Mr. Madoff himself.

The SEC also separately brought civil accounting fraud charges against Mr. Bonventre, alleging he helped disguise Mr. Madoff’s fraud and financial losses at the Madof firm by misusing and improperly recording investor money to create the false appearance of legitimate income.