Ponzi Scams

Texas Securities Fraud: San Angeleno Man Goes to Prison over $900K Investment Scam, Jury Convicts Houston Couple For Bilking California Bank, and Dallas Twins Go to Jail Over Ponzi Scam

Published on: March 8, 2017 | by Shepherd Smith Edwards & Kantas, LLP

San Angeleno Man Goes to Prison Over Investment Scams
Stanley Jonathan Fortenberry of Texas has been sentenced to 78 months behind bars for running two investment scams and bilking investors of about $900K. He pleaded guilty to obstruction of justice and mail fraud in 2016. Now, Fortenberry must pay over $890K in restitution and forfeit more than $311K.

Fortenberry ran Premier Investment Fund and raised money for social media projects operated by another company. According to prosecutors, the Texas man misled investors about that company’s profitability and regarding what their money would be used for. He admitted to diverting about half of investors’ money to himself and to his fundraising operation.

Fortenberry also ran Wattenberg Energy Partners, a company that raised money for oil and glass drilling projects in Colorado. He admitted to establishing the company under his son’s name because the US Securities and Exchange Commission was already investigating him about the way Premier investors’ funds were being used.

Defendants Convicted of Ponzi Scam That Touted Loans to Professional Athletes Are Sentenced to Prison

Published on: March 6, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Susan C. Daub and William D. Allen have each been sentenced to six years in prison for running a Ponzi scam that involved issuing loans to professional athletes. Allen, a former NFL player with the Miami Dolphins and the New England Patriots, and Daub have been both the subject of a criminal case and an Securities and Exchange Commission case over this matter.

The two of them were arrested in 2015 on criminal charges of wire fraud, conspiracy, and charging money related to a specified illegal act. Along with their Capital Financial Partners Enterprises, Capital Financial Holdings, and Capital Financial Partners, the two of them raised nearly $32M from investors, who were told that they were providing loans professional athletes but would get back their money in full along with interest when the loans were repaid.

In its civil case, SEC said that Daub and Allen only advanced about $18M to the athletes even though they’d raised over $31M from investors. The regulator said that from 7/2012 through 2/2015, even though the defendants had only gotten back a little over $13M in loan repayments from the pro athletes, they paid back about $20M to investors by using investors’ funds to make up for the almost $7M deficit.

Criminal Securities Fraud: Ex- CEO Extradited From Namibia is Sentenced to 30-Months, Long Island “Mini Madoff’s Associate Goes to Prison Over $400M Scheme, and the Trial of Two Ex-Barclays Traders is Underway in the UK

Published on: February 26, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Libor Trial Of Two-Ex Barclays Traders Begins
Ryan Reich and Stylianos Contogoulas are on trial in London on criminal charges accusing them of rigging the US dollar Libor. According to prosecutors, from ’05-’07, the two ex-Barclays Plc (BARC) traders conspired to manipulate the interest-rate benchmark in order to profit illegally.

Contogoulas and Reich have pleaded not guilty to the criminal charges. Two other ex-Barclays employees, Jonathan Mathew and Peter Johnson, were previously convicted for rigging Libor. They were tasked with submitting Libor rates.

16 banks are responsible for determining the Libor dollar rate every day. They do this by estimating how much it would cost to borrow from one another over different periods. The Libor dollar rate is linked to mortgages and loans and other financial products. Already, a number of big banks have collectively paid several billion dollars for their role in Libor manipulation.

Dallas Investment Firms Charged with Texas Securities Fraud in Alleged Ponzi Scam

Published on: February 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed Texas fraud charges against Patrick O. Howard, Optimal Economics Capital Partners, LLC (OE Capital) and Howard Capital Holdings, LLC. Howard controls the two Dallas-based companies., which have raised about $13M from 119 investors. The regulator is alleging that the money went to fraudulent offerings involving private fund investments in three limited liability companies and that Howard falsely presented himself as a registered investment adviser when, in fact, he was not. In addition to offering and selling units through OE Capital, he retained two firms to do the same and paid them a 5% commission.

The SEC is charging Howard and his companies with violating the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The regulator wants permanent injunctions, disgorgement, prejudgment interest, and civil penalties.

According to the Commission, which filed its complaint under seal in Dallas federal court, Howard and his two companies promised investors 12-20% yearly returns, along with minimal risk. They also purportedly claimed that almost all invested money would go toward acquiring interest in revenue streams of the portfolio companies and that promised returns were insured.

Criminal Cases: Hedge Fund Manager is Sentenced for Bilking Veterans of $1.8M, Charges Brought Over $81M Ponzi Scam Involving Hamilton Tickets, and Indictment in $17M Ponzi Scam is Dropped

Published on: January 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Chicago Hedge Fund Manager Gets Over Four Years in $1.8M Fraud
Clayton Cohn is sentenced to more than four years behind bars and he will pay $1.55M in restitution for targeting military veterans in a $1.8M hedge fund fraud. Cohn is an ex-US Marine. He pleaded guilty to the criminal charges against him.

Cohn is accused of pretending to be a successful hedge fund manager to persuade clients to invest with his Marketaction Capital Management. Of the over $1.8M that was invested,he lost more than $1.5M and spent at least $400K on his luxury lifestyle and business investments.

The US Securities and Exchange Commission had brought civil charges against him in 2013 when they accused Cohn of soliciting investors through his Veterans Financial Education Network. The non-profit was supposed to help veterans handle their money. Instead, he diverted some of their funds toward himself. The regulator stayed its case against him following the federal indictments. Now, the civil fraud charges will proceed.

MC2C Capital Accused of Ponzi Scam, Hedge Fund Fraud

Published on: January 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin has filed a securities fraud complaint against MC2 Capital. The state regulator is accusing the Boston-area hedge fund of running a Ponzi scam involving three hedge funds: the MC2 Capital Partners Fund, the MC2 Capital Value Partners Fund, and the MC2 Canadian Opportunities Fund. Alleged victims included a local institutional investor that invested $2M.

Galvin has taken action to bar the three MC2 Capital funds along with their fund operator Yasuna Murakami, from engaging in further securities business in Massachusetts. Murakami purportedly took more than $15M from over 45 investors.

He allegedly used investors’ money pay for luxury hotels, alcohol, specialty cars, and other personal expenses. The MC2 Capital Partners Fund, which was the original fund and founded in 2007, was marketed primarily to friends and family. Within a year of operation, however, the fund’s balance was negative and investors’ equity was erased.

Securities Fraud: Jury Convicts Former Visium Portfolio Manager, Boston-Ex-Hilliard Lyons Broker Accused of Unauthorized Trades is Barred by FINRA, and Utah Businessman is Charged with Bilking Investors In $100M Ponzi Scam

Published on: January 20, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Bond Fraud Case Leads to Conviction for Former Visium Asset Management

A jury has convicted Stefan Lumiere, a former Visium Asset Management LP portfolio manager, of wire fraud and securities fraud. Lumiere was accused of conspiring to artificially inflate the value of a fund that was invested in debt issued by healthcare companies. Prosecutors said that his actions caused the fund’s net asset value to become overstated by tens of millions of dollars, compelling investors to pay more than they should have for the securities. They argued that Lumiere got fraudulent price quotes from brokers who worked outside the firm in order to override prices that the credit fund’s administrator had calculated. They say that he mismarked securities for years.

Ex-Former Hilliard Lyons Broker Doesn’t Appear to Testify, Gets Barred by FINRA

Securities Fraud: Two Indiana Men Are Charged with Running Ponzi Scam, NY Investment Adviser Gets Five-Year Prison Sentence for $1.725M Scam, and Illinois Investment Firm Owner is Ordered to Pay $270K in Restitution

Published on: December 29, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Two Men Are Accused of Scamming Indiana Investors in More than $3.5M Ponzi Scam
Prosecutors are charging two Indiana men with securities fraud involving a Ponzi scam. They claim that Richard E. Gearhart and his business partner George R. McKown sold securities to investors who moved their annuities, pensions, cash, and 401ks to invest in Asset Preservation Specialists Inc. The investors were purportedly promised a guaranteed return rate.

The authorities say that McKown and Gearhart were not registered with the state of Indiana or the Securities and Exchange Commission to sell these securities.

It was in 2013 that a number of Gearhart’s clients filed complaints against him after he filed for Chapter 13 federal bankruptcy. They contended that their losses collectively totaled over $2M. Court records, however, indicate that the two men allegedly stole over $3.5M from over two dozen investors. between ’08 and ’13.

Texas Ponzi Scams: Oil Co. Owner Is Indicted by a Federal Grand Jury, CEO of Texas First Financial is Charged in Internet-Related Fraud, and Texas REIT United Development Funding Remains in Trouble

Published on: December 24, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Texas First Financial CEO is Arrested For Fraud

Authorities have arrested Bobby Eugene Guess, an ex-Texas-based registered representative and the CEO and founder of Texas First Financial, for financial fraud. Guess promoted himself as a financial expert through financial seminars and radio promotions in the Dallas-Fort Worth area.

He is accused of running a Ponzi scam online involving two companies—StaMedia Inc., which is a Dallas company, and TenList Inc. According to the Texas State Securities Board, Guess was indicted for money laundering, securities fraud, theft, and taking part in organized criminal activity involving the multi-million-dollar sales of investments in an internet ad company.

Prosecutors contend that Guess and others sold $6M in investment contracts, stock certificates, and notes in Stamedia Inc. Also, he allegedly raised millions of dollars from Stamedia investors from ’14 to ’16 but did not disclose that the company’s net income and revenue were negligible. Investor funds were allegedly used to pay earlier investors the returns they were promised.

Former LPL Financial Adviser/North Carolina Broker Is Sentenced in $1.4M Ponzi Scam

Published on: December 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Charles Caleb Fackrell is sentenced 63 months behind bars and three years of court supervision. The 36-year-old former North Carolina financial adviser, who worked with LPL Financial (LPLA), pleaded guilty to one count of securities fraud earlier this year. He now must pay his victims nearly $820K in restitution.

According to court documents, Fackrell ran an investment scam from approximately 5/2012 to 12/2014. During this time, he solicited about $1.4M from at least 20 investors. The companies he ran included Robin Hood LLC, Robin Hood Holdings LLC, Robinhood LLC, and Robinhood Holdings LLC.

Prosecutors contend that instead of using investors’ money as intended, Fackrell enriched himself in what North Carolina Secretary of State Elaine Marshall has described as “one of the most vicious financial crimes” the state has seen.