Ponzi Scams

$12M Ponzi Scam May Be Connected to Possible NYPD Corruption, Reports Newsweek

Published on: April 8, 2016 | by Shepherd Smith Edwards & Kantas, LLP

According to a law enforcement source that spoke to Newsweek, there may be a connection with a $12 million Ponzi scam involving restaurateur Hamlet Peralta and an investigation that the FBI is conducting into allegations of corruption at the NYPD. Peralta, who is the purported mastermind of the alleged scheme, has been arrested.

According to a federal indictment, investors thought they were investing in Peralta’s wholesale liquor business. Instead, he used $700K of their funds on liquor and over $11 million to pay earlier investors, purchase spa treatments and cover his other expenses. Peralta purportedly lied when he told investors that he was the owner of the West 125th Street Liquors. (The business belongs to his sister.) One investor gave Peralta over $3.5M.

Peralta is charged with wire fraud. At least 12 investors were allegedly bilked. Peralta is said to have promised them regular interest rate returns that he claimed would come from profits made by his business. Instead, he misappropriated the money.

Now, Newsweek is saying that the liquor scam may be tied to the FBI’s NYPD probe. The FBI is reportedly looking into whether senior members of the police department received gifts in exchange for favors from two businessmen who invested with Peralta.

Unregistered Investment Adviser Accused of $53M Ponzi Scam Involving Pre-IPO Companies

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

New Jersey adviser John Bivona is facing U.S. Securities and Exchange Commission charges accusing him of raising over $53M from investors in a Ponzi-like scam that involved the selling of investments in pre-IPO tech companies. However, contends the SEC, instead of investing the funds as intended, he used investor money to pay taxes, legal fees, a car loan, a vacation house mortgages, and cover his nephew’s credit card bills.

The regulator, in its complaint, said Bivona funneled millions of dollars into earlier funds that he and his company managed, while at least $5.7M went to family members, including nephew Frank Mazzola, who also is dealing with SEC charges for a previous investment scam.

The Commission alleges that Bivona raised the money through Saddle River Advisors, which has not registered with the regulator since 2013, and SRA Management. Because he purportedly took the money for his own spending, to pay family bills, and keep different funds running, his firms often never had enough money to buy the shares investors had been promised.

The SEC believes that Bivona was able to keep his Ponzi scam going because he kept transferring funds between over a dozen bank accounts associated with a number of entities. Meantime, investors never received financial statements they were promised.

In its press release announcing the charges, the SEC linked to one of its bulletins that identifies the possible warnings signs that the unregistered offering you are thinking of investing in may be a scam. The Commission noted that unregistered securities are

NY Broker –Dealer Owner Charged in $17.2M Ponzi Scam

Published on: March 25, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Guy Gentile, who owns a New York-based brokerage firm, is charged with fraudulently inflating two micro-cap stocks’ prices before selling them to investors. His alleged actions purportedly allowed him to make $17.2M in gross trading proceeds.

Gentile was indicted in federal court. He and co-conspirators Itamar Cohen and Michael Taxon, both Canadian stock promoters, are accused of buying Kentucky USA Energy Inc. and Raven Gold Corp. shares from 4/07 to 6/08 and then using misleading marketing collateral and manipulative trading to inflate the shares. Taxon and Cohen have already pleaded guilty to their involvement in the Ponzi scheme. Gentile, who is charged with securities fraud and conspiracy to commit securities fraud, could be facing twenty years in prison.

Running a Ponzi scam is not the only way to get in trouble for it. Connecticut fund manager Marlon Quann has been ordered to surrender nearly $81M in profit for helping Thomas Petters run his $3.5B Ponzi scheme. The U.S. Securities and Exchange Commission said that Quann hid evidence of the fraud in part with $187M in “round trip” transactions.” The SEC also sued Quan’s Acorn Capital Group LLC, Stewardship Investment Advisors LLC, and ACG II LLC.

Elder Investors: Morgan Stanley Must Pay Home Shopping Network’s Estate Over $34M, Broker Accused of Making Over $1.7M From Churning at Craig Scott Capital, and $10M Ponzi Scam Involving Jamaican Businesses Targets Older Investors

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

FINRA Panel Awards Estate Over $34M from Morgan Stanley in the Wake of Churning Allegations
A Financial Industry Regulatory Authority arbitration panel awarded the estate of Home Shopping Network Roy M. Speer over $34M in its case against Morgan Stanley (MS). The panel ruled that the firm, branch manager Terry McCoy, and broker Ami Forte were jointly liable for breach of fiduciary duty, negligence, unauthorized trading, constructive fraud, unjust enrichment, and negligent supervision. The alleged negligence would have occurred from 1/09 to 6/12 and involved investments in the financial services and banking sectors.

According to Mrs. Speer’s lawyer, in six of Mr. Speer’s accounts, about 12,000 transactions took place, most of them involving municipal bond trading and corporate trading. Many of these trades were unauthorized.

The arbitrators awarded $32.8M in compensatory damages to Speer’s widow, Lynnda Speer, and $1.5M for the costs involved in the arbitration process. The panel said that Morgan Stanley violated a law in Florida that prohibits the exploitation of vulnerable adults. Mr. Speer had dementia. Forte, who was his broker, is said to have been in a relationship with him.

Former Craig Scott Capital Broker Accused of Elder Financial Fraud
FINRA is accusing broker Edward Beyn of making over $1.7M in commissions and fees by engaging in excessive trading in client accounts while he was a registered representative at Craig Scott Capital. He is now with Rothschild Liberman. Beyn is accused of churning nine accounts of six customers, all of them over the age of 60, from 3/12 through 5/15. They all sustained losses.

$2.5B in Investor Money from Madoff Ponzi Scam Went Unclaimed

Published on: March 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

According to Fortune and Bloomberg, victims of Bernard Madoff’s Ponzi Scam were able to recover 57 cents for every dollar they invested in his fake funds because there were investors who never filed claims for $2.5B of the $20B lost in the fraud.

Seeing as the deadline to file claims to recover losses from Madoff’s scheme passed nearly seven years ago, it would be too late for any of these parties to try to get that money back now.

Fortune says no one even knows where this $2.5B is, as the Madoff’s trustee only sought to recover money from claims made. Bloomberg believes that almost half of this money is owned by feeder funds that invested with Madoff. The media outlet said that a couple of Caribbean-based hedge funds are the likely investors. Bloomberg speculated that the funds may have figured that whatever they recovered on the $1.2B would have been much smaller than what they might have had to give back had they stepped forward. The owners of the other $1.3B remain unknown, but could be individual investors who had reasons for not coming forward and filing their own claims.

To date, trustee Irving Picard has paid direct investors about $9.2B. There are tens of thousands of others who, unable to file directly with Picard because they’d invested in the feeder funds, are still waiting to get some money back.

The FBI Raids UDF IV Offices in Dallas, Texas

Published on: February 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Federal Bureau of Investigation has raided the Dallas offices of United Development Funding. The publicly traded real estate investment trust recently came under fire amid allegations that it has been run like a Ponzi scam for years.

Since the accusations against UDF IV were published on the Harvest Fund website, the REIT’s stock has dropped 81% in the last two months. News that the FBI went to the UDF headquarters caused the company’s share price to plunge nearly 55% during the raid on Thursday to close at $3.20/share.

UDF IV has denied the allegations that it is a Ponzi scam. Following news of the accusations, It filed a complaint with the U.S. Securities and Exchange Commission alleging that it was the victim of a “short and distort” securities trading scam involving an investor that was building up a short position in a stock. The aim , said UDV, was to illegally manipulate shares. In December, UDF revealed that it has been under investigation in a fact-finding probe by the SEC since 2014.

This month, hedge fund manager Kyle Bass said that he is the one who has been shorting UDF. He accused the nontraded REIT of using new investor funds to pay existing investors and exploiting “Mom and Pop” retail investors. Bass’s Hayman Capital Management LP has been betting against UDF IV shares. He was the one who made the Ponzi scam claims against UDF at the end of last year.
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Securities Fraud: SEC Charges Unregistered California Man with Fraud, FINRA Bars Two Brokers, Second Scam Lands Man in Jail Again

Published on: February 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

SEC Files Charges in $1.9M Broker Scam
A California man is facing Securities and Exchange Commission charges. The regulator is accusing Gregory Ruehle of fraudulently selling purported stock in a medical device company and keeping investors’ money. The unregistered broker purportedly raised about $1.9M from over 100 investors but did not transfer or deliver the securities that they purchased to them. Meantime, Ruehle is said to have used the funds to cover his personal spending and pay off gambling debts.

According to the SEC, Ruehle began bilking investors in 2012. He allegedly misrepresented to investors in Minnesota and California that he would sell them securities that he owned in ICB International Inc., for which he was a former consultant.

Instead, said the regulator, Ruehle sold investors more securities than what he owned and he failed to tell them that the securities that belonged to him were not transferrable. Ruehle is accused of generating fake documents that he claimed came from the company and issuing bogus company stock certificates to investors, along with a letter that falsely stated that the stock had been transferred to them.

The SEC wants permanent injunction, disgorgement, prejudgment interest, and penalties against Ruehle. The unregistered broker is also now the subject of criminal charges in a parallel case that was brought by U.S. Attorney’s Office for the Southern District of California.

FINRA Bars Two Men for Hedge Fund Fraud
In other broker news, the Financial Industry Regulatory Authority has announced that it is barring brokers Walter F. Grenda and Timothy S. Dembski from the securities industry. The industry bar is for fraud involving the sale of the Prestige Wealth Management Fund, LP, which is a hedge fund.
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Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction

Published on: January 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Equinox Fund Management Resolves SEC Charges For Over $5.8M
A Denver-based alternative fund manager has consented to settle Securities and Exchange Commission charges accusing it of misleading investors about the way certain assets were valued and for overcharging management fees. According to the regulator, Equinox Fund Management LLC determined its management fees differently from the method it described in registration statements for The Frontier Fund, which is a managed futures fund.

Although registration statements said that management fees would be calculated based on each series’ net asset value, Equinox used the assets’ national trading value instead. Also, the firm is accused of straying from the valuation methodology it had disclosed for certain holdings.

The fund manager will pay back investors about $5.4M in excessive management fees that it was paid over seven years, in addition to $600K in prejudgment interest. It also will pay a $400K penalty.

Futures Trader Goes to Jail, Pays Restitution for Securities Fraud
RXM Holdings Ltd. futures trading director Robert Scott Wiens is sentenced to one year in prison after pleading guilty to securities fraudhttps://www.investorlawyers.com/legal-news. He also will pay $260k in restitution to investors he harmed.

Wiens was an unlicensed securities professional in 2010 and 2011. He sold fraudulent investments, which he traded on the futures market.

Wiens directed investors to open bank accounts under RXM’s name for their funds. He told them that there was zero risk and returns were guaranteed. He then used the money in the accounts to pay off earlier investments and cover his own spending.
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Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader

Published on: January 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ohio Financial Adviser is Indicted in $15M Securities Fraud
Evolution Partners Wealth Management owner Larry Werbel has been indicted on criminal charges accusing him of involvement in a securities scam to bilk at least 100 investor of over $15M. Werbel recruited investors for shares of VgTel Inc. He and other brokers purportedly promised high dividends even though the shares were sold and purchased by companies belonging to the alleged scammers so that they could artificially inflate the share price.

According to prosecutors, over $9M of investor funds were pockets by the fraudsters. Werbel, who prosecutors say got investors to purchase $3M in VgTel shares, received over $300K in kickbacks.

He is charged with securities fraud, conspiracy to commit securities fraud and wire fraud, investment adviser fraud, wire fraud, and making false statements to federal officers. Werbel claims he is innocent.

Meantime, the man accused of masterminding the securities scam, Edward Durante, was arrested in Germany and brought back to the US last month. He previously was convicted of securities fraud in 2011. The U.S. Securities and Exchange Commission has filed a civil case against Evolution Partners, Durante, and others.
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Securities Fraud News: Barclays to Pay $13.5M For Unsuitable Fraud Transactions, Appeals Court Upholds Asset Freeze of Wyly Brothers’ Relatives, Ex-NBA Player to Get Sentence for Ponzi Scam Conviction

Published on: December 29, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Barclays Capital Gets FINRA Fine for Unsuitable Mutual Fund Transactions

The Financial Industry Regulatory Authority said that Barclays Capital, Inc. (BARC) must pay over $10M in restitution plus interest to customers that were impacted by violations related to unsuitable mutual fund transactions. The self-regulatory organization said that the firm did not give certain customers the breakpoint discounts that applied. Aside from the restitution, Barclays must pay a $3.75M fine.

According to the SRO, from 1/10 through 6/15, the firm’s supervisory systems were not adequate enough to make sure that unsuitable transactions didn’t happen or that the firm’s duties related to mutual fund sales to retail brokerage clients were met. FINRA said that Barclays supervisory procedures wrongly defined a mutual fund switch as warranting three transactions within a specific period of frame. Because of this erroneous definition, the firm did not act on thousands of automated alerts warning of transactions that might be unsuitable, failed to include certain transactions for suitability review, and neglected to make sure that customesr got disclosure letters about transaction costs. Over 6,100 unsuitable mutual fund switches occurred, causing r about $8.63M in customer harm.

FINRA said that the Barclays did not give its supervisors enough guidance so that they could make sure that brokerage customers were engaging in mutual fund transactions that were suitable for their investment goals, holdings, and ability to tolerate risks. The SRO, which evaluated activities over a six-month period of time, said that 39% of mutual fund transactions were found unsuitable and customers suffered financial harm, including realized losses, of over $800K.

Also, during these five years, the firm’s supervisory system did not succeed in making sure that purchases were properly aggregated so eligible customers could get breakpoint discounts, including those involved in 100 Class A share mutual fund transactions.

By settling, Barclays is not denying or admitting to FINRA’s charges. It is, however, consenting to the entry of findings.
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