Articles Posted in Ponzi Scams

A Financial Industry Regulatory Authority (FINRA) panel has ordered Pershing, LLC to pay $1.4m to six investors who lost money in R. Allen Stanford’s $7.2B Ponzi scam. Pershing is a Bank of New York Mellon Corp. (BK) division. It acted as Stanford Group Co.’s clearing broker for several years.

Pershing is accused of enabling the Stanford Ponzi Fraud, including through its transfer of hundreds of millions of dollars from US investors’ securities accounts, as it continued to make money from the sales of at least $500M in fake, unregistered certificates of deposit (CDs).

Pershing also allegedly disregarded the unusual ways in which Stanford ran his operations, including the use of offshore transfers and the high compensation awarded to brokers. The unregistered CDs were issued out of Stanford International Bank, a Stanford Financial Group unit based in Antigua, and then sold by Stanford’s brokerage firm in the US.

Patrick Dibre, a former business partner of GPB Capital Holdings, is accusing the asset management firm of operating a Ponzi Scam. Dibre made his claims in his counter-suit filed against GPB after the company sued him.

GPB Capital is at the center of a growing controversy surrounding brokerage firms that sold its private placements, raising $1.8B in the process. The asset management company, which invests primarily in auto dealerships and waste management companies, has been under fire since late last year when it suspended its sale of the private placements, as well as redemptions to investors. It also is under investigation by the US Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), state regulators, and the Federal Bureau of Investigation (FBI).

The following GPB funds are under investigation:

Ex-Woodbridge Group of Companies CEO and owner Robert Shapiro and former Woodbridge directors Ivan Acevedo and Dane R. Roseman are now facing criminal charges over their alleged involvement in operating a $1.2B Ponzi scam that went on from ’12 to ’17. All three men were arrested and appeared in federal court last week.

Woodbridge and its 281 related companies are accused of defrauding over 8,400 retail investors, including many senior investors who lost retirement money as a result. According to the US Securities and Exchange Commission’s (SEC) 2017 complaint against Shapiro, Woodbridge, and the related companies, investors were promised yearly returns of up to 5 to 8%. Payments were supposedly from the interest paid to an affiliate on loans issued to third party borrowers. However, contends the SEC, there were not enough third-party borrowers to pay the thousands of investors involved, resulting in just under $14M in interest income. Newer investors’ funds were allegedly used to pay earlier investors.

Woodbridge and the companies settled the regulator’s case last year by agreeing to pay over $1B, including disgorging $892M in ill-gotten gains. Shapiro’s settlement involved a $100M penalty and disgorgement of $18.5M plus $2.1M in prejudgment interest. Now, with the criminal case, Shapiro is charged with tax evasion and conspiracy to commit money laundering.

The US Securities and Exchange Commission (SEC) has filed fraud charges against two men claiming to be pastors of a church at a strip mall in Orange County, California. Kent R.E. Whitney and David Lee Parrish are accused of targeting members of their local Vietnamese community and defrauding investors of millions of dollars. The regulator has obtained an asset freeze in what it is calling a $25M Ponzi scam.

Whitney, who has a criminal fraud record, is the founder of The Church for the Healthy Self. The Commission said that he established the church three months after getting out of federal prison where he had been serving time for a different investment scam that had defrauded 10 investors of over $600K.

The regulator contends in its complaint that The Church for the Healthy Self’s investment program, called the CHS Trust, touted:

Cameron Jezierski, a Texas resident, has pleaded guilty to charges tying him to a Ponzi scam that defrauded over 400 investors of $360M. Jezierski and two other men, Jay Ledford, also of Texas, and Kevin Merrill were indicted last year for money laundering, identity theft, wire fraud, and conspiracy.

They allegedly persuaded investors to buy consumer debt portfolios that had defaulted by claiming that money could be made either through collecting on the debts or by selling the portfolios to third-party debt buyers. The investors who were harmed included restaurateurs, small business owners, retirees, construction workers, financial advisers, professional athletes, and other working professionals. However, instead of investing the money as promised, the three men allegedly used most of the funds on their lavish lifestyles or to pay earlier investors in a Ponzi scam-like fashion.

In the US Securities and Exchange Commission’s (SEC) investor fraud case against the three men, which was brought last year, the regulator’s complaint said that of the money raised by investors, more than $90M came from over 200 individual investors, almost $203M was from feeder funds made up mostly of individual investors, and $52M came from family offices.

Carol Ann Pederson, an unregistered investment advisor and an ex-CPA, is facing charges accusing her of defrauding more than two dozen investors. The US Securities and Exchange Commission claims that Pederson:

  • Raised at least $29M from investors.
  • Made false promises that their money would go into “federally guaranteed securities.”

$20M Ponzi Scam Results in Guilty Plea for Kiddar Capital Founder

Todd Hitt, Kiddar Capital’s founder and a member of a prominent commercial real estate family in Virginia, has pleaded guilty to criminal fraud charges accusing him of operating a $20M Ponzi fraud that involved several schemes. According to prosecutors, Hitt solicited about $30M from investors and then proceeded to use most of the money to fund his lavish lifestyle while using newer investors’ funds to pay older investors. He also allegedly made “false statements and material omissions” to investors when he didn’t tell them that their money was comingled with unrelated projects and not just the real estate and venture capital investments for which their funds were supposedly designated.

The U.S. Attorney’s Office for the Eastern District of Virginia contends that because of Hitt’s “fraudulent conduct,” investors lost about $20M. He is facing up to 20 years behind bars and is expected to pay a fine of millions of dollars. He previously settled related civil fraud charges filed against him by the US Securities and Exchange Commission.

Ex-Merrill Lynch Broker Will Pay $5M Penalty and Serve Time In Prison

A federal judge has sentenced Thomas Buck, an ex-Merrill Lynch broker, to 40 months in prison. Buck pleaded guilty to securities fraud in 2017. As part of his plea, he admitted to lying to Merrill about telling clients about their account options, and, at certain times, making trades for them without getting their approval.

That year, the US Securities and Exchange Commission (SEC) had filed a complaint against Buck accusing him of making over $2.5M in excessive commissions and fees from more than four dozen clients. The SEC contends that Buck placed clients into accounts that charged them commissions instead of ones that were fee-based and not as costly. The regulator also accused him of making unauthorized trades. The Commission barred the former Merrill broker from the investment advisory and brokerage industries last year.

A federal court has ordered the Woodbridge Group of Companies and its former CEO and owner Robert H. Shapiro to pay $1B in disgorgement and penalties for allegedly running a $1.2B Ponzi scam that victimized 8,400 retail investors, including many senior investors who ended up losing their retirement money. Of this $1B, Woodbridge and its 281 related companies must pay $892M in disgorgement. Shapiro must disgorge $18.5M in ill-gotten gains, as well as pay $2.1 in prejudgment interest and a $100M civil penalty.

In 2017, the US Securities and Exchange Commission (SEC) filed charges against Woodbridge, which it called a “group of unregistered investment companies,” and other defendants. The regulator contends that Woodbridge claimed that its main business was to issue loans to third-party commercial property owners. The defendant allegedly promised investors 5-10% in interest yearly. The company’s marketing materials touted an “over 90% renewal rate” from investors because of “proven results.”

The SEC said that the reality was that most of these supposed third-party borrowers were, in fact, companies that Shapiro owned. They purportedly made no income and did not pay interest on any of these supposed loans.

John G. Schmidt, an ex-Wells Fargo (WFC) broker, is now facing 128 felony counts over his alleged running of a $1M Ponzi scam. Criminal charges include:

  • 124 counts of forgery
  • 1 count of telecommunications fraud
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