Articles Posted in Ponzi Scams

Former Bernard L. Madoff Investment Securities LLC Employee Faces SEC Charges for Creating Fake Trades to Enable Ponzi Scam

Published on: November 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

David Kugel, who was a long time Bernard L. Madoff Investment Securities LLC (BMIS), has been charged by the Securities and Exchange Commission with fraud. Kugel is accused of making fake trades to keep Madoff’s multi-billion dollar Ponzi scam running. He has consented to settling the securities fraud charges.

The SEC claims that Kugel, who worked for Madoff for nearly 40 years, was asked by the Ponzi mastermind to turn backdated arbitrage trade information into fake trades. Kugel’s own BMIS account included backdated trades. While some of the trades imitated successful ondx made by Kugel for BMIS, others were founded on historical facts that he got from old newspapers.

Over a number of years Kugel even withdrew almost $10 million in profits from these bogus trades in his own BMIS. SEC New York Regional Office George S. Canellos claims that Kugel knew such profits were fake.

Two other people accused of setting up fake trades from the information that Kugel provided were Joann Crupi and Annette Bongiorno. Both allegedly asked him for backdated data about trades that added up to millions of dollars. They would then take the information and design trades that equaled those figures. These bogus trades showed up as trade confirmations on investors’ account statements.

The SEC filed securities charges against the two women last year. The Commission claims that Bongiorno regularly set up bogus books and records and misled investors via phone calls, trade confirmations, and account statements. She also is accused of setting up false trades in her own BMIS counts that allowed her to cash out millions of dollars more than what was put in. Meantime, Crupi was accused of deciding what accounts to cash out and which investors should receive checks as Madoff’s scam stood on the brink of collapse. The two women are facing criminal charges over their alleged involvement. They have denied any wrongdoing.

Prosecutors have filed parallel criminal charges against Kugel. On Monday, he pleaded guilty to six criminal counts, including securities fraud, conspiracy, and bank fraud. He will be sentenced in May.

Meantime, Irving Picard, who has been appointed as the trustee in charge of helping Madoff’s Ponzi victims from recouping their losses, is seeking at least $22.2 million from Kugel and his family.

Ponzi Scams
A Ponzi scheme can be described as a multi-level marketing operation. The director solicits investments while promising clients a given return rate. However, rather than paying investors from real profits, the principal from new investors is used to compensate earlier investors. Ponzi scams can result in devastating losses for investors once the money dries up.

SEC Charges Longtime Madoff Employee With Creating Fake Trades, SEC, November 21, 2011
Read the SEC Complaint (PDF)

Bernie Madoff Cronies Arrested, ABC News, November 18, 2010
More Blog Posts:
SEC Files Charges in $27M Washington DC Ponzi Scam, Stockbroker Fraud Blog, November 21, 2011
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

SEC Files Charges in $27M Washington DC Ponzi Scam

Published on: November 21, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has charged Garfield M. Taylor and a number of his relatives and friends with running a DC-area Ponzi scam. The more than $27 million financial fraud targeted investors in the area.

Taylor and his partners allegedly defrauded about 130 investors between 2005 and 2010. The scam fell apart when the money dried up as a result of trading losses and the interest payments that were made to investors.

According to the Commission, Taylor convinced mainly middle-class clients to refinance their houses and use their money, including their retirement and savings, to invest in promissory notes that were put out by his two companies, which were supposedly taking part in low-risk trading options. He touted returns of up to 20% and provided investors with false assurances that their investments were protected by either a “covered call” trading strategy or a “reserve account.”

To keep new investor money coming, Taylor is said to have persuaded current investors and others to refer prospective clients to him in exchange for commission fees that were calculated according to how much the new investors put in. Although he is not a licensed securities broker, Taylor convinced a number of investors to give him access to their brokerage accounts and he used this privilege to make trades. He promised them a portion of the profits.

The SEC contends that contrary to his promises, Taylor actually was taking part in risky options trading, which then resulted in the financial losses. He also allegedly took $5 million to pay relatives and friends and cover his kids’ education.

Also charged with securities fraud bu the SEC (allegations against the parties vary, but include: violation of federal securities’ laws anti-fraud provisions, offering registration requirements, and broker-dealer registration requirements):

• Gibraltar Asset Management Group LLC • Garfield Taylor Inc.
• Maurice G. Taylor. He is Taylor’s sibling and is Gibraltar’s chief investment officer • Randolph M. Taylor. Taylor’s sibling who was Gibraltar’s VP of organizational development.
• Benjamin C. Dalley. He formerly served as VP of operations at Gibraltar.
• Jeffrey A. King. Taylor’s brother-in-law and Gibraltar’s former COO and President.
• William B. Mitchell. He was a senior executive at both companies
These individuals and entities, along with Taylor, are accused of jointly putting together a Gibraltar PowerPoint presentation that contained false and misleading statements and giving these to prospective clients. The SEC says the documents misrepresented the financial firm’s options trading strategy, the protections offered, the expected return rate, and degree of risk involved. Institutional investors and charities, including a Baptist church, were even pursued as prospective clients.

The SEC is seeking enjoinment from future violations, the payment of penalties, and disgorgement.

SEC Charges Perpetrator of Washington-Area Ponzi Scheme, SEC, November 18, 2011
Read the SEC’s Complaint

More Blog Posts:
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011
SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme

Published on: November 11, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The CFTC has been able to get a permanent injunction and default judgment against former Houston resident Jeffery Alan Lowrance and First Capital Savings and Loan. As restitution for their involvement in an alleged off-exchange foreign currency Ponzi scam, both will pay $1.2 million in restitution and a civil monetary penalty of $3.3 million. They have been permanently banned from commodity-related activities.

According to the order, Lowrance and First Capital Savings and Loan fraudulently solicited at least three dozen to get involved in forex trading. The two of them allegedly falsely claimed that they were successful traders and promised up to 4.15% monthly returns on their investments. They also are accused of publishing bogus client account statements that showed supposed monthly profits on the financial firm’s Web site. The court said that not only did both Lowrance and First Capital fail to put the money clients gave them into forex trading accounts, but also, they allegedly misappropriated the funds to set up a religious newspaper, support Lowrance’s personal expenses and the expenses of his family members, and pay supposed profits to existing investors. The order mandates that any entity or person that provided Lowrance and his company with domain registration or web hosting services now pull offline any of their Web sites that are soliciting clients to trade forex or commodity futures.

It was the U.S. Attorney’s Office for the Northern District of Illinois that indicted Lowrance for running a $25 million financial scam. In July, the SEC charged him with running a multimillion-dollar Ponzi scheme that defrauded hundreds of investors. Lowrance allegedly raised about $21 million. The investors he targeted lived in over two dozen US states. He enticed investors by claiming to share their Christian values and government views.

The SEC complaint contends that Lowrance and his financial firm told investors they were guaranteed a “predictable” income each month, along with returns as high as 7.15%. Certain clients even received bogus credit letters. Even though by 2008 Lowrance and his company had lost all of the investors funds, between June 2008 and February 2009 he still solicited at least another $1 million from at least three dozen investors.

The SEC is alleging violations of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and the Securities Act of 1933. It is seeking penalties, disgorgement, and other relief.

Court Orders Jeffery A. Lowrance and His Company to Pay More than $4.5 Million for Operating Foreign Currency Ponzi Scheme, CFTC
SEC CHARGES OPERATOR OF $21 MILLION FOREX PONZI SCHEME, SEC, July 15, 2011
Read the indictment (PDF)

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Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011
Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M, Stockbroker Fraud Blog, October 28, 2011
Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011 Continue Reading ›

SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam

Published on: October 13, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has received an emergency order to stop a Ponzi scam that bilked victims of about $26 million. Investors in PermaPave Companies were promised significant returns if they would place their money behind water-filtering natural stone pavers. According to the SEC, which has filed a securities complaint, Eric Aronson, a convicted felon, is the mastermind behind the scheme.

Aronson, who pleaded guilty to fraud in another case more than 10 years ago, is now accused of persuading about 140 people to buy promissory notes from PermaPave Companies and promising up to 33% in returns. Between 2006 and 2010, Aronson and company executives Robert Kondratick and Vincent Buonauro Jr., allegedly used new investor money to pay older clients while spending some of the Ponzi funds on gambling trips to Las Vegas, jewelry, and expensive cars. He also allegedly misappropriated about $2.6 million to repay victims of the earlier securities scam to which he entered a guilty plea.

Some of the investors’ funds that went into the Ponzi scam were also allegedly used to buy Interlink-US-Network, Ltd., which was a publicly traded company. Interlink later put out a Form 8-K falsely stating that LED Capital Corp. had said it would put $6 million into it. LED Capital did not have the money and never made such an agreement.

The SEC says that when investors began demanding that they be paid the money they were owed, Aronson accused them of committing a felony because they lent PermaPave Companies money at interest rates that were exorbitant—even though he was the one who promised them such high percentages. The Commission is accusing both Aronson and attorney Frederic Aaron of making false statements to get investors to change their securities into ones that would defer payments owed for several years.

U.S. District Court Judge Jed S. Rakoff is granting the SEC’s request that the defendants and relief defendants’ assets be frozen. Meantime, the Commission wants to bar Aronson, Buonauro, and Kondratick from being able to work as directors and officers of public companies and keep them from taking part in penny-stock offerings. The SEC also wants permanent and preliminary injunctions against the defendants, the return of illicit profits plus prejudgment interest, and civil monetary penalties.

Aronson, Kondratick, and Buonauro have been arrested in connection with the Ponzi scam.

Ponzi Scams
To succeed, Ponzi schemes need to bring in new clients so that their money that they invest can be used to pay older clients their promised returns. Unfortunately, with hardly any legitimate earnings, Ponzi scams can fall apart when it becomes a challenge to recruit new investors or too many investors ask to cash out.

SEC Files Emergency Action to Halt Green-Product Themed Ponzi Scheme, SEC.gov, October 6, 2011

SEC Claims Author Used Ponzi Scheme to Repay Prior Fraud Victims, Bloomberg Businessweek, October 6, 2011

More Blog Posts:
SEC Chairman Criticized For Allowing Ex-Commission Official that Benefited from the Bernard Madoff Ponzi Scam to Help Craft Policy Regarding Victims’ Compensation, Institutional Investor Securities Blog, September 23, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative, Stockbroker Fraud Blog, October 10, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative

Published on: October 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Two years after San Antonio broker was sentenced to prison for Texas securities fraud, FINRA has fined Merrill Lynch $1M for not properly supervising its former employer. These failures allegedly allowed Bruce Hammonds to run a Ponzi scam that defrauded investors of $1.4M.

Hammonds persuaded 11 people to invest in the Texas Ponzi scam, which he operated under the name B&J Partnership. It was supervisors at Merrill Lynch that gave the green light for him to open an account for B & J. The supervisors also are accused of not monitoring the funds that moved between customers and Hammonds.

Rather than putting investors’ money in a Merrill Lynch fund, he put $1.4 million of their funds in his working capital account. He even gave clients charts showing how the B & J fund was performing even though the fund wasn’t real. Hammonds used the money to pay for his personal spending, including a supposed house-flipping business.

He later pleaded guilty to federal securities charges. In addition to five years behind bars and three year supervised release. Hammond has been barred from the securities industry. All investors have been paid back in full for their losses.

In deciding to fine Merrill Lynch, FINRA found that the financial firm did not have a supervisory system that did a satisfactory enough job of monitoring accounts of employees for signs of possible misconduct. The system was only able to immediately capture accounts opened by an employee if he/she used his/her social security number as the main tax identification number. The SRO also said that between 1/06 and 6/10 Merrill Lynch did not monitor another 40,000 employee/employee-interested accounts.

By agreeing to settle, Merrill is not denying or admitting to the charges.

Failure to Supervise
It is a brokerage firm’s responsibility to establish written procedures for how to properly supervise its employees’ activities. These procedures must then be implemented to prevent broker fraud. When misconduct does arise and failure to supervise played a role in allowing the incident to happen, the financial firm can be held liable for securities fraud.

Brokerage companies have to supervise every broker that they license to work for them. Even if an accused broker is later found not liable, there is still a possibility that the brokerage firm or supervisor can be held liable for failure to supervise and be ordered to pay damages. For example, a broker may not have received the proper training or was given the wrong information by the financial firm, and this resulted in Texas securities fraud that caused an investor to suffer losses.

FINRA Fines Merrill Lynch $1 Million for Supervisory Failures That Allowed a Registered Representative to Operate a Ponzi Scheme, FINRA, October 4, 2011
Shepherd Smith Edwards & Kantas LTD LLP is Investigating Merrill Lynch in Light of Recent FINRA Fines Against the Firm for Failure to Supervise, MarketWatch, October 5, 2011
More Blog Posts:
Former Merrill Lynch Employee, Guilty of $1.4 Million Texas Securities Fraud Scheme, Receives Prison Term, Stock Broker Fraud Blog, October 5, 2009
Wedbush Securities Ordered by FINRA to Pay $2.8M in Senior Financial Fraud Case Over Variable Annuities, Stock Broker Fraud Blog, August 31, 2011
Actions of Former Ferris, Baker Watts, Inc. General Counsel Accused of Supervising Rogue Broker to be Reviewed by SEC, Institutional Investors Securities Blog, December 9, 2010 Continue Reading ›

SEC Chairman Criticized For Allowing Ex-Commission Official that Benefited from the Bernard Madoff Ponzi Scam to Help Craft Policy Regarding Victims’ Compensation

Published on: September 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Securities and Exchange Commission Chairman Mary Schapiro has been taking some heat because the agency allowed David Becker, a former SEC general counsel, to help develop policy regarding compensation for the victims of the Bernard Madoff Ponzi scam should be compensated even though Becker was someone who benefited from the scheme. SEC Inspector General H. David Kotz has asked the Justice Department to look into whether Becker violated any laws as a result and whether criminal charges should be filed.

At a House hearing this week, Becker testified that SEC ethics officials told him that there was no conflict of interest preventing him from taking on this task. Attendees at the hearing criticized Schapiro for letting Becker participate in establishing compensation policy even though he had inherited his own Madoff account. Schapiro has already admitted that she was wrong in allowing him to stay involved.

Some lawmakers believe that Becker’s participation in this type of policy planning is just one more incident that has caused the public to lose faith in the SEC, which didn’t even realize for almost 20 years that Madoff had been running a multibillion-dollar scam. They are now raising questions about leadership within the agency, the ability of SEC senior management to make decisions, and possible flaws in the Commissions procedures and policies as they apply to ethical matters.

On Tuesday, Kotz issued a report stating that Becker took part “personally and substantially” in matters in which he had a financial interest. Also per his report, Kotz said that the ex-General Counsel had recommended to commissioners that they put into place a policy that would value Madoff clients’ claims in a manner that would have restricted the court-appointed trustee’s power to sue Ponzi scheme beneficiaries to get back fictitious profits. Becker is one of those beneficiaries.

Earlier this year, the trustee, Irving Pickard, filed a lawsuit against Becker and his siblings contending that about $1.5 million of the money in their mom’s account was a bogus profit that should go tot the fund designated to pay back victims of Madoff’s Ponzi scam. Becker, who maintains that he never considered there to be a conflict of interest (he says that on two occasions, the ethics committee even advised him that this was correct) said that if he knew then that the trustee would sue him later he would have recused himself from working on the compensation policy.

According to Reuters, while some lawmakers don’t believe that Becker broke any laws, many are wondering why he didn’t decide on his own to not get involved in Madoff-related SEC matters.

Bernard L. Madoff Investment Securities LLC’s multibillion-dollar Ponzi Scam, which cost investors billions, wasn’t discovered until the end of 2008. Madoff has been sentenced to 150 years behind bars.

Some lawmakers doubt ex-SEC lawyer broke the law, Reuters, September 22, 2011

More Blog Posts:

Texas Congressmen Seek Answers from SEC Chairwoman Regarding Conflict of Interest Related to Madoff Debacle, Stockbroker Fraud Blog, March 8, 2011

Madoff Investors Who Were Victims of “Ponzi” Scam Contact Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP to Explore Recovery Options, Stockbroker Fraud Blog, December 17, 2008

SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees

Published on: August 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed securities charges against James Davis Risher and Daniel Joseph Sebastian. The two men are accused of running a Ponzi scam that raised over $22 million from over 100 investors. Many of the victims were Florida retirees and teachers that entrusted the two men with their life savings.

Charges against Sebastian and Risher include two counts of fraud in the sale or offer of securities, unregistered securities sales, fraud related to the sale or purchase of securities, investment adviser fraud, and violations of aiding and abetting. This would include alleged violations of the Securities Act of 1933, the Investment Advisers Act of 1940, and the Securities Exchange Act of 1934.

According to the SEC, the two men ran a bogus private equity fund and lured people in by promising 14-124% investment gains. The fake account was called “The Preservation of Principal Fund.” Investors fake bogus account statements claiming high returns. Also, money being brought in from new investors was used to pay the older investors. The names that Sebastian and Risher used to market the fund were Safe Harbor Private Equity Fund, Preservation of Principal Fund, and Managed Capital Fund.

From January 2007 through July 2010, Sebastian allegedly gave out materials to potential investors. $100,000 was the supposed minimum that one could invest. Even though only $3.8 million of the money they raised was actually invested, the two men allegedly paid themselves more than $16 million in bogus performance and management fees.

RIsher, who is accused of spending over $140,000 of the money on designer jewelry, cars, and artwork, allegedly told investors that he was experienced in wealth and asset management and trading equities when, in fact, he did not have this experience and had spent 11 years of the last two decades behind bars.

Meantime, Sebastian allegedly approached former customers that he worked with when he was an insurance broker. In addition to seniors and teachers, he also targeted church members, as well as investors outside Florida and in Canada.

The SEC is accusing the two men of making misrepresentations and omissions to clients about the fund’s investment strategy, returns, risks involved, audited financial statements, and Risher’s criminal past. Sebastian allegedly even told investors that they couldn’t lose their principal investments and gave some of them written guarantees that any losses would be reimbursed.

The FBI, the IRS, the Florida Department of Law Enforcement, the US Postal Inspection Service, and the State of Florida Office of Financial Regulation all investigated this Florida financial scam. In the related criminal case, Risher has pleaded guilty to money laundering and mail fraud. He faces up to 50 years in prison. However, because he cooperated with federal authorities on this case, his punishment may not be so severe.

Risher also has prior criminal convictions for securities fraud, mail fraud, and money laundering. In 1990, he pleaded guilty to violating Georgia’s securities act, as well as multiple counts of theft.

Related Web Resources:
SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees, SEC, August 29, 2011
James Risher pleads guilty in $21 million Florida Ponzi scheme, WTSP, August 30, 2011
Two named in $22 mil. ponzi scheme case, News Chief, August 31, 2011

More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011
Even as Ponzi Schemers Serve Time Behind Bars, Investors Are Left Coping with Millions in Financial Losses, Stockbroker Fraud Blog, January 25, 2011
Madoff Trustee Files Securities Lawsuit Against Safra National Bank of New York Seeking to Recover Almost $111.7M for Ponzi Scam Investors, Stockbroker Fraud Blog, May 12, 2011 Continue Reading ›

Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions

Published on: August 22, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Kurt Branham Barton, the former CEO, president, and founder of Triton Financial, has been convicted of running a $50 million Ponzi scam that bilked over 300 investors across the country, including former Heisman Trophy winners Ty Detmer, Chris Weinke, and Earl Campbell, NFL Kicker David Akers, and ex-NFL quarterback Jeff Blake. Barton could be sentenced to life in prison for the Texas securities fraud.

A jury convicted Barton on almost 39 criminal counts, including numerous counts of wire fraud, conspiracy to commit wire fraud, making false statements to financial institutions in order to get loans, money laundering, and one count of securities fraud. The Ponzi scam ran for four years through 2009.

According to prosecutors, Barton lied to investors, including relatives, business leaders, pro football players, and Church of Jesus Christ of Latter Day Saints members, when he said that his financial firm was using their money to invest in business, real estate, and short-term business loans. In fact, Barton was taking their funds to cover personal expenses, including luxury football tickets, expensive clothes, and sports cars. He deceived potential investors, commercial lenders, and financial institutions by presenting them with bogus monthly account statements.

Examples of those hit hard by Barton’s Texas securities scam is Detmer, who, during his testimony, admitted that he lost approximately $2 million-that’s the majority of his life savings-in the Ponzi scheme. The former NFL quarterback, who is now a coach in Austin, says he has been forced to liquidate accounts that were supposed to go to his daughters’ college education. He also had to put up his house for sale. Detmer thought Barton was his best friend. The two met at church. Detmer says that he even brought new investors to Barton. Another pro football player, David Akers, now of the San Francisco 49ers, lost over $3 million because of Barton’s scam. There are also many investors that aren’t famous who sustained significant losses because of the Texas Ponzi scam, including Diane Gordon, who lost her husband’s entire life insurance payment of approximately $850,000.

In 2009, the Securities and Exchange Commission filed a securities fraud lawsuit against Barton and two of his businesses. The SEC accused Barton of using famous celebrity athletes, stockbrokers, and others to promote Triton securities to new investors. Without denying or admitting to the SEC’s allegations, all defendants agreed to permanent injunctions from securities fraud violations in the future, appointment of a receiver, prohibition of the destruction of documents, and orders freezing assets.

Ty Detmer testifies at Ponzi fraud trial, UPI, August 9, 2011
Austin investment broker convicted of using NFL stars, churches to defraud clients, The Washington Post, August 17, 2011
The SEC’s Complaint (PDF)

More Blog Posts:
Ex-Triton Financial CEO Accused of Using NFL Contacts to Commit $50M Texas Securities Fraud, Stockbroker Fraud Blog, February 17, 2011
Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011
Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud Blog, August 3, 2011 Continue Reading ›

Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M

Published on: August 9, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A 76-year-old Amarillo insurance agent has pleaded guilty to 15 counts of Texas securities fraud over the sale of bogus investments and unregistered securities that resulted in over $5 million in losses for primarily elderly investors. The Texas State Securities Board won’t sentence John F. Langford until next month, but he faces up to 100 years in prison for running this Ponzi scam.

Meantime, Langford’s business partner, Jimmy Don King, has been indicted on 10 criminal counts, including selling securities despite not having a license, selling unregistered securities, and acting as an agent/dealer but without the appropriate registration. King was the voice and face of Langford & Associates’ commercials on TV and commercials guaranteeing “not to make you poor.” (Langford also did business as Langford Funding and Langford Investments.)

The two men came under suspicion after an elderly woman sued them for securities fraud. She said that they persuaded her to invest $941,756 in private annuities. Later, a court found that the woman who suffered from dementia had been incompetent and therefore wasn’t fit to make a decision about whether investing in bogus annuities that weren’t going to be due until her 90’s-a decade from when she signed on-was a good decision to make.

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M

Published on: August 3, 2011 | by Shepherd Smith Edwards & Kantas, LLP

An El Paso man accused of running a Texas Ponzi scheme may in fact be a man who was convicted of fraud in Maryland more than 10 years ago. Scott Lindemann is now charged with wire fraud for allegedly defrauding at least 25 investors of $2 million.

Prosecutors say that Lindemann’s real name may actually be Scott Yermish, who left Maryland after serving time in jail. He left the state without finishing his probated time for a theft conviction.

It is in El Paso that Lindemann is accused of using his hedge fund to set up his Texas securities fraud scam. Per court records, he gained the trust of one person, who then assisted him in bringing in more investors. Lindemann allegedly gave some of the investors money so they would think they’d earned a profit. He also generated bogus documents that caused them to believe that their investments had grown substantially.

According to the San Antonio Express-News, one victim of the alleged Texas securities fraud says that she and her husband lost over $250,000. She also claims that other investors took out mortgages on their houses to invest with Lindemann.

The FBI is calling this a “quick investigation.” Lindemann was arrested a week after the complaint was made.

Ponzi Scam
This type of investment fraud generally involves investors receiving purported returns except that the money they are “making” is actually from new investors who think that these funds are being invested. To keep the scheme going, new investors must keep joining up so that scammers can use their money to pay the earlier-stage investors. Ponzi scams can collapse when too many investors ask to cash out or bringing in new investors starts to prove challenging.

Every year, there are investors that lose money because they placed their money in a Ponzi scam. Fortunately, there may be a way to recoup your losses. It is important that you speak with a Texas securities fraud law firm about your case.

Warning Signs that You May Be Investing in a Texas Ponzi Scheme:
• Watch out for “guaranteed” investment opportunities or the promise of high investment returns with little or no risk.
• Returns are too consistent. It is natural for investment returns to go up and down-especially if there is the hope of high returns.
• The investment that isn’t registered with the state or the SEC.
• The investment professional you are working with isn’t registered or licensed.
• The investment strategy involved is too complex for you to understand or you can’t get complete information about it.
• There isn’t enough information about your investment that can be found in writing.
• Account statement errors.
• You aren’t getting promised payments.
• Cashing out on your investment is proving to be a challenge.
• Your financial adviser tries to get you to “roll over” payments that are owed to you with the promise of even higher returns.

Many Ponzi scam victims have lost their life savings, retirement, and/or kids’ college fund because they placed their trust and their money in the hands of the wrong people.

Related Web Resources:
Man arrested by FBI may have scammed millions, San Antonio Express-News, August 2, 2011
Accused Texas Ponzi Schemer May Be Fugitive Md. Fraudster, FinAlternatives, August 3, 2011
Ponzi Scams, SEC

Ponzi Scams, FBI

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Houston Securities Fraud: Ex-Citigroup Broker Accused of Stealing Millions from Wealthy Mexican Investors is Barred from FINRA, Stockbroker Fraud Blog, July 29, 2011
Basketball Benefactor Accused of Texas Securities Fraud and Ponzi Scam that Targeted High-Profile Coaches Found Dead, Stockbroker Fraud Blog, July 19, 2011
Venezuelan Workers Fall Victim to Francisco Illarramendi’s Ponzi Scam, Stockbroker Fraud Blog, March 30, 2011 Continue Reading ›