Articles Posted in Ponzi Scams

Investors who placed their funds in the Texas-based United Development Funding IV real estate investment trust are asking a federal judge to approve a $13.5M REIT fraud settlement they’d reached with the company over the allegations that it had been run like a Ponzi-like scam and concealed this. The plaintiffs contend that UDV IV and its affiliates not only made false statements but also they did not disclose material facts involving business and operations.

They brought their REIT fraud case against the UDF companies three years ago, accusing the defendants of using investors’ funds from newer offering to pay investors who had gotten involved in earlier offerings. The investors, who want class certification, alleged that disclosures they were offered were misleading and lending practices lacked transparency.

Both sides eventually arrived at the $13.5M settlement—$10.5M in cash and another $3M once the REIT hits its $75M cash flow target in two years. This deal is separate from a settlement the plaintiffs reached with UDF accountants, as well as those that underwrote and sold the allegedly fraudulent offerings.

Top10-3Five unregistered brokers and their companies are now facing US Securities and Exchange Commission charges accusing them of selling Woodbridge securities to investors even though they were not registered as broker-dealers and therefore were not allowed to sell these securities. The defendants allegedly made millions of dollars from the Woodbridge securities sales.

The unregistered brokers and their companies are Barry and Ferne Kornfeld and Fek Enterprises, Andrew G. Costa and Costa Financial Insurance Services Corp., Albert D. Klager and Atlantic Insurance & Financial Services Inc., and Lynette M. Robbins and Knowles Systems, Inc. They allegedly sold over $243M of Woodbridge unregistered securities to over 1600 retail investors.

According to the regulator’s complaints, the unregistered brokers and the companies marketed Woodbridge Group of Companies, LLC as an investment that was “safe and secure.” Woodbridge, however, declared bankruptcy last December. The moment Woodbridge filed for bankruptcy protection, investors stopped receiving the interest they were due each month and they still haven’t received a return on their principal.

The US Securities and Exchange Commission is accusing Equitybuild Inc., a real estate investment firm that is based in Florida, and its owners of operating a $135M Ponzi scam that defrauded approximately 900 investors. The regulator contends that the company, its President/CEO Jerome Cohen, and Vice President Shaun Cohen, who are father and son, promised investors double-digit returns of 12-20%, even as their business was incurring massive losses. Meantime, investors were paid returns using earlier investors’ money in Ponzi-like fashion.

Equitybuild investors were mostly unsophisticated, non-accredited investors without much experience in investing in real estate. The Cohens allegedly touted a purportedly original strategy for identifying an undervalued property in Chicago, Illinois’ South Side that they claimed would render huge returns. Investors were promised promissory notes that named a specific property. Third parties were supposed to buy the properties with mortgages that the investors had funded and this would generate returns.

Unfortunately, there don’t appear to have been many third-party buyers. Equitybuild was the one that owned most of the properties and the real estate investment company purportedly stopped searching for third-party buyers a few years ago.

The US Securities and Exchange Commission has filed fraud charges in an alleged $85M Ponzi scam that may have defrauded at least 150 investors. The defendants in the civil case are Arthur Lamar Adams and his Madison Timber Properties, LLC. Prosecutors have brought a parallel criminal case against Adams charging him with two counts of wire fraud. They contend that Adams’ fraud ran from 2011 through last month and his Ponzi scam involved fraudulently securing over $100M from over 250 investors in at least 14 states.

Adams Allegedly Provided False Information to Investors in the Ponzi scam involving his business Madison Timber Properties.

According to the regulator’s complaint, Adams lied when he told investors that their funds would go toward obtaining and harvesting timber from different land owners. He also promised 12-15% yearly returns. In truth, contends the SEC, Adam’s company did not have harvesting rights and Adams allegedly forged documents, deeds, and cutting agreements. The regulator is accusing Adams and Madison Timber Properties of violating the federal securities laws’ antifraud provisions, making untrue statements and omissions, and committing fraud through their business actions. A court has approved the regulator’s request for an asset freeze

According to New Jersey’s Attorney General’s Office and Division of Consumer Affairs, JB Financial Resources and its owner Jeffrey Mitchell Isaacs must pay a $750K for allegedly selling NJ investors over $7M in unregistered securities connected to the $1.2B Woodbridge Ponzi Scam. More than 8,500 people are said to have been defrauded nationally in that scheme before its demise last year.

The state of New Jersey contends that JB Financial Resources and Isaacs sold about 88 unregistered securities on behalf of the Woodbridge Group of Companies. Isaac’s other entity, JMI Associates  LLC, is also accused of promoting and selling unregistered investments, including first position commercial mortgage securities (FPCMs)  tied to Woodbridge in NJ.

Marketing collateral touted the unregistered securities as a “unique lending opportunity.” Sale proceeds would reportedly be used by the Woodbridge Funds to issue commercial loans to commercial borrowers. Instead, the FPCMs sold to NJ investors were not collateralized right away. In certain instances, borrowers did not get the loans for weeks or months after investors bought them.


Michael Scronic Pleads Guilty in Ponzi Scheme

Michael Scronic, who touted himself as the hedge fund manager of the unregistered Scronic Macro Fund, has agreed to a US Securities and Exchange Commission ban permanently blocking him from buying or selling securities. In a parallel criminal case, Scronic pleaded guilty to securities fraud that involved 45 victims in his over $22M hedge fund fraud. His victims who suffered significant investment fraud losses included acquaintances, relatives, and friends. According to Bloomberg, investors gave him amounts ranging from $23K to $2.4M to invest.

Prosecutors contend that Scronic lied about his investment fund’s performance, touting returns of up to 13% when, in reality, the fund suffered millions of dollars in losses. About $500K, also from investors, was used to fund his own expenses, including a $12K/month New York rental, mortgage payments on a Vermont vacation home, country club and beach club membership fees, and about $15K/month in credit card expenses. The investment scam went on from 2012 through June 2017.

Daniel Glick, a Chicago-Based investment adviser who bilked clients, including older investors, of $5.2M, has been sentenced to 151 months in prison. He also has to pay $5.2M in restitution. Glick’s Ponzi-like fraud took place between 2011 and 2016.

Glick, who is the owner of Glick Accounting Services Inc., Financial Management Strategies Inc., and Glick & Associates Ltd., pleaded guilty earlier this year to wire fraud. He told clients that not only would he invest their funds but also that he would pay their bills for them. He sent them account statements that were “false and misleading.”

Glick’s own family, including his wife’s parents, were among his victims. He defrauded them of hundreds of thousands of dollars. Another family paid him $700K in fees while he misappropriated hundreds of thousands of dollars. Clients’ funds were also used to pay two business associates.

The US Securities and Exchange Commission has filed fraud charges against investment adviser Amrit J.S. Chahal, who founded Kane Capital Investment Group, LLC. Chahal is accused of using his company to solicit about $1.4M from about 50 people, some of them friends and family members. Now, the regulator wants a permanent injunction, penalties, and disgorgement.

According to the SEC’s securities fraud complaint, from at least 2/2015, the investment advisor targeted prospective investors by telling them he was a seasoned trader who could make clients “above-market returns” by employing a trading strategy whose risks were low. In truth, contends the Commission, Chahal had no previous substantive experience in the securities industry or in trading securities for others.

Investors gave Chahal their money with the understanding that he would use the funds to buy and sell futures, options, and commodities. He told them they would have to pay a $2.5% yearly fee and a performance-based fee that was 10% of an investor’s returns that went beyond a yearly 30% return rate. Chahal also falsely claimed that Kane Capital employed the most current software to help it garner the “highest possible profit” from every investment, with a focus on choosing investments that were high-yield and low-risk. In truth, said the Commission, the accused investment advisor “traded risky options and margins,” as well as sold and purchased commodities and futures.

Man Accused of Targeting Religious Congregation Members Admits to $13M Fraud

Sung “Laurence” Hong has pleaded guilty to money laundering and wire fraud, as well as to pretending to be an investment adviser so he could bilk clients of almost $13M. His plea agreement states that Hong mostly targeted members of religious organizations.

This is not the first time Hong that was caught for investor fraud. He served three years in prison after defrauding a neighbor of about $800K. Now, he may end up back in jail for decades.

SEC Files Case Against Man Accused in $250K Ponzi Scam

The US Securities and Exchange Commission has filed charges against Niket Shah, who is accused of stealing over $250K from coworkers and friends in a Ponzi scam. The regulator’s case comes in the wake of complaints brought by investors.

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Massachusetts Secretary of the Commonwealth William Galvin has filed an administrative complaint accusing private equity fund ARO Equity LLC, Timothy James Alcott, and Thomas David Renison of running a Ponzi scam that bilked investors of over $5.8M. Most of their victims were senior investors in their 70’s and 80’s who were allegedly promised 8-12% yearly returns over three-to-five years for their purchase of mostly promissory notes.

According to the Massachusetts Regulator’s complaint, Renison, Alcott, and ARO Equity invested just half of investors’ funds, with most investments made sustaining substantial losses. They allegedly ran their scam out of a trailer park in the city of Peabody despite listing their address at the One International Place Tower in Boston. Meantime, the two men have purportedly paid themselves more than $1M since their alleged Ponzi scam began.

Renison, who allegedly made $710K, was barred from the securities industry by the US Securities and Exchange Commission in 2014 for promissory note fraud involving a client. He was ordered by a jury to pay a $1.4M judgment in that matter. A criminal charge for conspiring to commit wire fraud was brought against him in a parallel case that was dismissed following his cooperation and testimony against a co-conspirator.

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