Articles Posted in Ponzi Scams

In a subpoena enforcement action, the US Securities and Exchange Commission is ordering 235 LLCs in Colorado and Delaware to provide documents related to its probe into whether Woodbridge Group of Companies, LLC, a California-based real estate and investment company owned and run by its president Robert Shapiro, engaged in a $1B financial fraud. All of the entities, plus another LLC, are affiliated with Woodbridge. The regulator had subpoenaed the 236 of them for the documents in August. Only one LLC responded by the deadline.

Now, the Commission wants a federal district court to make the rest of the LLCs comply with the subpoenas. Meantime, Shapiro has invoked his Fifth Amendment right. However, he maintains that his company did not commit fraud.

SEC Has Been Probing Woodbridge Since 2016
For the past year, the regulator has been looking into looking into possible securities fraud by Woodbridge and others involving more than $1B that was provided by thousands of investors throughout the US. The alleged fraud may include unregistered securities sales, including securities sales by brokers who were not registered, and other fraud.

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Brian R. Callahan, a former investment fund manager, has been ordered to serve 12 years in prison and three years of supervised release for his role in a $96M Ponzi scam. He also must pay $67.6M in restitution. Callahan pleaded guilty to wire fraud and securities fraud in 2014.

Between 12/2006 and 2/2012, Callahan raised over $118M from at least 40 investors related to four investment funds he oversaw. He told investors that their money would be placed in different securities, such as hedge funds and mutual funds. What happened instead was that the former investment manager misappropriated about $96M in a Ponzi scam.

Callahan is accused of diverting millions of dollars toward an unprofitable beachfront residence and resort development named Panoramic View that he co-owned with his brother-in-law, Adam Manson. The latter is a co-defendant in the Ponzi fraud.

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In US district court in Oregon, siblings Gary Holcomb and Michael Holcomb pleaded guilty to money laundering and felony conspiracy in a $40M Ponzi fraud that bilked approximately 40 investors. The brothers were formerly executives at financing company Berjac. The insurance business went bankrupt in 2012.

Berjac was supposed to issue loans to small businesses so they could pay their insurance premiums. The loans were considered low risk, with Berjac getting to keep an interest in the part of the insurance premium that went unused should a business default on a loan.

Investors were told they’d get quick returns by investing in Berjac, and as borrowers repaid the loans with interest. The financing company made it appear as if that were the case by instead paying investors with funds given to them by other investors in Ponzi-like fashion. Meantime, the Holcombs would issue quarterly statements that contained false information to investors, even as the brothers used the money to pay down their debt, purchase a vacation home, and get involved in speculative real estate projects. When Berjac failed, investors lost their principal investments.

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A federal grand jury has indicted two men for their alleged involvement in a nearly $230M institutional investor fraud scam involving biotech companies. G. Steven Burrill, the owner and CEO of Burrill & Company, and Marc Howard Berger are the two defendants named in the criminal indictment. Burrill is charged with 26 counts of wire fraud, one count of investment adviser fraud, and one count of tax evasion. Berger is charged with multiple accounts of aiding in preparing fraudulent tax returns.

According to the criminal indictment, Burrill sent letters that were false and misleading to persuade limited partners to give capital to the fund. He also allegedly moved millions of dollars in unnecessary management fees to companies under his control, as well as submitted the allegedly fraudulent tax returns.

It was in March of last year that Burrill settled civil charges brought by the US Securities and Exchange Commission accusing him of taking funds from the Burrill Life Sciences Capital Fund III in order to maintain his expensive lifestyle and keep some of his other businesses in operation. The regulator claimed that Burrill took from the Fund III and pretended that these were management fees he was issuing to himself in advance. He then allegedly went on to spend the money on vacations, jewelry, private planes, and other expenses.

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Bernard L. Madoff Investment Securities LLC trustee Irving H. Picard announced that a settlement has been reached for $687M with Thema International Fund for its ties to the multibillion-dollar Madoff Ponzi Scam. Now, a court must approve the agreement.

According to Bloomberg, the “Irish investment fund funneled $1.1B” to the Ponzi scam that bilked thousands of investors, including those who were with offshore feeder funds, of billions of dollars over several decades. The $687M is representative of all the funds transferred from Madoff’s securities firm to Thema International prior to the former’s collapse, in addition to 19.26% of the withdrawals beyond that time period.

Thema International Fund belongs to a number of offshore entities with ties to Madoff friend and Austrian banker Sonja Kohn and the Benbasset family of Switzerland. Picard contends that Kohn and the Benbassets granted Madoff key access to funds as his Ponzi scam began to fail.

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NJ Investment Adviser Accused of Stealing Over $1M from Clients
The US Securities and Exchange Commission has brought investment adviser fraud charges against Scott Newsholme, a New Jersey-based financial adviser and tax preparer, accusing him of stealing over $1M from clients so he could support his lifestyle and support his gambling. According to the regulator, Newsholme generated fake account statements and “doctored stock certificates and forged promissory notes.”

Prosecutors have filed a parallel criminal case against him. Rather than invest clients’ funds in different securities as promised, Newsholme allegedly went to a check-cashing store to cash their checks and then kept their money for himself to cover his own expenses and gambling activities, as well as make Ponzi-like payments to the clients who wanted their money back.

Radio Host Accused of Stealing Millions of Dollars in Concert Ticket Scheme
Craig Carton, a sports radio host, is accused of running a concert ticket scam to bilk investors. According to the SEC’s complaint, he and Joseph Meli, another man whom the regulator had already filed charges against earlier this year, touted blocks of face value tickets to concert performances that were in demand and promised investors high returns that would come from ticket resales and their accompanying price markups.

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The US Securities and Exchange Commission has filed charges against ex-financial adviser Dawn Bennett accusing her of bilking investors, making Ponzi-like payments, and spending clients’ funds on herself. According to the regulator, Bennett and her DJB Holdings LLC raised over $200M through the sale of notes issued to at least 46 investors by the luxury sports apparel company. Many of her victims were unsophisticated and older investors.

During the sales, Bennett allegedly claimed that the notes were safer than they actually were, as well as that her firm could pay yearly returns of up to 15%. Investors were purportedly told that their money would go toward company use but instead she paid back earlier investors in a Ponzi-like manner and used some of the funds to pay for her expenses. Meantime, contends the SEC’s complaint, Bennett hid the alleged fraud, lied to regulators, used sham promissory notes instead of actual convertible notes, and inflated her net worth.

Now, the Commission has charged Bennett and her company with violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The regulator wants disgorgement, interest, and penalties for the alleged senior financial fraud.

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Federal Judge Orders Tim Durham to Pay $1. 3M in Securities Fraud Case

Five years after he was convicted of securities fraud, businessman Tim Durham has been ordered by a federal judge to pay $1.3M in the US Securities and Exchange Commission’s civil case against him. Durham bilked over 5,000 investors in his Ponzi Scam involving his company Fair Finance. He is serving 50 years behind bars.

The Commission had wanted the judge to order Durham to pay back over $200M in ill-gotten gains. Instead, Judge Jane Magnus-Stinson ordered him to pay a $130K penalty for each criminal conviction, of which there were 10. After Fair Finance shut down in 2009, its bankruptcy trustee repaid investors $18M.

Ex-ArthroCare CEO is Convicted in $750M Scam For a Second Time
Michael Baker, the ex-CEO of ArthroCare Corp., has been convicted once again in a $750M securities fraud. An earlier conviction for the same scheme was vacated last year by the 5th U.S. Circuit Court of Appeals.

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A jury has found former pharmaceutical CEO and hedge fund manager Martin Shkreli guilty of securities fraud in connection with his two hedge funds, MSMB Capital and MSMB Healthcare, as well as of conspiracy to commit securities fraud involving shares of the drug company Retrophin, which he founded.

Prosecutors had said that Shkreli misled investors, losing their money on bad stock picks while scheming to try recover millions of dollars of these losses. At one point, Shkreli claimed he had $40M in one hedge fund when it had only $300 in the bank.

That said, prosecutors experienced some challenges in proving their criminal case against the ex-hedge fund manager. For example, during the trial, a number of rich Texan financiers admitted that Shkreli’s scam made them money, sometimes even double or triple of what they invested, when Retrophin’s stock went public.

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Ex-Gerova Financial Group Head is Sentenced in $72M Fraud

Gary Hirst, the former president of Gerova Financial Group who was convicted of securities fraud and wire fraud last year, has been sentenced to six years behind bars. Hirst defrauded Gerova shareholders when he secretly gave away almost $72M of company stock to co-conspirators and himself.

He and his co-conspirators are accused of issuing huge quantities of stock and bilking stockholders and the investing public in order to earn millions of dollars in ill-gotten gains. Hirst and one of the co-conspirators, Jason Galanis, had gained enough control of Gerova that they could engage in transactions to enrich themselves and others even as they worked to conceal the scam.

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