Ponzi Scams

Investor Fraud Claims Include Kiddar Capital and Stanford Ponzi Scam

Published on: February 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

$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.

Investor Fraud: Former MML Investors Broker Who Sold $3.5M of Woodbridge Notes is Barred, Ex-Merrill Lynch Rep Gets 40-Month Prison Term for Defrauding Clients, and Barred UBS Broker is Sentenced in $3.7M Fraud

Published on: February 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

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.

Woodbridge and Its Ex-Owner Must Pay $1B Over Alleged Ponzi Scam

Published on: January 30, 2019 | by Shepherd Smith Edwards & Kantas, LLP

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.

Ex- Wells Fargo Broker Faces 128 Felony Counts in Alleged $1M Ponzi Scam

Published on: January 3, 2019 | by Shepherd Smith Edwards & Kantas, LLP

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

Criminal Securities Fraud: Jury Convicts Former NJ Investment Manager Over $10M Ponzi Scam and Wilmington Trust Executives Get Prison Term of Six Years

Published on: December 21, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In federal court in New Jersey, a jury has found former investment manager Vincent P. Falci guilty of securities fraud and multiple counts of wire fraud related to a $10B Ponzi scam that defrauded over two hundred of his former clients, including Falci’s own relatives, friends, business associates, police officers, and firefighters. Falci was formerly the fire chief in Middletown, NJ.

According to a statement by the US Justice Department, Falci convinced his clients to invest in Vicor Tax Receivables, LLP and the Saber Funds, both of which were under his control. The Saber Funds were supposed to be low risk while offering high returns. Instead, Falci diverted $10M in investors’ money either to himself, his family, and companies he ran or into more high-risk investments, including real estate and day trading, both of which led to losses.

Falci is accused of hiding the losses and fraud. He did this through fake monthly statements showing investors that they were making money, which is why clients continued to work with him. Meantime, he stole from the Vicor Funds to pay Saber Funds investors their returns that they were promised.

Investor Fraud: Ex-HCR Wealth Advisors Advisor Who Stole $1.2M from Pro Athlete Makes a Deal with the SEC, Investment Adviser and His Daughter Settle $7.9M Ponzi Scam Case, and Texas-Based Developers to Pay Over $50M in E-B Offering Scam

Published on: December 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Former HCR Wealth Advisors financial adviser Admits to Defrauding Pro Athlete of $1.2M

Jeremy Joseph Drake, an ex-HCR Wealth Advisors financial adviser, has agreed to a consent judgment in the US Securities and Exchange Commission’s case against him in which he admits that he defrauded a pro athlete and his wife of $1.2M while misleading them about how much he was actually charging them to manage about $35M of their money.

The US government contends that Drake told the couple that he was charging them less than most clients to manage their assets. Instead, they ended up paying $1.2M more in management fees. Drake, meantime, was personally paid $900k in “incentive-based compensation” related to these fees. He is accused of fudging financial statements to them, lying, and then later, after admitting to what he’d done, pressuring the couple not to report him by saying that this could lead to “bad publicity” for the athlete.

Investment Scam: Ex-MRI International CEO Convicted in $1.5B Ponzi Scam, Receiver Says Aequitas Capital Management Was Involved in $617M Fraud, and Texas-Based AriseBank CEO Is Accused in $4M Cryptocurrency Fraud

Published on: December 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Former MRI International Head is Found Guilty in $1.5B Ponzi Scam

Edwin Fujinaga, the ex-CEO of medical billings collections company MRI International, has been convicted of multiple counts of wire fraud, mail fraud, and money laundering. He is scheduled to be sentenced earlier this year.

According to the release issued by the US Attorney’s Office for the District of Nevada, Fujinaga and two other MRI executives were indicted in 2013 and were accused of fraudulently soliciting investments from over 10,000 residents in Japan, who wired their money to the US into bank accounts that he controlled. Fujinaga told investors that their funds would go toward buying medical claims only.

Former Lombard Securities Broker Pleads Guilty in Multimillion-Dollar Ponzi Scam That Defrauded Older Investors

Published on: December 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Steven Pagartanis, an ex-New York broker with Lombard Securities, has pleaded guilty to wire fraud and mail fraud in a Ponzi scam that went on for more than 18 years and caused investors to lose more than $9M of the over $13M that they invested. Many of his victims were older investors who lost a significant amount of their life savings. Many of them had worked with Pagartanis for years.

According to the release by the US Attorney’s Office for the Eastern District of New York, from 1/2000 to 3/2018, Pagartanis persuaded older individuals to get involved in investments involving real estate, including those that had affiliations with an international hotel conglomerate and publicly traded entities. Investors were told that their principal was secure and they would make a fixed return of 4.5 to 8% yearly.

Pagartanis’ victims were instructed to write checks to an entity of which he was secretly in control. The former broker used different bank accounts to launder the stolen money that he then spent on his own expenses as well as to pay other investors their “interest or dividend payments” that they were owed. He set up bogus account statements so as to encourage further investing and to hide his fraud.

FINRA Bars Broker For Selling $10.8M of Notes in $1.2B Woodbridge Ponzi Scam

Published on: December 6, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred yet another ex-broker for selling promissory notes that have since been linked to the $1.2B Woodbridge Ponzi scam. The fraud is believed to have bilked around 8,400 investors.

According to the self-regulatory authority (SRO), broker Frank Dietrich sold 58 investors $10M of promissory notes that came from the Woodbridge Group of Companies. 30 of these investors were clients of Quest Capital Strategies, Inc., which was Dietrich’s brokerage firm at the time of the sales. FINRA said that the former Quest Capital broker earned $261K in commissions from selling the Woodbridge investments.

Quest Capital Strategies reportedly did not know that Dietrich was selling the Woodbridge notes to its customers. Earlier this year, the brokerage firm allowed him to step down after finding that he had sold a product it had not approved and for failing to disclose external business activities.

Investor Fraud: Investment Adviser Pleads Guilty to Retirement Fund Fraud, Stock Research Firm is Sued in Alleged Pump-and-Dump Scam That Targeted Seniors, and A Rabbi is Accused of Running a $35M Ponzi Scam

Published on: November 23, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Investment Adviser Accused of Lying to Retirement Fund Clients Pleads Guilty

Richard G. Cody, an investment adviser who ran Boston Investment Partners and is accused of lying to clients about how he handled their retirement funds, has revised his not guilty plea. Cody is now pleading guilty to both making a false declaration under oath and investment adviser fraud.

According to The U.S. Attorney’s Office for the District of Massachusetts, Cody allegedly lied to at least three investors who had relied on him to manage their retirement savings. The investment adviser is accused of fabricating documents so it would look as if their funds were still in the accounts even though hundreds of thousands of dollars had disappeared.