Ponzi Scams

Texas REIT UDF Files Lawsuit Accusing Hedge Fund Manager of Damaging False Statements

Published on: November 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The United Development Funding, a beleaguered Texas real estate investment trust accused of running a $1B Ponzi-like scam, is suing a hedge fund manager for the allegedly “false and disparaging” statements that led to the fraud allegations.

The REIT came under fire two years ago after an investor website issued a report accusing UDF IV of being run like a Ponzi scam. For the last two years, our Texas securities fraud lawyers at Shepherd Smith Edwards and Kantas LTD, LLP has been fielding calls from investors who suspect they may have suffered financial losses from investing in UDF Funds.

According to UDF’s complaint, filed in Dallas County, hedge fund manager Kyle Bass and his Hayman Capital Management are the ones that anonymously published the Ponzi allegations online and then later on a proprietary site. They allegedly did this to damage the UDF Funds.

In its filing with the US Securities and Exchange Commission about the complaint, the REIT accused the defendants of engaging in “false and disparaging statements,” including that: the UDF Funds were part of a Ponzi fraud, they were unable to run their own business, had insolvency problems that made their shares “worthless,” their real estate developments that were “not genuine,” and they “misappropriated” investors’ funds. The filing countered that the UDF Funds were “successful” and had actual real estate developments. The REIT claims that because Bass had set up a “large short position” in the Texas REIT before publishing the false allegations, he and his company “profited” from the damages wreaked by their claims.

Bass had a short position in the REIT. Once he disclosed this news, United Development Funding shares plunged in price. In response to this lawsuit, the hedge fund manager claims it is meritless.

Ponzi Scams: DOJ Begins Paying Distributions to Madoff Victims, Real Estate Investment Scam Allegations Lead to Guilty Plea, and SEC Seeks to Shut Down $38M “Ad Packs” Scheme

Published on: November 28, 2017 | by Shepherd Smith Edwards & Kantas, LLP

DOJ Begins Distributing Payments to Bernie Madoff’s Victims

Nearly nine years after Bernie Madoff was arrested for running a multi-billion dollar Ponzi scam, the US Department Justice has begun to pay out distributions owed to his victims. The money comes from the Madoff Victim Fund, a $4B fund set up for settlements paid by JPMorgan Chase & Co. (JPM), which was the bank that the Ponzi mastermind used, and the estate of Jeffry Picower, who was one of Madoff’s longtime customers.

This fund will pay back over 24,000 victims some $772M during the first round of distributions. Another fund, which is supervised by bankruptcy court, has already paid out over $10B to investors. Investors who will be paid by from Madoff Victim Fund are those that did not qualify for recovery under the bankruptcy proceedings.

NY Woman Pleads Guilty to Running An Investment Scam

Alisa Adler has pleaded guilty to two counts of wire fraud. Adler is the ex-head of ASG Real Estate Services Group.

SEC Cases: $15.7M Final Judgment Issued in Ponzi Scam that Touted Loans to Athletes, MicroCap Issuer is Accused of Accounting Scheme, and Company’s Assets are Frozen in the Wake of Alleged $5.3M Offering Fraud

Published on: November 25, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Regulator Orders Alleged Ponzi Scammers to Pay $15.7M Plus Interest
In its final judgement against ex-pro football player William D. Allen, Susan Daub, and three entities, the US Securities and Exchange Commission is ordering the defendants to pay over $15.7M in disgorgement of ill-gotten gains in addition to prejudgment interest for an alleged Ponzi scam that raised nearly $32M from investors. Allen, formerly of the Miami Dolphins, and Daub, who both pled guilty to related to criminal charges last year, have been sentenced to six years in prison. They must pay $16.8M in restitution for that action. The SEC’s order will be deemed met “based on the restitution order” in the criminal case.

The SEC’s complaint contends that Daub and Allen and the entities misled investors about the loans, which were supposed to go to professional athletes. Instead, they allegedly used just part of the money to issue the loans while using investors’ funds to cover nightclub and casino expenses, other ventures, and to pay back other investors.

Microcap Issuer and Its Ex-CEO Resolve Investor Fraud Allegations
Integrated Freight Corporation and its ex-chairman/CEO David N. Fuselier have settled SEC charges accusing them of investor fraud. Both Fuselier and the company, however, did not deny or admit to the allegations.

SEC Orders 235 LLCs to Produce Documents Related to Its Woodbridge Fraud Probe

Published on: November 5, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

Ex-Investment Manager Gets 12-Years in $96M Ponzi Scam

Published on: September 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

Brothers Plead Guilty in $40M Oregon Ponzi Scam That Bilked 400 Investors

Published on: September 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

Alleged $283M Institutional Investor Fraud Involving Biotech Companies Leads to Criminal Indictments

Published on: September 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

Thema International Reaches $687M Settlement Over Madoff Ponzi Scam

Published on: September 8, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

NJ Investment Adviser Allegedly Used Investor Funds to Pay Gambling Bills, Radio Host is Accused of Bilking Investors of Over $5M in Ticket Resale Scheme, & Pennsylvania Man Pleads Guilty to Felony Charges

Published on: September 6, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.

Ex-Financial Adviser Dawn Bennett Faces SEC and Criminal Charges Over Alleged $20M Investor Fraud

Published on: August 28, 2017 | by Shepherd Smith Edwards & Kantas, LLP

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.