SEC Up To Its Ears In Ponzi Investigations

The Securities & Exchange Commission has charged CRE Capital Corp. with running a Ponzi scheme that sucked millions of dollars from investors.

Meanwhile, a hedge-fund operator in Florida has gone missing — along with $350 million in clients’ money. Although the Florida case is brand new and the SEC hasn’t announced a probe, it almost certainly will open one.

Arthur Nadel, 75, has been missing since Wednesday. The Sarasota Herald-Tribune reported Nadel left a suicide note in a case that’s already being called a “mini-Madoff.”

In the CRE Capital case, the SEC accused the Alpharetta, Ga., company and its president, James G. Ossie, of paying off old investors with money from new investors to create the illusion of profitability.

Ossie and CRE suffered steep losses, the SEC said in its complaint.

“In April 2008, CRE and Ossie opened a trading account in the name of CRE at Forex.com, a division of Gain Capital Group, LLC (“Gain Capital”). CRE and Ossie deposited over $5 million into the Forex.com trading account. Since June 18, 2008, CRE and Ossie traded foreign currency futures in the Forex.com account and incurred losses totaling over $4 million, including commissions and fees.

“On or about December 2, 2008,” the SEC continued, “CRE and Ossie represented to Forex.com, in response to inquiries from that firm, that all of the funds they had deposited into CRE’s trading account were their own funds, and not those of customers or investors. These statements were false.

“In approximately June 2008,” the SEC said, “CRE and Ossie opened a second trading account in the name of CRE in London, at Deutsche Bank. From June through December 2008, CRE and Ossie transferred $12 million of investor funds to the Deutsche Bank trading account in London. From June 2008 through January 8, 2009, CRE and Ossie’s currency trading in the account generated losses totaling $8,067,032.40.”

CRE’s assets have been frozen and a receiver has been appointed.

“CRE and Ossie fraudulently obtained at least $25 million from investors during 2008 by representing that it would use their money to engage in a currency trading program,” the SEC said. “Most investors were advised that they would receive guaranteed returns of 10 percent every 30 days, although a few investors were promised as much as 20 percent.

The company employed multiple layers of deception to fleece investors, the SEC said.

“CRE also falsely claimed that the firm and its program were audited by an outside accounting firm, which had concluded that CRE was not a Ponzi scheme,” the SEC said.

Ossie and CRE also were charged with fraud “relating to their offer to sell $100 million in CRE stock that was slated to begin in early 2009,” the SEC said.

“The SEC’s emergency action in this case will protect investors from further harm — both those who have invested and need all remaining assets preserved as well as those who were contemplating an investment,” said Katherine S. Addleman, regional director of the SEC’s Atlanta regional office.

“We also want to remind investors to be skeptical of promoters promising exorbitant returns. Such claims should be a red flag to investors,” Addleman said.

In the Nadel case, investors grew suspicious when they did not receive statements this month. The Herald-Tribune reported that one of the funds — “Scoop” — in Nadel’s three-fund portfolio could not meet a year-end demand for $50 million in redemptions.

The others were known as “Viking” and “Valhalla.”

People have filed complaints with Sarasota police — not the usual place one goes to file an investment-fraud report — but a place that demonstrates the word “Ponzi” has become positively nuclear.

As was the case with the alleged Madoff Ponzi, local charities have been affected, as have investors’ sense of security and retirement income.

And to think that some members of AdSurfDaily accorded Ponzi operator Andy Bowdoin folk-hero status.

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8 Responses to “SEC Up To Its Ears In Ponzi Investigations”

  1. Don’t you think the fraudulent investment scammers ought to start up their own blog, or somehow find a way to spread the word among that band of brothers that they need to give the suicide/disappearance story a rest? Don’t forget about the Indiana financial fraudster’s faux plane crash followed by a faux suicide (that almost became a real suicide):

    http://tallahassee.com/article/20090117/NEWS01/901170327/-1/BREAKINGNEWS

    He’s in the hospital in Tallahassee — only l0 miles from Andy (if Andy really is still in Quincy, that is). I wonder if Andy will visit him? The fraudster/pilot was captured by U.S. Marshal’s in a KOA campground just outside of Andy’s stomping ground: Quincy — I swear I’m not making that up. For them to meet would be kismet.

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  2. “CRE also falsely claimed that the firm and its program were audited by an outside accounting firm, which had concluded that CRE was not a Ponzi scheme,” the SEC said.”

    Ouch – sounds familiar

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  3. Hi alasycia,

    “CRE also falsely claimed that the firm and its program were audited by an outside accounting firm, which had concluded that CRE was not a Ponzi scheme,” the SEC said.”

    Ouch – sounds familiar

    That line leaped out when I was reading the SEC info.

    Patrick

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  4. Name me one legitimate company that has stated in the company literature they are not a Ponzi. Every time I see some company stating they are not a Ponzi, you can take it to the bank they are a Ponzi. Why else would they even raise the issue? Most people, up until now, hardly knew what the word Ponzi meant.

    It just amazes me they think just because they declare themselves not to be a Ponzi, it makes them legitimate. I think going forward that statement will be a major red flag to most. At least one can hope so.

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  5. I thought I had “It’s not a Ponzi” one the Ponzi Buzzword Bingo list, I must have forgotten. I think “audited by outside accounting firm, found not to be a ponzi” comes under “done due diligence and no red flags”.

    I’m not sure if the SEC is “up to it’s ears” any more this year than in the past. Maybe the publicity around the Madoff case will encourage folk to report ponzi schemes more often. However, it usually takes the SEC some months to investigate a scheme before they instigate proceedings.

    I once heard a story that every 3rd March the SEC celebrate Charles Ponzi’s birthday for keeping them in business all these years.

    A news story on some other recent ponzi schemes:
    http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/01/11/BUKO156JB3.DTL

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  6. Hi Lynn,

    Every time I see some company stating they are not a Ponzi, you can take it to the bank they are a Ponzi. Why else would they even raise the issue?

    Part of it is just plain amateurism. Words are secondary to the acquisition of the autosurf script, which is the crown jewel.

    Of course, by using the word “Ponzi,” they’re also signaling the Ponzi-playing crowd that they’re open for business — a new wrinkle in the wink-nod nature of autosurfs and, apparently, HYIPS.

    Patrick

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  7. Patrick: Did you catch today’s update about the Sarasota financial absconder? Here is what HIS ex-wife had to say about him:

    “My husband had a history in Sarasota that wasn’t a secret,” Hoffman said of Nadel. “Many here knew about his past business deals which had gone sour. Yet, folks still trusted him with their money. Why?”

    WOW — Talk about the triumph of hope over experience….

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  8. Hi Marci,

    Patrick: Did you catch today’s update about the Sarasota financial absconder?

    Just now getting caught up on overnight news about Nadel. I see he used charities as a springboard for his hedge-fund business — doling out some donations, on the condition they were reinvested in the funds.

    One of the things I noticed about one of the new surfs is that it’s trying to position itself as a great choice for charities.

    Maybe there is a master scammer’s playbook out there.

    Thanks for the note.

    Patrick

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