PatrickPretty.com

Tag: Texas Ponzi scheme

  • BULLETIN: SEC Goes To Federal Court In Dallas To Halt Alleged Ponzi Scheme Involving DOZENS Of Companies; China Voice Holding Corp. Implicated In Alleged Domestic And International Fraud

    BULLETIN: UPDATED 3:07 P.M. EDT (U.S.A.) The SEC has gone to federal court in Dallas to halt the operations of what it described as a highly complex fraud and Ponzi scheme involving a purported VOIP/telecommunications firm and more than 40 individuals and companies.

    A federal judge has frozen the assets of China Voice Holding Corp., and the SEC described the case as a “complicated web” of deceit engineered by David Ronald Allen and others associated with the firm, which is headquartered in Boca Raton, Fla.

    Allen, 60, resides in Dallas. Also named defendants were former China Voice executive William F. Burbank IV, 52, of Delray Beach, Fla.; Alex Dowlatshahi, 36, of Dallas; Ilya Drapkin, 64, of Dallas; Christopher Mills, 34, of McKinney, Texas; Gerald Patera, 69, of Pinehurst, N.C.; and Robert Wilson, 42, of Dallas.

    Dowlatshahi was described by the SEC as a recidivist securities offender who was part of a 2006 offering fraud in California.

    Dozens of companies were part of the China Voice fraud, the SEC alleged.

    Investors were told they’d earn returns of “at least” 25 percent, but an $8.6 million Ponzi scheme was under way, the SEC charged.

    “These promoters falsely touted what they claimed to be a prudent investment with reliable returns through loans made to carefully selected businesses,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that’s a tell-tale sign that something likely is amiss.”

    China Voice, Allen and Burbank were accused of issuing a “series of fraudulent company statements about its financial condition and business prospects,” the SEC said.

    Patera and Drapkin helped China Voice “finance stock promotion campaigns to pump up the company’s stock price,” the SEC charged,

    Meanwhile, Wilson orchestrated a “a blast fax campaign,” the SEC charged.

    “The spam faxes were sent to thousands of people at once and contained false and misleading statements about China Voice and who was paying for the faxes,” the SEC alleged. “At the same time they were spending more than a million dollars on stock promotion, Patera and Drapkin dumped millions of shares of the company into the market.”

    So many individuals and companies were involved in the alleged fraud that the recitation of the names of the defendants and relief defendants in the 50-page complaint took up all or parts of seven pages.

    The facts as outlined by the SEC did not begin until the tenth page of the complaint. Regulators at virtually all levels have been encountering increasingly complex financial capers that involve dozens of corporations and shell companies.

    A case filed in Nevada by the FTC in December alleged that 10 corporations and 52 shell companies were part of a colossal fraud that had gathered hundreds of millions of dollars.

    Read the SEC complaint.

  • Defendant In $50 Million Texas Ponzi Taken Into Custody

    A previous encounter with the Securities and Exchange Commission and a $50,000 fine did not stop Benny Lee Judah from selling unregistered securities, and now Judah has been taken into federal custody.

    Judah, 50, of Lubbock, Texas, pleaded guilty today to one count of money laundering and one count of sale and delivery after sale of unregistered securities. He faces up to 20 years in prison and a fine of up to $250,000 on the money-laundering charge, and up to five years in prison and a $250,000 fine on the count of selling and delivering unregistered securities.

    Although his formal sentencing is scheduled later, Judah was taken into immediate custody by federal agents. His company, Excel Lease Fund Inc., already is in receivership. Judah’s assets have been frozen since April, when the SEC sued him for the second time this decade for selling unregistered securities.

    Both Judah and Excel were previously sued in 2001. He was fined and put on notice not to break securities laws. In 2005, however, he again began to sell unregistered securities, collecting at least $50 million, but Judah actually was running a Ponzi scheme and lying to investors that his company was profitable, investigators said.

    “As part of his scheme, Judah misrepresented the viability of Excel by failing to disclose the true and actual use of investor funds, and the true financial condition of Excel, thus allowing him to conceal, disguise and convert investor monies for unauthorized purposes,” prosecutors said. “He generated false documents consisting of prospectuses, balance sheets, income statements and interest accrual letters that were represented to be true in order to perpetuate the image of a successful company. He mailed these fraudulent documents to investors and received approximately $50,162,707. He represented to investors that Excel was profitable, when it was not, and grossly overstated the value and nature of Excel’s assets.”

    Restitution in the case was pegged at more than $48 million, according to records.

  • Former Texas Bail-Bondsman Charged In $45 Million Ponzi Swindle

    In the aftermath of a probe by the Securities & Exchange Commission and the FBI, a former Texas bail-bondsman has been accused of swindling investors — many of them senior citizens — out of millions of dollars.

    Rod Cameron Stringer was named a defendant in an SEC complaint filed yesterday in Texas.

    Stringer claimed his stock-trading strategy “has generated annual returns as high as 61%, and total returns in excess of 600%,” the SEC said.

    ‘Extremely Lavish Lifestyle’

    In truth, the agency said, Stringer “has been operating a fraudulent scheme since at least 2001, during which he has misappropriated millions of dollars of investor funds to support an extremely lavish lifestyle and to make Ponzi payments to earlier investors with new investor funds.”

    Stringer used less than 20% of the investors’ funds to engage in securities transactions, and those transactions have resulted in substantial losses, not gains, as reported to investors, the SEC said.

    An “expedited investigation” by the FBI and the SEC focused on Stringer’s activities since January 2007, the SEC said.

    “Since that time, the complaint alleges that Stringer raised at least $8.5 million from  approximately 12 -15 investors. Contrary to Stringer’s representations, only approximately $1.5 million of this amount made its way into three securities brokerage accounts, each of which is maintained in Stringer’s personal name.”

    What happened to the money is unclear.

    “The exact disposition of the remaining funds is presently unknown, but it is clear that Stringer used substantial amounts of investor funds to, among other things, finance a horse racing partnership, purchase a luxury boat, build a swimming pool at his office, purchase several pieces of jewelry, pay off mortgages on at least two houses, and purchase several expensive cars and trucks,” the SEC said.

    At least $2.4 million of the $8.5 million invested by clients was used “to pay distributions and purported profits to other investors,” the SEC said.

    A receiver has been appointed “to recover and conserve assets for the benefit of defrauded investors,” the SEC said.