EDITOR’S NOTE: R.J. Zayed, the court-appointed receiver in the Ponzi and Forex fraud case brought by the SEC and CFTC against Trevor Cook and Pat Kiley, has said many investors were made destitute by the scheme. Not all investors lost their money, however. Yesterday Zayed filed petitions to claw back millions of dollars in “preferential transfers”  made to investors as the scheme allegedly was unraveling.

Zayed, who is seeking to make victims as whole as possible, also filed actions against two banks to recover mortgage payments made by Cook on two Minnesota properties. All in all, the clawback actions are targeted at 22 individuals or entities on the legal theory they are not entitled to benefit from proceeds that flowed from Cook’s illegal scheme. The precise number entities or people who allegedly received tainted money is not known. One of the investors named in the clawback actions was the grandmother of a Cook employee, according to court filings.

Chief U.S. District Judge Michael J. Davis has given Zayed the authority to pursue “any third party recipient of asset transfers from Cook or any named Receivership entity,” meaning more clawback actions could be in the offing as the probe by the receivership continues.

Here, now, the clawback story . . .

Acknowledged Ponzi swindler Trevor Cook knew in 2008 that Crown Forex S.A., a Swiss entity in which the CFTC alleged Cook held a majority ownership stake, “was insolvent and incapable of paying its investors,” according to new petitions filed by the court-appointed receiver in the case.

And Cook also knew that the Financial Industry Regulatory Authority (FINRA) was asking questions as early as April 2009. “No later” than May 2009, according to receiver R.J. Zayed, Cook knew Swiss regulators had placed Crown Forex S.A. in “liquidation.”

On June 22, 2009, according to Zayed, “the SEC conducted a surprise investigation of the scheme’s headquarters and personally served Cook with a subpoena.”

Up to six SEC attorneys and accountants were poking around in Minneapolis for five days in June 2009. The clamor surrounding the scheme set in motion a series of events in which certain investors with links to Clifford Berg, a carpet salesman and Cook’s father-in-law, suddenly began to receive back their money, according to court filings.

Neither Berg nor the investors has been accused of wrongdoing. Events in the case demonstrate the risks that confront both investors and individuals who drive business to Ponzi schemes and other forms of investment fraud. Neither Ponzi principal nor interest is safe because the money comes at the expense of other investors, not as a result of legitimate commerce. Zayed is seeking to force Berg, his wife and the investors to return money traced to the scheme. The Bergs already have agreed to return $948,848.36.

Clifford Berg worked as a Cook recruiter and brought investors’ money into the scheme, according to court filings. The Bergs also were investors.

One of Cook’s investors is believed to be the husband of Berg’s dental hygienist, who learned of the purportedly profitable trading program from Berg. Other investors are believed to have known Berg from the carpet business, according to Zayed.

On June 29, seven days after the SEC appeared unannounced in Minneapolis, the investor married to the dental hygienist received two checks totaling $916,570 from the scheme, according to court filings. The investor had placed $785,162.44 in the program and did not complete paperwork for the withdrawal.

Some of the investors received calls from Berg. One of the investors placed $147,233 in the program. Although he did not request a withdrawal, he received a check for $360,700 on June 29, 2009, a week after the SEC appeared, according to Zayed.

Another investor believed to be an acquaintance of Berg placed $1,519,999.51 in the program. This investor called Cook “during the last week in June 2009″ to inquire about investing money for his nephew, according to court filings.

Cook told the investor that there were problems in “another part” of the company, according to Zayed.

On the very next day, according to Zayed, the investor called Cook and requested withdrawal of his money, but did not complete paperwork for the withdrawal.

Regardless, Berg “delivered” a check to the investor at his place of business “[s]everal days later,” according to Zayed. The investor’s wife also was an investor and also received a check. Together the couple had placed more than $1.62 million in the program. The total paid to the couple exceeded their outlay, according to Zayed.

Another investor believed to be a Berg acquaintance from the carpet business placed $618,000 in the program. This investor — in late June 2009 — received a call from Berg during which Berg told him that there were “problems with the company,” according to Zayed.

“Berg also mentioned a possible investigation,” Zayed said.

The investor then went to Berg’s house to pick up a check for $747,500, according to Zayed. The check was dated June 29, a week after the SEC came to town. The investor then received three smaller checks, including a check for $2,200 drawn on a gold and bullion business, a check for $2,100 drawn on the bank account of Cook’s brother and a check for $2,100 drawn on the account of Oxford Global Partners LLC.

Another married couple believed to be acquaintances of Berg invested $243,500 in the program, according to Zayed. Although the husband and wife requested no withdrawals, Berg contacted them in late June 2009, telling the husband that accounts had been closed and that checks were in the mail, according to Zayed.

This couple received a total of $280,950 in three separate checks after the SEC came to Minneapolis, Zayed said.

On June 28, another Berg acquaintance received a call from Berg. This person had placed $375,000 in the program and did not complete paperwork for a withdrawal.

Berg told this investor that there was going to be “some sort of investigation,” according to Zayed. The investor later received a check for $413,600. The check was dated June 29, seven days after the SEC appeared in Minneapolis.

Yet another investor believed to know Berg from the carpet business plowed $752,134 into the program, according to Zayed.

This investor had “received a call from Berg” and was told  “that there was some kind of investigation” and that Berg had “cashed everyone out,” according to Zayed.

Berg then “delivered” two checks totaling $795,911.53 to the investor, according to Zayed.

It appears as though Berg’s supervisor also was an investor, and placed $250,000 in the program, according to Zayed. The grandmother of a Cook employee also was an investor, placing $102,000 in the program.

When the grandmother “saw a newspaper article regarding the Receivership Entities and mentioning lawsuits filed against them,” she called her grandson  “and told him to get her money out,” according to Zayed.

Each of the investors named clawback targets “received payments preferentially over hundreds of other investors who were defrauded by Cook and unable to withdraw the money they had invested in the Trading Program,” Zayed said in court filings.

Read the clawback petition filed by Zayed against 20 investors. Read an earlier filing against the Bergs.

BULLETIN: The FBI will administer a lie-detector test to Ponzi schemer Trevor Cook. Meanwhile, his July 26 sentencing date may be delayed, a source told the PP Blog.

The date upon which the test will be administered was not immediately clear. The source, however, suggested that Cook could be subjected to the polygraph as early as tomorrow.

Under the terms of Cook’s April agreement in which he pleaded guilty to mail fraud and tax evasion in a $190 million Ponzi scheme case involving more than 1,000 investors, Cook is required to take a polygraph exam “[i]f requested by the government.”

Victims have expressed fears that Cook, 38, has hidden money from the scheme and could emerge from prison in his early sixties to reclaim the loot. The scheme was operated out of Minneapolis.

R.J. Zayed, the court-appointed receiver in the case, has recommended that the government administer the lie-detector test, according to his website.

Victims arranged a meeting with prosecutors, and the polygraph became a topic of conversation, according to a source who has knowledge about the meeting. Prosecutors have instructed the FBI to administer the test.

The Cook case has turned into an international paper chase. Zayed has served court orders on more than 400 financial institutions.

“We also have served subpoenas on approximately 250 individuals and institutions,” Zayed noted on his website. He added that he expects investor losses to top $139 million.

FBI Director Robert Mueller has warned Congress at least twice this year about the increasing complexities of white-collar crime, including criminals’ reliance on shell companies and a “shadow” banking system to frustrate efforts to detect and unravel schemes.

Cook was at the center of an international fraud scheme, part of which involved companies with confusingly similar names, according to court filings.

Victims have said they fear he is incapable of telling the truth.

One of the Trevor Cook homes. From court filings in the SEC/CFTC case.

Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme are none too pleased with Cook’s plea deal, which may place a ceiling of 25 years on any prison sentence he receives while tens of millions of dollars remain missing.

One investor has told the PP Blog that a group of investors is seeking a meeting with prosecutors either to overturn the plea deal or delay Cook’s sentencing until more information becomes known. Cook, 38, is scheduled to be sentenced in Minneapolis July 26, one month from today.

Cook pleaded guilty in April to mail fraud and tax evasion. Under the terms of the agreement, he is required to cooperate with authorities and R.J. Zayed, the court-appointed receiver, to unravel the scheme. Although Cook has met with both the government and Zayed, investors are concerned that he is incapable of telling the entire truth. Their concerns are based on his history of telling spectacular lies and thumbing his nose at both investors and the court by spending investors’ funds even after his assets were frozen in November 2009.

Records from the National Futures Association (NFA) show that Cook has a history of scamming. In 2006, NFA fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents. Read more about Cook’s NFA encounter here. Read more on yet-another case in which Cook’s name was referenced by NFA here.

Before we get into the details of some of recent events in the Cook case, we’d like to provide a short capsule based on court filings. It has become clear that the Cook Ponzi scheme has caused financial pain for hundreds of people, including loved ones, and also has resulted in frustration — some of it of the needless and senseless variety.

Such frustration surfaces in virtually all Ponzi cases, in part because the crimes can be extraordinarily elaborate even though the basic concept of a Ponzi is simple: tricking people into believing everything is on the up-and-up by using cash from new investors to pay earlier investors or duping people into rolling over their investments instead of taking distributions to keep the cash from drying up — all while the Ponzi schemer siphons funds and glad-hands and back-slaps with investors, politicians, bankers and others to create the illusion of success.

At the end of the day, however, Ponzis are about people. They cause pain and frustration for every person and institution they touch.

• Cook’s in-laws, Clifford and Ellen Berg of Apple Valley, Minn., received $948,848.36 from the scheme. Zayed recovered $726,650.38 of that sum, and then effectively sued the Bergs by seeking a court order for the balance of $222,197.98. The SEC, which had named the Bergs relief defendants in the case for receiving ill-gotten gains, backed Zayed in his efforts to recover the balance. Records show that the Bergs raised $194,000 to pay the receivership estate through the sale of two cars, the tapping of an IRA account and by taking out a mortgage on their cabin. They were given credit by the receivership for $13,500 from the sale of another vehicle, but still came up nearly $15,000 short of the sum needed to retire the receivership balance. If the shortage is not paid by Sept. 15, a judgment will be entered against the Bergs, who have retained the right to be treated as victims of their son-in-law and to file a claim for the principal they invested with Cook.
• Zayed effectively had to sue Wells Fargo by seeking a court order to force it to turn over the relatively small sum of $9,275.22 from Cook’s bank accounts. This document is worth reading because it paints a picture of a receiver — Zayed — encountering frustrating resistance in his bid to round up assets for victims. Although the Cook/Kiley Ponzi is extremely serious business that has altered the lives of more than 1,000 people, the document linked to above is almost dolefully comedic. Zayed eventually had to file a 12-page legal document to force the return of the sum. Just 13 days after Zayed asked a federal judge to order Wells Fargo to return the money, he filed a three-page document advising the judge that the bank finally had turned over the sum — something he’d been trying to get it to do for months.
• If you’re a victim of a Ponzi scheme or a loved one of a Ponzi schemer — such as Gina Cook, Trevor Cook’s wife — this document shows that your life may start to revolve around attorneys. No matter how you slice it, the result is conflict — legal, emotional or otherwise.

Can Cook Be Trusted In Any Context?

As noted above, some investors fear that Cook is incapable of telling the full truth. There is fear that he has stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

International litigation can be an extremely complex thing. The Cook case, according to Zayed, has required the notarization of documents “under the Hague Convention standards.”

One year ago today, President Obama announced a crackdown on international fraudsters. On the same day, the AdViewGlobal autosurf announced a new, offshore wire facilitator. By November, the president had created the interagency Financial Fraud Enforcement Task Force.

Longtime readers of the PP Blog may scarcely believe a year has passed since the AdViewGlobal (AVG) autosurf announced a new, offshore wire facilitator — on the same day President Obama announced a crackdown on international fraud.

Obama delivered his remarks at 11:37 a.m. By 5:54 p.m., a member of an AVG forum operated by some of the Mods and members of the Pro-AdSurfDaily Surf’s Up forum announced that AVG members could wire money offshore from the United States after the company’s bank account had been mysteriously suspended earlier in the year.

AVG highlighted its purported “offshore” location in sales promos.

The date of the wire announcement — May 4, 2009 — was an important one in the history of the PP Blog. In the following weeks, the Blog came under attack by advocates for autosurf Ponzi schemes. In the months that followed, however, one autosurf scheme after another came crashing down — including AVG.

Not even the collapse of one autosurf Ponzi scheme and HYIP scheme after another, however, has caused serial promoters to renounce these sordid pursuits. Too much money is involved. Why fret over the national-security implications if a downline commission is on the line in this shadowy and unseemly pocket of reprehensible commerce populated by greedsters, MLM hucksters and just plain criminals and racketeers?

In this seedy world of constantly expanding rationalizations for criminal conduct and personal profit, the bomb or missile probably will land on a neighborhood that deserves to be destroyed. Right? Longtime readers of the PP Blog know the Ponzi advocates reshape their stories whenever the need arises. Any fanciful, made-up reality will do.

Some of the Blog’s readers — and the Blog itself — came under near-ceaseless attacks last spring and summer from people who desire to legalize Ponzi schemes. Although the proposition itself is absurd, it was championed by the Blog’s Kool-Aid-drinking critics. Indeed, some of them believe, for example, that all commerce should be legal.

Some of them are so out-of-touch that they appear not to recognize they are advancing the argument not only for economic misery and the steady supply of drugs for the schoolchildren of America, but also for slavery and human bondage. Their argument is one that would set Bernard Madoff free if society placed any credence in it at all. Madoff victims would be out billions of dollars, 80-year-old people fleeced of their pensions and savings would be forced to reenter the workforce because “that’s the breaks” of capitalism — and yet Madoff would be set loose to run a brand-new scheme of his choosing.

No part of that vision for America computes. It is a desperate argument of convenience advanced by people who are willing to embrace crime as long as some people make money. In short, it’s the delusional argument for Enron-style capitalism applied to Ponzi schemes. The scalding irony is that some of the very same people who championed Andy Bowdoin of AdSurfDaily did not do the same for Madoff. The hypocrisy — the disconnect — is stunning. If the basis of a pro-Ponzi argument is that all commerce should be legal and that the government wields too big a stick, then both Madoff and Bowdoin should be equally championed — victims be damned.

So what if Grandma, 92, is greeting customers at Walmart because Madoff needed another big house? And so what if Enron employees and stockholders lost jobs and what they believed to be their financial security? That’s the breaks. Right? It’s much better to follow the lead of some AdSurfDaily members in calling for the prosecutors to be jailed and the judges to be brought up on charges for violating their oaths? Right?

Today the PP Blog invites readers to visit its archives.

You’ll see a story about the announcement of AVG’s purported new, offshore wire facility here. You’ll find a related story here.

In this story, you’ll find a tie between KINGZ Capital Management — AVG’s purported offshore facilitator — and the Trevor Cook Ponzi scheme in Minnesota.

Here you’ll find a comment from a purported attorney who advised the PP Blog that it might be stepping on too many toes by publishing stories about AVG. Our response is here.

You’ll find a story about the collapse of AVG here. The collapse occurred about 23 days after we received the note from the purported attorney. As a side note, the story about the collapse also points out that AVG threatened its own members.

Here you’ll find a story about AVG’s name being mentioned in a racketeering lawsuit against AdSurfDaily, which has close ties to AVG. (Take time to read the comments from readers below the story.)

In this earlier story, we provided plenty of reasons for people not to join AVG.

We also recommend you read this story and the accompanying comments. Weighed by a number of factors beyond page views, it is the “most popular” story in the history of the PP Blog.

Finally, we encourage you to read this story. It’s one of a number of stories we’ve done on  what the President of the United States is doing to combat the insidious amount of financial fraud.

EDITOR’S NOTE: Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme in Minnesota say they believe Cook is lying to investigators about the whereabouts of assets and perhaps other elements of the probe.

“We do not believe this much money could be totally lost in such a short period of time,” an investor told the PP Blog this evening.

The comment followed on the heels of a grim statement issued today by R.J. Zayed, the court-appointed receiver in lawsuits brought against Cook by the SEC and CFTC in November. Cook, 37, pleaded guilty to criminal charges earlier this month and is required to cooperate in unraveling the money mystery as part of his plea agreement.

Zayed said he met with Cook April 23 — and Cook shed little new light on the probe.

Here is the verbatim statement of the receiver (coloring added to distinguish Zayed’s statement from the PP Blog’s Editor’s Note):

The Receiver met with Trevor Cook on April 23, 2010 at the United States Attorney’s office in Minneapolis, Minnesota for about 4½ hours for the purposes of identifying, locating, and retrieving assets belonging to the Receivership Estates. Also present at the meeting were representatives of the SEC, the CFTC, the FBI, the IRS, and the United States Attorney’s Office.

Other than the $362,700 in cash and the collection of “Fabergé” eggs or purses resembling “Fabergé” eggs that Cook caused to be turned over to FBI on April 12, 2010, and which were identified at Cook’s change-of-plea hearing on April 13, 2010, Cook provided the Receiver with little new information with respect to the nature and location of any Receivership assets. Almost all of the information that Cook provided to the Receiver was already known to the Receiver as a result of the Receiver’s own investigation in this matter.

Cook informed the Receiver that he had no submarines, houseboats, or hidden cash. He also identified no real estate, personal property, cash, bank accounts, safe-deposit boxes, jewelry collections, art collections, bonds, stocks, precious metals, buried treasures, or assets of any kind that were not already known to the Receiver. Cook further informed the Receiver that he has not given any assets to others to hold or hide for him. In sum, Cook identified little more than what the Receiver had previously identified, through the Receiver’s investigation, as assets belonging to the Receivership Estates.

Cook identified three gambling accounts that were not included in the public Receiver reports; however, the Receiver already was aware of them. Those accounts contain over $100,000, but the Receiver has not been able to retrieve the money because the accounts are located in places outside of the Receiver and the Court’s authority (Costa Rica, Cyprus, and Jamaica). With Cook’s cooperation, these funds may be recoverable.

According to Cook’s plea agreement, “his currency trading during the period from July 1, 2006 through August 31, 2009 at PFG in Chicago generated trading losses in excess of $35 million.” Cook also filed a claim against Crown Forex, S.A. for $67 million in investor funds that he claims were being held by Crown Forex, S.A. Crown Forex, S.A., however, is insolvent. Therefore, the timing and the amount of any potential recovery is speculative, uncertain, and unknown.

R. J. Zayed
Court-Appointed Receiver for Trevor Gilson Cook et al.

The acts of Nevin Shapiro — a Florida man arrested in New Jersey yesterday on charges of orchestrating a $900 million Ponzi scheme — represent a “perfect example of greed run amok,” an FBI agent said.

Separately, a grand jury in Colorado has charged two men under the state’s organized-crime statute with operating an $18 million securities-fraud scheme that affected at least 270 investors.

Arrested in Colorado were Bela Geczy, 57, of Longmont, and Michael Brian Kass, 48, of Boulder. Authorities said they orchestrated a massive Ponzi scheme involving domestic and offshore business opportunities.

The court docket in the cases against Geczy and Kass shows two dozen felony counts, including violations of the Colorado Organized Crime Control Act, conspiracy to commit securities fraud, securities fraud by fraud or deceit and securities fraud by untrue statement or omission.

Like Florida, Minnesota, Washington, New York, South Carolina, California, Michigan and other states, Colorado has been plagued by Ponzi and fraud schemes. No fewer than five major Ponzi or financial fraud probes are under way in Colorado. Records suggest the highly complex frauds involved more than $100 million.

In New York alone this week, two major financial-fraud cases were filed. The schemes involved in the neighborhood of $101.5 million, according to court filings. Meanwhile, U.S. Attorney Jenny A. Durkan of the Western District of Washington outlined five major Ponzi probes in various states of completion in the Greater Seattle area. These cases involve tens of millions of dollars, according to records.

At the same time, the main page of the website of U.S. Attorney B. Todd Jones of the District of Minnesota features links to three major Ponzi cases in various stages of investigation. One of the cases is the Tom Petters’ Ponzi case. Petters was sentenced this month to 50 years in federal prison for presiding over a $3.65 billion fraud.

Jones’ website also includes information on a Ponzi case involving at least $190 million. Trevor Cook pleaded guilty to mail fraud and tax evasion in the fraud earlier this month, and is awaiting sentencing. The website also includes information on the investigation into the business practices of Steve Renner in an alleged autosurf Ponzi scheme case involving tens of millions of dollars.

Florida/New Jersey Cases Against Nevin Shapiro

Shapiro, 41, was a prominent Miami Beach businessman. Authorities now say he was operating a Ponzi scheme since 2005 that rivaled the $1.2 billion Scott Rothstein scheme in dollar volume. Rothstein pleaded guilty in his massive fraud case earlier this year.

Like Rothstein, Shapiro liked to chum around with sports figures and live large, according to records.

Shapiro used “stolen funds to purchase a pair of diamond-studded handcuffs, which he gave as a gift to a prominent professional athlete,” prosecutors said. He also spent more than $400,000 for floor seats to watch the Miami Heat, a team in the NBA.

At the same time, prosecutors said, he spent about $26,000 per month on mortgage payments on his $5.3 million residence in Miami Beach, while directing about $7,250 per month for payments on a $1.5 million dollar Riviera yacht and roughly $4,700 per month for the lease of a Mercedes-Benz.

Viewed on a yearly basis, the payments on the residence, yacht and car alone consumed more than $450,000 — and yet Shapiro’s purported business produced no sales.

A veteran FBI agent said the case was about naked greed.

“This case is a perfect example of greed run amok,” said FBI Special Agent in Charge Michael B. Ward. “In pursuit of wealth and a lifestyle he was otherwise unable to attain, Mr. Shapiro allegedly preyed upon unsuspecting investors looking to secure a safe place to maximize their investments.  Instead, their futures have been irrevocably damaged.”

Although purportedly in the business of buying groceries in a lower-priced market and selling them wholesale in markets in which they would fetch higher prices, Shapiro’s company largely was a mirage that conducted virtually no legitimate business after 2004 and sustained itself by paying investors with the money of other investors, prosecutors said.

“Nevin Shapiro is charged with tricking investors with false documents and false promises,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “He spent tens of millions of their money on gambling debts, lavish gifts and a luxury lifestyle built on a house of cards.”

Authorities gave credit for the Shapiro criminal collar and an accompanying civil action by the SEC to the combined investigative efforts of the Financial Fraud Enforcement Task Force. President Obama formed the Task Force in November 2009.

Shapiro, prosecutors said, diverted at least $38 million in investors’ funds for his own use, and investors now are out tens of millions of dollars.

A girlfriend received goods totaling $116,000 from a charge card, which Shapiro used to rack up $640,000 in personal purchases, according to court records.

The IRS is part of the investigative team in the Shapiro case.

“Scammers, con artists and swindlers will do and say anything to get you to buy into their scheme,” stated William P. Offord, Special Agent in Charge, IRS-Criminal Investigation.

Like his investigative colleagues in other Ponzi cases, Offord reuttered the age-old adage:

“Remember the old cliche,” he said.  “If it’s too good to be true, it probably is.’”

The executive director of the newly created Financial Fraud Enforcement Task Force is a veteran federal prosecutor who served on the team that shined the light on the spectacular fraud of Enron Corp. and gained the convictions of former executives Kenneth Lay and Jeffrey Skilling in 2006.

Meanwhile, the Task Force now has its own website — StopFraud.gov — and is targeting fraudsters and criminals who have fleeced the American public through Ponzi schemes, mortgage fraud, tax schemes and other financial crimes, the Justice Department said.

StopFraud.gov is designed to be an information hub and educational resource that “combines resources from a wide range of federal agencies on ways consumers can protect themselves from fraud and report fraudulent activity.”

Tens of thousands of people — from Enron employees to employees of the Arthur Andersen accounting firm — lost their jobs because of the Enron fraud and the accompanying accounting scandal. Investors lost fortunes.

Robb Adkins, who became executive director of the Task Force in February, was on the Enron prosecution team in the main case and was the lead prosecutor in Lay’s separate trial for bank fraud. The Enron case ranks among the largest frauds in U.S. history.

Adkins formerly was the top federal prosecutor in Orange County, Calif., working out of the Ronald Reagan Federal Courthouse in Santa Ana.  He was a special prosecutor in the Enron trials, which were held in Houston.

“The Financial Fraud Enforcement Task Force is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud, but one of our best partners in the fight is a vigilant, informed public,” said Adkins. “Throughout government there are resources to help hardworking, honest Americans protect themselves from fraud and report fraud, and StopFraud.gov will connect the public with those valuable tools.”

President Obama created the Task Force by executive order in November. One of the first cases it tackled was the prosecution of Minnesota resident Trevor Cook in a $190 million Ponzi scheme.

Cook, 37, pleaded guilty last week to mail fraud and tax evasion. He is jailed awaiting sentencing, and his plea agreement requires him to cooperate with the government and the court-appointed receiver in the case to recover assets.

Among other things, Cook, who purportedly bought a submarine to access his island retreat in Canada, is required to take a lie-detector test “if requested” to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.”

EDITOR’S NOTE: There was significant action in Ponzi cases today. Earlier we reported on the guilty plea of Trevor Cook in Minnesota and the issuance of a bench warrant in South Carolina for Michael Derrick Peninger. The brief below summarizes action in the Ponzi and affinity-fraud case case of Steven Byers in New York, the Ponzi case of Barron A. Mathis in Tennessee, and new allegations of a Forex Ponzi scheme against Claudio Aliaga in Florida.

New York: Steven Byers, 47, of Oak Brook, Ill., pleaded guilty today to felony counts of conspiracy and wire fraud in a Ponzi case said to involve $255 million. U.S. District Judge Denny Chin, who sentenced Bernard Madoff to 150 years in prison, is the presiding judge in the case. Byers will be sentenced in September. He faces a maximum of 25 years in prison.

Byers was the former president and chief executive officer WexTrust Capital LLC, a private-equity firm. Orthodox Jews were targeted in the scheme, which involved real estate and specialty finance.

“From at least 2003, Byers and others raised money from investors pursuant to private placement offerings and then used material amounts of that money for other purposes, and did not disclose their diversion of funds to investors,” prosecutors said. “In one such private placement, Byers and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration (GSA).

“According to the GSA private placement memorandum issued to investors by WexTrust Capital,” prosecutors said, “the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses.

“The seven GSA properties, however, were never purchased. Instead, virtually all of the funds raised from investors to purchase the properties were diverted by Byers and others to other purposes, but investors were never informed that the funds were used for any purpose other than to purchase and operate the seven GSA properties. Byers and others later agreed to make up a story that they would then tell the GSA investors regarding what happened to their investment,” prosecutors said.

The guilty plea was entered as a result of a plea deal with prosecutors. Byers “agreed to forfeit $9.2 million and is subject to mandatory restitution and faces criminal fines up to twice the gross gain or loss derived from the offense,” prosecutors said.

Tennessee: In Nashville, Barron A. Mathis, 29, pleaded guilty to wire fraud. He formerly was vice president and portfolio manager for J.C. Reed & Co., a failed financial services company headquartered in Franklin.

Mathis sold his Ponzi and fraud scheme to friends, acquaintances and clients, collecting $11 million in the process, prosecutors said. Most of the investors were elderly, inexperienced traders.

“Cases like these are egregious examples of predators who target vulnerable and innocent victims through false and fraudulent business practices,” said U. S. Attorney Edward M. Yarbrough. “By his own admission, Mathis encouraged people to invest by falsely promising security, growth and inflated returns on their money, but instead the investors lost their savings as part of an elaborate fraud scheme.”

U.S. District Judge Robert L. Echols will sentence Mathis. A sentencing date has not been set.

Florida: Claudio Aliaga, of Davie, has been charged civilly by the CFTC with operating a commodity-pool and Forex Ponzi scheme that gathered $4.5 million.

Also charged was Aliaga’s company, CMA Capital Management LLC of Miami Lakes.

Named relief defendants were Aliaga’s wife, Betty Aliaga, and a company known as CMA Global Investement (sic) Fund LLC. The CFTC noted that the company misspelled its own name and “received funds as a result of defendants’ fraudulent conduct.”

U.S. District Judge Marcia G. Cooke ordered an asset freeze.

UPDATED 11:31 A.M. EDT (U.S.A.) Federal prosecutors have filed a motion to disqualify attorney Mark Kallenbach as counsel for INetGlobal and related companies, claiming that Kallenbach is attempting to be both a witness in the case and a lawyer for multiple clients involved in a Ponzi scheme, wire fraud and money-laundering probe.

Kallenbach, prosecutors said, has made himself a subject of cross-examination because of an affidavit he filed last month. They added that wearing two hats in the same case might create a conflict with the Minnesota Rules of Professional Responsibility, a local rule of U.S. District Court in Minnesota and the “Court’s inherent supervisory authority over its bar.”

“Should Mr. Kallenbach testify, he will be cross-examined,” prosecutors said. “The Court will have to decide whether Mr. Kallenbach’s voluntary assumption of the role of witness works as a waiver of the attorney-client privilege on cross-examination, or whether the government’s cross-examination of Mr. Kallenbach will be limited, in ways it might not be limited if the witness was not counsel to several parties, in order to preserve the privilege.”

On April 2 — a week ago yesterday — prosecutors said INetGlobal had no attorney of record in the autosurf Ponzi scheme litigation. Kallenbach filed a notice of appearance for the firm and several related companies on Monday, three days after the prosecution’s filing.

On Wednesday, Kallenbach filed a second affidavit (see subhead below) labeled a supplement to an affidavit he filed March 25.

Prosecutors responded by saying Kallenbach’s second affidavit “heightens the government’s concern about Mr. Kallenbach attempting to serve as both lawyer and witness” and that he should be disqualified as an attorney for “any of the individuals or companies involved” in the case.

“This motion is brought because Mr. Kallenbach has made himself a necessary witness in this case,” prosecutors argued. “This is a case in which Mr. Kallenbach conducted his own
investigation and then voluntarily drew up a lengthy affidavit setting forth his observations.”

Their claim is based on a 20-page affidavit and 12 additional pages of exhibits Kallenbach filed March 25 — before he entered his notice of appearance as INetGlobal’s attorney in court.

In his March 25 affidavit, Kallenbach said he conducted an “investigation” and concluded that “Inter-Mark and its subsidiary iNetGlobal and its other subsidiaries are clean, legitimate and profitable businesses.”

Kallenbach, in the March 25 affidavit, attacked an affidavit for a search warrant by the U.S. Secret Service and also challenged assertions the government made about V-Local, a company related to INetGlobal.

Prosecutors argued that the affidavit and conclusions Kallenbach described as “true facts” make him a witness. Some of the information was woven into a memorandum of law filed March 25 by Jon Hopeman on behalf of INetGlobal owner Steve Renner, prosecutors said.

The prosecution motion was filed by Assistant U.S. Attorney John Docherty, one of the prosecutors who handled the Ponzi case against Tom Petters. Petters was sentenced this week to 50 years in prison for operating a $3.65 billion fraud.

U.S. Attorney B. Todd Jones of the District of Minnesota approved the filing of the disqualification motion. The main page on Jones’ website lists three major Ponzi probes the office has undertaken in recent months, including the Petters’ case, the case involving Minnesota Ponzi scheme figures Trevor Cook and Pat Kiley, and the investigation into the business practices of Renner at INetGlobal.

Minnesota’s Ponzi Plague

Ponzi schemes have plagued Minnesota. The Cook/Kiley case involves at least $190 million and investor losses of at least $139 million, according to court filings.

Another big case in Minnesota involved Gerard Cellette Jr. Cellette was implicated in a $53 million Ponzi scheme last year by Hennepin County Attorney Mike Freeman.

Meanwhile, Charles “Chuck” E. Hays pleaded guilty last year to charges in a $20 million Ponzi-scheme case in which the government seized a $3 million yacht.

Separately, three members of a Minneapolis family were indicted last year on Ponzi and fraud charges. The case became known as the Kalin Thanh Dao case. Dao’s parents also were indicted.

Dao and her parents pleaded guilty. Prosecutors said money was siphoned from the scheme to pay for gambling in Las Vegas.

“Investors were promised that their money would be placed in investment programs targeted within specific markets and industries,” prosecutors said. “Investors were also told that Kalin Dao had a ‘partner’ who held a seat on the New York Stock Exchange, had contacts in the emerging Asian markets who had ‘inside’ information, and was associated with various Las Vegas casinos.”

The Kalin Thanh Dao probe uncovered a web of deceit in which Dao’s father claimed nearly $3 million in losses for businesses owned by his daughter to eliminate his personal tax liabilities, and Dao’s mother claimed to be “single,” the “head of [a] household” — and also claimed a tax exemption for Dao.

Kalin Thanh Dao was 32 years old and operated at least four companies, prosecutors said.

“Instead of investing the investors’ funds as promised, Kalin Dao diverted substantial amounts of the funds for her own purposes, including gambling, lulling payments and personal expenses,” prosecutors said. “She also admitted that the fraud was between $2.5 and $7 million.”

Also on the Ponzi front, AdSurfDaily, a Florida-based company implicated in a massive autosurf Ponzi scheme by the Secret Service in 2008, was popular in Minnesota. Some Minnesota members of ASD were among the staunchest defenders of ASD President Andy Bowdoin.

The Secret Service referenced the ASD case in filings in the INetGlobal case, saying an undercover agent was introduced to INetGlobal by an ASD member who described the operation as a wink-nod enterprise.

A federal judge in the District of Columbia has issued three orders of forfeiture totaling more than $80 million in the ASD case. Bowdoin is appealing. His appeal brief cites two other cases filed under seal and suggests that prosecutors subpoenaed at least two attorneys involved in the defense of ASD’s assets to appear at a grand-jury proceeding.

It is unclear if the attorneys attempted to invoke attorney-client privilege. What is clear is that a federal judge ordered the attorneys to appear and that the order is being challenged in a federal appeals court.

Kallenbach’s Second Affidavit

Kallenbach filed a second affidavit April 7. The affidavit asserts that a Renner entity known as V-Media Marketing LLC “borrowed” all of the money that was placed in a bank account at Premier Bank Minnesota in early March, about a week after the Secret Service raid at INetGlobal’s offices in Minneapolis.

Prosecutors, describing the INetGlobal case as a “major fraud and money laundering investigation,” said $47,400 was deposited into the account.

“IMC Desperately Needs Working Capital To Pay Its Creditors,” Kallenbach said.

He also described a webcast he attended April 5 that was “sponsored by one of IMC’s marketing consultants.”

“At the April 5th Meeting, I learned, amongst other things, that many of iNetGlobal’s new customers have demanded refunds,” Kallenbach said. “The number of customers seeking refunds and the amount of such refunds is unknown. What is known is that as each and every day passes, without iNetGlobal being in business as usual, more of iNetGlobal’s customers will seek refunds.”

He also asserted that “iNetGlobal’s marketing consultants are clamoring for commission payments that are legitimately due and owing to them,” according to the affidavit. “iNetGlobal has been unable to pay the commissions.”

Kallenbach’s filing also suggested that, through negotiations, a little more than $1 million has been returned to INetGlobal and that the sum was now considered “unrestricted” cash. The affidavit did not disclose specific details about the negotiations

In the March 25 affidavit,  Kallenbach argued that INetGlobal had no cash to operate.

“At the time I signed my March 25, 2010 Declaration, I believed it to be true that iNetGlobal had no unrestricted cash meaning cash available for working capital. I have since learned that as a result of negotiations in which I was involved, on March 22, 2010 iNetGlobal netted approximately $220,000 from the return of restricted cash. As of the time my March 25, 2010 Declaration was prepared, I was unaware that this money had been returned to iNetGlobal.

“After my Declaration was signed, approximately $795,000 of restricted cash was made available to iNetGlobel for working capital after close of business on March 25, 2010,” Kallenbach said. “As of today [April 7], iNetGlobal’s unrestricted cash is approximately $1,015,000. I arrive at this sum by adding $220,000 and $795,000 to reach $1,015,000.”

Prosecutors said that, because Kallenbach has become an “essential witness” subject to cross-examination by the prosecution and direct examination by the INetGlobal side, there is a question about “whether Mr. Kallenbach’s clients can be provided constitutionally effective assistance.”

“The government did not bring this situation about,” prosecutors contended. “[T]he government has not subpoenaed Mr. Kallenbach, or raised questions about whether he, and only he, can testify as to certain facts.

“This is a case in which Mr. Kallenbach conducted his own investigation and then voluntarily drew up a lengthy affidavit setting forth his observations. Nor may Mr. Kallenbach, at this juncture, announce that he will henceforth act only as an advocate, because the choice to be a witness was made when the affidavit was filed.”

BULLETIN: (UPDATED 12:21 P.M. EDT (U.S.A.) Tom Petters, whom federal prosecutors said presided over a $3.65 billion Ponzi scheme, has been sentenced to 50 years in prison.

The fraud was one of the largest in U.S. history — though still significantly smaller than the Bernard Madoff scheme, estimated to have involved $65 billion.

Prosecutors had sought a sentence of more than 300 years. Petters’ attorneys countered with an argument that an appropriate sentence was in the range of four years.

U.S. District Judge Richard Kyle bridged the gap, sentencing Petters to 50 years — 100 years fewer than the sentence Madoff received, but more than 12 times the sentence sought by the defense.

Minnesota has been plagued by Ponzi schemes and rocked by allegations of Ponzi schemes.

Three links on the main page of the website of U.S. Attorney B. Todd Jones lead to information about major Ponzi scheme prosecutions or Ponzi investigations undertaken by the office, including the Petters’ case, the case against Trevor Cook and Pat Kiley, and the investigation into the business practices of Steve Renner, who is alleged by prosecutors to have operated an autosurf Ponzi scheme known as INetGlobal.