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Tag: Utah Ponzi schemes

  • SEC: Utah Ponzi Schemer With ‘Loans’ Program Ripped Off Church Associates, Family Members, Friends, Seniors — And Some Of The Money Went To ‘Multilevel Marketing And Web-Based Advertising Business Opportunities’; Separately, Newspaper Reports Allegations Of Cash Handoffs To Investors In Parking Lots

    secsheinzIn the latest affinity-fraud scheme detected in Utah, an Orem man conducted a $4 million offering fraud and Ponzi scheme aimed at church associates, family members and friends, including senior citizens and the “recent widow of a church associate” whom he volunteered to help with finances after she lost her husband, the SEC said.

    Some of the money scammed by Steven B. Heinz was used “to pay his adult children to fund various business opportunities they are involved in, including multilevel marketing and web-based advertising business opportunities,” the agency said.

    The SEC did not identify the “programs” in a complaint filed yesterday that led to an emergency asset freeze.

    Heinz is 56. He is associated with a “financial planning and insurance” entity known as S.B. Heinz & Associates Inc. of Provo, the SEC said.

    “Heinz promised some investors that they would earn tax-free income if they provided a ‘loan’ to Heinz to invest for them,” the SEC said.

    And Heinz “has issued investment contracts to investors which guarantee returns ranging from 6% to 120% per year,” the SEC alleged.

    Separately, the Deseret News is reporting allegations that he “paid returns in cash, often asking his clients to meet him in grocery store parking lots for the handoff.”

    Regulators and law enforcement have been warning for years about affinity fraud in Utah.

    From a statement yesterday by the SEC (italics added):

    The complaint alleges that since January 1, 2012, Heinz acted as an investment adviser and solicited nearly $4 million from more than fifteen former clients, family members, and friends to enable him, through his company S.B. Heinz, to execute rapid buy and sell orders of futures contracts. The complaint further alleges that investor funds are being used to falsely create the appearance of a successful investment business although S.B. Heinz has actually lost approximately $1.5 million executing Heinz’s high risk futures contract trading activities. In addition, the complaint alleges that Heinz pays “returns” to earlier investors using new investor funds, used investor funds for his own personal purposes and that S.B. Heinz used investor funds to pay business expenses, including the salary for its secretary and its office rent.

    Named a relief defendant in the case as the alleged recipient of ill-gotten gains was Susan K. Heinz, Heinz’s wife. The SEC said Heinz “reportedly makes large monthly cash payments to his wife” and alleged that he’d drained $1 million to fund “personal expenses such as paying for family members to accompany him to Mexico on vacation.”

    In addition to duping the widow, the SEC said, Heinz also duped an elderly couple.

    Heinz, the SEC alleged, “convinced the elderly couple to liquidate their investments and invest those funds with him personally. Heinz did not disclose to the couple that they would incur $45,000 in penalties as a result of early liquidation of their investments.”

  • BULLETIN: Already Jailed, Utah Ponzi Schemer Ordered To Pay More Than $18 Million; United States Extradited Jeffrey Lane Mowen From Panama And Charged His Pitchmen

    Jeffrey Lane Mowen

    BULLETIN: Utah Ponzi schemer Jeffrey Lane Mowen has been ordered by a federal judge to pay more than $18 million in a civil case that sparked a criminal probe and resulted in allegations that Mowen had hatched a murder-for-hire plot from a U.S. jail after he was extradited from Panama in 2009.

    The FBI worked with officials in Panama to return Mowen, 50, to the United States.

    The Mowen case destroyed Ponzi-forum myths that scammers are untouchable if they remain “offshore.” It also destroyed the myth that individuals who drive business to a Ponzi scheme cannot be charged. Indeed, the SEC sued at least six individuals who drove money to Mowen and also filed administrative actions against them.

    Mowen ultimately pleaded guilty to wire fraud and is serving 10 years in federal prison. The case is fabled in Ponzi lore because Mowen had accumulated more than 200 vehicles with investors’ funds — so many that it created a storage problem for the U.S. Marshals Service.

    Part of Jeffrey Lane Mowen's Ponzi haul.

    Here is the breakdown of the civil judgment against Mowen: disgorgement of $8,041,779 in ill-gotten gains, a matching civil penalty of  $8,041,779 and $1,964,203.67 in interest.

    Mowen is scheduled to be released from prison in January 2018.

  • 6 Pitchmen Who Raised Funds Plowed Into Jeffrey Mowen’s Ponzi Sanctioned By SEC On Heels Of Long-Running Lawsuit; Alleged Offering Fraud’s Advertised Monthly Payout Rate 20 Times LOWER Than JSS Tripler/JustBeenPaid

    Part of Jeffrey Lane Mowen's Ponzi haul.

    UPDATED 7:43 A.M. ET (MARCH 9, U.S.A.) If ever there has been a cautionary tale for HYIP pitchmen, it is Jeffrey Lane Mowen’s Utah Ponzi scheme.

    Mowen and at least six promoters ended up inspiring litigation on multiple fronts, with Mowen charged criminally. At issue was Mowen’s Forex Ponzi scheme, which allegedly was funded in part through an alleged high-yield “promissory notes” offering fraud.

    Tonight, Mowen, 49, is listed as “in transit” to an unspecified federal prison. He has been jailed in the United States since he was extradited from Panama in 2009. He pleaded guilty to U.S. charges of wire fraud last year and was sentenced to 10 years.

    Mowen received a merciful plea agreement in which other serious criminal charges were dropped, including solicitation to commit a crime of violence, witness tampering and retaliating against a witness.

    The sidebars in the Mowen story have been every bit as compelling as the story-in-chief. Indeed, Mowen sought to shield himself in Panama when his scheme collapsed.

    It didn’t work. Panamanian authorities and the FBI got him quickly.

    Jeffrey Lane Mowen

    After his return to the United States, Mowen allegedly solicited the murder of four witnesses “with the intent of preventing their attendance and testimony at his federal fraud trial” in the Ponzi scheme case.

    That didn’t work. The cellmate through whom he allegedly solicited the murders was a snitch.

    Other than ripping off investors and authoring a particularly ugly drama, about the only thing Mowen managed to do was create a storage problem for the U.S. Marshals Service, which had to round up and warehouse more than 200 vehicles he bought with investors’ funds.

    Yes, more than 200.

    But the cautionary tale doesn’t end there. Jeffrey Lane Mowen was a felon and a recidivist securities huckster. Thomas Fry,  an unregistered promoter, used at least five other unregistered promoters to raise funds for “opportunities” that purported to pay a return of between 2 percent and 3 percent a month, according to the SEC.

    Fry and the pitchmen were sued by the SEC in 2009. All six also now face administration sanctions from the SEC — this after the agency targeted their ill-gotten gains in the earlier lawsuit.

    Failure to conduct due diligence and engaging in willful blindness were elements in the SEC’s lawsuit 2009 against the promoters, according to court filings.

    “Because the Promoters not only conducted virtually no due diligence in connection with Fry’s purported investment opportunities, but transferred investor money to Fry without any documentation or limitation on his use of the funds, the Promoters were reckless in failing to discover Fry’s association with Mowen and that their funds were being placed into a Ponzi scheme or used for other undisclosed purposes,” the SEC charged at the time.

    All of the pitchman now have been barred from the securities business under the terms of the administrative action. In a settlement, none of the pitchmen acknowledged wrongdoing. But the various Ponzi-  and fraud-related actions were front-and-center in their lives for the better part of three years.

    This common paragraph appears in each of the administrative actions against the five Fry pitchmen (italics added):

    “The Commission’s complaint alleged that, from at least January 2007 through July 2008, [Pitchman’s Name] offered and sold purported high-yield promissory notes to investors that he claimed would pay 2% to 3% interest monthly. The funds raised by [Pitchman’s Name] were given to Thomas R. Fry who funneled those funds into a Ponzi scheme run by Jeffrey L. Mowen, a convicted felon and securities law recidivist. The Commission alleged that [Pitchman’s Name] distributed private placement memoranda to investors that falsely stated that all the investors’ funds were being used to make collateralized domestic real estate loans and domestic small business loans and that misrepresented the level of his due diligence as to the investment scheme. The Commission alleged that [Pitchman’s Name] conducted virtually no due diligence in connection with the purported investment opportunities and transferred investor money without any documentation or limitation on the use of the funds.”

    Fry knew Mowen was a scammer, but still continued to solicit funds, the SEC said. All in all, he and the other five pitchmen raised more than $18 million for Mowen.

    But the FBI said Mowen wasn’t operating a legitimate investment opportunity. What he was doing was buying exotic cars, taking personal vacations, supporting a luxurious lifestyle and making Ponzi payouts that ultimately defrauded more than 200 investors out of between $9 million and $10 million.

    The purported monthly returns offered by JSS Tripler/JustBeenPaid — an “opportunity” now making its way around the web — are roughly TWENTY times higher than the scheme pitched by Fry and his promoters, according to records.

    As noted above, the alleged offering fraud involving Fry and the other pitchmen was promoted on the purported basis of returns of 2 percent to 3 percent a month. JSS Tripler/JustBeenPaid advertises 60 percent a month.

    Also on a monthly basis, the purported payout of JSS Tripler/JustBeenPaid is roughly between TWO and SEVEN times higher than the payout of the Ponzi scheme that put Mowen in prison for 10 years, according to records.

    Mowen’s Forex Ponzi scheme scheme offered between 8 percent and 33 percent a month, federal prosecutors said last year.

    It is somewhat common for HYIP purveyors who populate Ponzi boards such as TalkGold and MoneyMakerGroup to assert they have conducted “due diligence” on an “opportunity” or to assert that a “program’s” operator and/or management “team” have done so and that prospects don’t have to concern themselves with doing any legwork.

    It often proves to be the case that the “due diligence” consists of GIGO — garbage in, garbage out. The promoters simply repeat the company line, rather than doing any sort of critical assessment such as questioning how an HYIP  “program” operator could provide returns that may dwarf the returns of Bernard Madoff and other Ponzi schemers such as Mowen.

  • RECOMMENDED READING: Fortune Magazine On The Manipulations Of Recidivist Con Man Barry Minkow — And Deseret News On The Sentencing Of Utah Ponzi Schemer Travis Wright In Front Of A ‘Couple Of Rows Of Eagle Scouts’

    EDITOR’S NOTE: This post contains links to recommended reading on Barry Minkow and Travis Wright — the former a classic narcissist and con man doing his second stint in federal prison after having played the redemption circuit for years, the latter a man who used other people’s money to ensconce himself in the lap of luxury, surround himself  with gaudy taxidermy such as a full-body African lion — and once reportedly paid $150,000 to have a swimming pool at his tony digs moved eight feet to make his life more perfect.

    The stories on Minkow in Fortune magazine and Travis Wright in Deseret News are intriguing and, we believe, socially significant. Both provide plenty of fodder for rumination as America continues to confront an epidemic of white-collar fraud . . .

    Barry Minkow first rose to national infamy as a con man who’d managed to dupe investors and Wall Street before he was old enough to sip a cocktail legally in many jurisdictions. The spectacular rise and fall of his ZZZZ Best carpet-cleaning business became one of the great cautionary tales of the 1980s.

    Minkow was sentenced to federal prison for the ZZZZ Best caper, but reportedly embraced Christianity while jailed and later was freed. He became a pastor who doubled as a fraud analyst and television commentator.

    But Minkow, now 45, is back in prison. Fortune magazine explains why in its Jan. 16 issue — and also reports that Minkow appears to have let it slip during the filming of a movie on his life that he was up to no good again. Here is an outtake:

    “Finally, one day in September 2009, recounts Meyers, he was in the production booth with headphones on when Minkow and James Caan were schmoozing between takes. Perhaps forgetting about the open mike in his lapel, Minkow leaned over to Caan and whispered, “I financed this movie by clipping companies,” Minkow said.

    “Clipping,” of course, is a slang word for “swindling.” Minkow says the incident “never happened.” “Not ever,” he wrote Fortune in an e-mail in September. “And have him produce the tape.”

    Fortune reports that the tape was produced and that “Minkow said it.”

    And Fortune reports plenty of other things, including an assertion that some people working on the film were getting paid in strange ways.

    Read the Fortune story.

    Separately, Deseret News is reporting that Utah Ponzi schemer Travis Wright has been sentenced to 10 years in federal prison.

    Here is an outtake from the story in the Deseret News:

    “A couple of rows of Eagle Scouts in court to support a former Scoutmaster-turned-criminal might have backfired against a convicted Ponzi scheme operator Friday.”

    Going to court to observe proceedings as part of a civics lesson is one thing. But should Eagle Scouts assemble in court to show “support” for a man facing sentencing for one of the largest frauds in Utah history?

    In Ponzi schemes — as longtime observers and victims know all too well — the visuals often are incongruous. In the AdSurfDaily case, for instance, some members who openly described themselves as people of faith looked on and said nothing as ASD President Andy Bowdoin claimed the prosecution was the work of “Satan” and compared the U.S. Secret Service to the 9/11 terrorists.

    It’s our hope that the scouts were present at Wright’s sentencing to receive an education on how Ponzis alter lives and futures, not as stage props for Wright. And we also hope that Wright, post-release, shows the scouts that redemption is not just a religious or penal theory and that he doesn’t backslide like Minkow and become a slave to self-absorption.

    Read the full story on Wright’s sentencing in the Deseret News, which notes that “several” victims were crying in the courtroom.

    NOTE ON ADDITIONAL RECOMMENDED READING: “The Salon of Famous Babies,” a classic poem by Irving Feldman, is not about Ponzi schemes. But if a Ponzi schemer or narcissist’s “daydream of glory” has sucked the joy from your life, you very well might find that the poem gives voice to your feelings of anger and provides a measure of comfort.

    Visit the Virginia Quarterly Review to read “The Salon of Famous Babies.”

    “As well teach ducks to drown as teach him not to take it all as owed the world’s own son and heir.” — From “The Salon of Famous Babies” by Irving Feldman, American poet

  • SEC Names 3 Defendants In Alleged $16 Million Credit-Card ‘Merchant Portfolio’ Ponzi Scheme Targeted At Mormons; Records Show Schemes Within Schemes Dating Back Years

    EDITOR’S NOTE: If you’re keeping a Bubba Blue notebook on how to have a Ponzi scheme as opposed to shrimp, here is an entry: an alleged “merchant portfolio” Ponzi scheme.

    Ponzi and fraud schemes often use impressive-sounding terminology to separate people from their money. Schemes typically mushroom to consume millions of dollars when investors — who sometimes become commission-based promoters and effectively act as unregistered brokers and dealers — accept a firm’s extraordinary claims at face value, ignore red flags such as outsized returns or engage in willful blindness because choosing to see is bad for profits.

    In June 2010, the SEC charged Joseph A. Nelson, Anthony C. Zufelt, David Decker, Cache Decker and five companies “in connection with three related Ponzi schemes largely targeting the Mormon community.” The complaint was filed in Utah and alleges schemes within schemes dating back at least to 2005.

    As 2011 came to a close, the SEC named three additional defendants in a separate, Nelson-related complaint also filed in Utah. Named in the year-end complaint were Kevin J. Wilcox, Jennifer E. Thoennes and Eric R. Nelson.

    Eric Nelson is Joseph Nelson’s brother. He is accused of deceiving investors by creating “fictitious bank account statements reflecting balances in his brother’s accounts that were far in excess of the actual amounts in those accounts.”

    Wilcox and Thoennes are accused of solicitation fraud

    Joseph Nelson, Wilcox and Thoennes told investors “that Joseph Nelson and his companies were engaged in the business of purchasing ‘merchant portfolios’ of credit card processing accounts, holding them for a certain period of time, and then selling them for a profit to financial institutions, such as banks.”

    “Many” of the investors were “fellow members of the Church of Jesus Christ of Latter Day Saints” whom Joseph Nelson “identified and targeted through church connections and during church functions,” the SEC charged.

    But “Joseph Nelson and his companies never purchased or sold a single merchant portfolio,” the SEC charged.

    “The money invested with Joseph Nelson and his companies was instead used by Nelson to make incremental payments to investors in a Ponzi-scheme fashion, to pay his associates, including Wilcox and Thoennes, and to pay his own lavish personal expenses, as well as those of other family members,” the SEC charged.

    Affinity fraud is a major problem in Utah. In June 2010, the FBI said thousands of people in the state had been victimized by Ponzi schemes and cases of investment fraud that caused Utah residents to lose an estimated $1.4 billion.

    SEC Warns About Scams That Use Social-Media Sites To Fleece The Masses

    In a separate, unrelated action yesterday, the SEC charged an Illinois-based investment adviser with offering to sell fictitious securities on LinkedIn, a social-media site.

    Social media increasingly are being used to sanitize schemes and help them mushroom, a top SEC official said.

    “Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes,” said Robert B. Kaplan, co-chief of the SEC Enforcement Division’s Asset Management Unit.

    Charged in an SEC administrative action yesterday was Anthony Fields, 54, of Lyons, Ill.

    The agency alleged he “offered more than $500 billion in fictitious securities through various social media websites.”

    On LinkedIn, for example, he allegedly used “discussions to promote fictitious ‘bank guarantees’ and ‘medium-term notes.’”

    Read the SEC order against Fields, Anthony Fields & Associates and Platinum Securities Brokers. See this SEC Investor Alert on social-media fraud.

    Revisit this July 2010 PP Blog story on a FINRA warning about HYIPs and scams that use social media to proliferate. See this Nov. 2, 2011, PP Blog editorial on a threat by AdLandPro — a purported social-media site — to sue RealScam.com, an antifraud forum.

    Among other collapsed schemes, the alleged AdSurfDaily and Pathway To Prosperity Ponzi schemes were promoted on AdLandPro. A recent thread at AdLandPro is promoting OneX, which also is being promoted by ASD President Andy Bowdoin while he awaits trial on criminal charges of wire-fraud, securities fraud and selling unregistered securities.

    Among the screaming headlines in OneX-related content on AdLandPro is this one:

    “Are You in Deep Money Trouble? See Me at Once!”

     

  • BULLETIN: SEC Alleges ‘Payday Loan’ Ponzi Scheme In Utah; Second Major Ponzi Case Brought In State In Two Days; Schemes Attracted Almost $75 Million

    BULLETIN: The SEC has gone to federal court in Utah to halt what it described as a $47 million “payday loan” Ponzi scheme and offering fraud in which investors were lured by the prospect of “extraordinary returns” while the alleged operator diverted large sums of cash to himself and other business interests.

    The payday-loan Ponzi case against John Scott Clark, Impact Cash LLC and Impact Payment Systems LLC was the second major Ponzi case brought by the SEC in Utah in a matter of days. On March 23, the SEC charged Mike Watson Capital LLC of Provo, Michael P. Watson of Mapleton and Joshua F. Escobedo of Spanish Fork in an alleged real-estate and promissory-notes Ponzi scheme that gathered more than $27.5 million from more than 120 investors.

    Clark and his companies were charged on March 25. Utah has been plagued by Ponzi schemes and other forms of fraud, many of them directed at people of faith. The FBI said last year that thousands of residents of the state had been victimized in investment-fraud schemes.

    Now, Clark’s alleged payday-loan fraud has been added to Utah’s Ponzi mix by the SEC. If the alleged Clark total is added to the total gathered in the alleged Watson/Escobedo fraud, a figure of at least $74.5 million emerges from the two schemes.

    “Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”

    Clark also bought “multiple expensive cars and snowmobiles” and “stole investor funds to purchase a home theater, bronze statues and other art for himself,” the SEC charged.

    In October, the SEC’s Salt Lake office also filed charges against Imperia Invest IBC, a mysterious offshore firm alleged to have stolen millions of dollars from thousands of deaf investors. The Imperia scheme was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.

    In the Clark case, the SEC said “at least” 120 investors were affected. The scheme operated between March 2006 and September 2010.

    Investors were recruited to fund payday loans, the SEC said. One recruiter was paid more than $500,000 to help drive business to the unregistered offering, according to the complaint.

    Clark 58, of Hyde Park, “has never been registered with the Commission or any other regulatory agency in any capacity,” the SEC charged.

    Investors were offered their own companies with an LLC designation and lured by suggestions that Clark and his Impact companies could generate returns “averaging at least 80% per year,” the SEC said.

    “Clark explained to investors that Impact would create a unique LLC for each investor or investor group for the purpose of investing with Impact,” the SEC said. “The investor LLC would then enter into a Joint Operating Agreement with Impact to provide money to Impact to fund payday loans.”

    And Clark’s “early investors” — impressed by their returns — helped the Ponzi gain a head of steam, the SEC said.

    “Many of Clark’s early investors mentioned their astronomical returns to their families or
    business associates, who then invested with Clark,” the SEC said. “Clark paid one salesperson between $500,000 and $600,000 over a four or five year period to locate potential investors and attend payday loan conferences and trade shows. Clark also paid certain individuals commissions ranging from 2% to 4% for bringing in investors to Impact.”

    Neither firm that used the word “Impact” in its name was registered, the SEC said.

    Although investors believed they were funding payday loans, Clark diverted cash to “to make unauthorized investments, including a real estate investment company, a diabetes research company and an online products store,” the SEC said.

    The assets of Clark and his companies have been frozen. Read the SEC complaint against Clark.

    Read the SEC’s statement on the alleged Ponzi scheme involving Watson and Escobedo, who have settled without acknowledging wrongdoing.

  • Spectacular Ponzi Scheme Alleged In Utah By SEC; Attorney Who Didn’t Do Homework Helped Fraudster Grease Money Wheel By Calling Investment ‘One Of The Best He Had Ever Seen,’ Agency Says

    EDITOR’S NOTE: If you’re an autosurf or HYIP promoter — or a person who is accepting fees for driving business to an investment opportunity based on assertions you cannot independently verify to be truthful — the story below should be instructive. It perhaps will be particularly instructive if part of your fraud game plan is to improve upon the lies told by the fraudster-in-chief.

    In the first major Ponzi case brought in 2011, the SEC has charged a Utah man with presiding over a spectacular promissory-notes fraud involving at least $60 million and several co-defendants, including an attorney.

    When the scheme started to collapse, delayed payments were blamed on “Homeland Security” and banking red tape caused by the Madoff Ponzi, the SEC charged, alleging that investors were discouraged from contacting authorities and told lies to keep hope alive that their money was safe.

    Raymond P. Morris, 42, of Draper, conducted an unregistered offering and operated the Ponzi scheme “at least” between March 2007 and January 2009. The scheme defrauded “at least 90 investors” and was a Ponzi out of the gate, the agency said.

    Three other Utah men, including attorney Luc D. Nguyen, 40, of Draper, helped the fraud spread by conducting no due diligence, recklessly repeating assertions made by Morris as though they were truthful and coming up with their own lies to drive money to the scheme, the agency alleged.

    Also charged were James L. Haley, 49, of Draper, and Jay J. Linford, 49, of Orem. At the same time, several companies also were charged: E & R Holdings LLC, Wise Financial Holdings LLC, Momentum Leasing LLC, Cornerstone Capital Fund LLC, Vantage Point Capital LLC and Freedom Group LLC.

    Ponzi Scheme Collapses

    The Morris Ponzi scheme began to unravel in April 2008, when he stopped making regular payments to investors, the SEC charged.

    “Morris gave many explanations to investors, including that Homeland Security had frozen the accounts, that the Madoff case had caused banks to hold funds and that typographical errors in wire request forms had caused delays,” the SEC charged.

    “Morris told Haley, Nguyen and Linford to pass these explanations on to investors, and they did so without questioning Morris or conducting due diligence on Morris or the Fund,” the agency charged. “As investors complained and threatened to go to the Commission and other government agencies, Morris began disseminating phony bank statements falsely showing that he had over $200 million deposited with Wachovia Bank.

    “In late October 2008, Morris gave Nguyen a purported ‘Bank Confirmation Letter’ from Wachovia,” the SEC continued. “This fraudulent letter states that Wachovia ‘currently holds funds in the amount of . . . $201,782,567.89 . . . [and] Mr. Raymond Paul Morris is the signatory on this account.” The letter also says ‘the funds are good, clean and of non-criminal origin, are unencumbered and freely disposable.’”

    Meanwhile, the agency charged, Morris gave Nguyen a phony ‘Verification of Depository,’ also purporting to be from Wachovia Bank, showing that $201,827,067.89 was in Morris’s account.

    “After Nguyen received the bogus ‘Bank Confirmation Letter’ and ‘Verification of Depository,’ he agreed to draft a letter to Morris’s investors, assuring them their funds were safe.

    “Nguyen’s October 30, 2008 letter states that ‘Mr. Morris is in possession of funds that will allow for the return of the principal amount of your investment along with any back interest in the anticipated redemption of your Promissory Notes(s),’” the SEC continued.

    “This letter further confirmed that Nguyen was ‘in possession of a copy of an official bank letter confirming that the funds are in a specified account under Mr. Morris [sic] signatory control at such bank,’” the SEC said. “Nguyen did not conduct reasonable due diligence prior to sending this October 30, 2008 letter. The letter caused investors to delay their attempts to contact government authorities regarding Morris, Haley, Linford and Nguyen and their investment activities.

    “By the time the Ponzi scheme unraveled, Morris, Haley, Linford and Nguyen, and their respective entities, had defrauded at least 90 investors out of $60 million or more by offering and selling unregistered and non-exempt promissory notes based on material misrepresentations and omissions,” the SEC charged.

    Other Misrepresentations

    Lies fueled the scheme, the SEC charged.

    “Morris told investors that their principal would only be used for ‘verification of deposit’ purposes by certain private traders,” the SEC charged. “Morris further told investors these private traders would obtain large lines of credit and invest the proceeds in ways that would generate a guaranteed 20% per month interest rate.

    “In reality, Morris used investor money for personal expenses, including a luxurious home and several sports cars, and for making Ponzi payments to create an illusion of a successful investment,” the SEC said.

    Haley took the base story and improved upon it, the SEC said.

    “From about August 2007 through June 2008, Haley, through his entities Cornerstone Capital and Vantage Point, raised at least $20 million for Morris’s Fund. In soliciting investments, Haley repeated Morris’s misrepresentations to investors and made additional misrepresentations, including that he was the sole owner of the Fund,” the SEC charged.

    “Out of the approximate $20 million Haley raised, Haley used at least $700,000 for personal expenses, including payments on a new home and $25,000 per month rental payments while building this new home,” the SEC charged.

    Linford, accused of collecting about $1 million for the scheme, added to the lies, as well, the SEC charged.

    “Linford also knowingly misrepresented to some investors that he controlled the secure account where their funds would be held,” the SEC charged. “Contrary to what Linford told investors about their funds being secure, the wiring instructions he gave investors were instructions to deposit funds into an account Morris controlled. Linford had no authority to verify what was being done with investor funds once they were deposited into Morris’s account.”

    Nguyen held himself out as an “SEC attorney” and told investors the fund was “one of the best he had ever seen,” the SEC charged.

    “Nguyen told investors he had personally met with the attorneys representing the supposed trading companies involved in the Fund and that he had received copies of all operating agreements between the leasing companies and the trading companies,” the SEC charged. “In fact, Nguyen performed no due diligence on Morris or the Fund, never met with anyone affiliated with the Fund or a leasing company or trading company involved with the Fund and never received any documents associated with the Fund.”

    Read the complaint.

  • OFFICIALS: Ponzi Schemes, Investment Fraud Have Led To Staggering Losses In Utah; Hundreds Of Potential Perpetrators Identified

    UPDATED 8:38 P.M. EDT (U.S.A.) Recent Ponzi schemes and cases of investment fraud have cost Utah residents an estimated $1.4 billion, the FBI said today.

    About 370 investigative “subjects” — defined as “potential perpetrators” in current cases — have been identified, and the agency and its law-enforcement partners have embarked on a public awareness and education campaign aimed at keeping Utahns safe from scammers.

    About 4,400 people have been affected by investment-fraud schemes in the state, the FBI said. The education campaign includes billboards and public-service messages.

    Under the umbrella of the Utah Securities Fraud Task Force, the FBI and its partners — including the SEC, the IRS, the U.S. Postal Inspection Service, the Utah Department of Commerce’s Division of Securities, the Utah County Attorney’s Office, the United States Attorney’s Office for the District of Utah and the Utah Attorney General’s Office — have produced a video that encourages viewers to be aware that schemers may target them based on their religious affiliation or interests.

    “Affinity fraud is when someone you know — for example a church member, a coworker, or a friendd — takes advantage of you in an investment fraud scheme,” said James S. McTighe, FBI special agent in charge.

    Con artists have been known to deliberately target members of the Church of Jesus Christ of Latter-Day Saints, the FBI said.

    No group of believers — and no group of people who share a common bond — is immune to the cunning of expert con men, the FBI added.

    An investor featured in the educational video said her experience of being duped can serve as a warning to others:

    “He was a religious man, so he says, and he really, he really put on the ‘You know I am so guided by the spirit’, and ‘I know I am here to help you’, and ‘just trust me,’” the woman said.

    Nothing about a Ponzi scheme is good news, warned the SEC’s top official in Salt Lake City.

    “Ponzi schemes always collapse eventually and it’s typically because you run out of newer investors,” said Ken Israel.

    How do fraudsters profit from a Ponzi scheme?

    “The hallmark of the Ponzi scheme is that you use money from new investors to pay off your old investors and of course put a bunch in your pocket at the same time,” said Keith Woodwell, director of the Utah Division of Securities.

    Officials warned the public to be on the look out for “signs of trouble”:

    • The investment offer is unsolicited.
    • It sounds too good to be true.
    • You’re promised big monthly or yearly returns with little or no risk.
    • You’re asked to keep the investment offer secret.
    • The promoter cannot answer specific questions or provide you with written financial documentation.
    • Slick websites and glossy literature can be deceiving, and also be suspicious of documentation that looks unprofessionally produced.
    • The promoter won’t give you time to research the investment.
    • You are told you are one of the lucky few allowed in on the investment.
    • You are required to bring in more investors.
    • The salesperson is not licensed or the product is not registered.

    “Con artists who run Ponzi schemes often promise big financial returns and may tell potential investors they operate programs that can sound impressive,” the FBI said. The agency advised investors to do their homework and be skeptical of pitches for programs such as these:

    • Foreign Exchange Currency Trading.
    • Prime Bank Investment.
    • Commodities Investments.
    • Real Estate Investments.

    “Research before you invest, the FBI warned, recommending these resources for Utah residents:

    Get educated for free at the June 30 “Fraud College” at Utah Valley University in Orem

    Watch the Task Force video.

    Get more information from the FBI:

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • Utah Ponzi Auction Features Wildebeest, Hyena, ‘Full Body African Lion,’ Other Exotic Animals; Event Expected To Draw Large Crowd And Help Recover Some Losses

    A taxidermy of a full-body African lion is part of the proceeds of the alleged Waterford Funding LLC Ponzi in Utah.

    America’s Ponzi culture now has spawned a taxidermy auction from “assets recovered in one of the largest alleged Ponzi fraud cases in Utah,” according to website of the auctioneer.

    Among the items up for bid are a “full body African lion,” Cape Horn buffalo, African antelope and hyena, wildebeest and other exotic animals. Forty-three firearms also will be sold, along with “beautiful, top-quality office furniture,” paintings, Persian and Oriental rugs, “fine home furnishings, antiques and more.”

    Statewide Auction Co. of Salt Lake City will conduct the auction at its Utah State Fair Park facility tomorrow beginning at 6 p.m. A preview begins at 10 a.m. The event is part of the bankruptcy of Waterford Funding LLC. Waterford was owned by Travis Wright.

    The company was placed in bankruptcy last year, and Ponzi allegations emerged.

    A separate, Ponzi-related auction involving more than 200 vehicles tied to the alleged Jeffrey Lane Mowen Ponzi was held in Utah earlier this year. Mowen was jailed after his extradition from Panama, and later charged in an alleged murder-for-hire plot to kill witnesses in his Ponzi case.

    Visit the website of Statewide Auction Co. to get details of the Waterford Funding LLC auction. (Got to the bottom of the page to find a link that leads to images of other assets of the alleged Ponzi that will be sold at a later date. One of the items is a “British ‘Tele’ Booth”; another is a “Child’s ‘Baby’ Grand Piano.”)