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Tag: bank guarantees

  • 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!”

     

  • URGENT >> BULLETIN >> MOVING: SEC Says D.C. Attorney Brynee K. Baylor Was Running Prime-Bank Swindle With Frank L. Pavlico III, A Felon On Probation In Case Involving ‘Drug Trafficking’ Proceeds

    UPDATED 10:04 A.M. ET (DEC. 8, U.S.A.)  Frank L. Pavlico III — convicted in 2007 of felony conspiracy to conduct financial transactions involving the proceeds of drug trafficking and released in 2008 after serving his 10-month prison term — has been arrested for wire fraud by the FBI in an alleged prime-bank swindle that occurred while Pavlico was on probation, the SEC said.

    Charged civilly with securities fraud is Brynee K. Baylor, an attorney in the District of Columbia, Maryland and New Jersey. The SEC said Baylor helped Pavlico pull off the swindle, which allegedly gathered about $2.1 million and affected at least 13 investors.

    U.S. District Judge Rosemary Collyer of the District of Columbia approved an emergency asset freeze, the SEC said.

    “Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This case is particularly egregious because attorneys hold a special position of trust, and Baylor and her law firm cloaked the Milan investment in the guise of licensed legal services to deceive investors and steal their money.”

    Baylor, 37, of Silver Spring, Md., is co-founder and managing partner of Baylor & Jackson PLLC in the District of Columbia, according to the SEC. The agency said she and the law firm “acted as ‘counsel’ for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.”

    The Milan Group, which also was known as The Milan Trading Group Inc., operated from Pavlico’s home in Clarks Summit, Pa., the SEC said. Pavlico is 41, the SEC said.

    The scheme operated in a shroud of mystery, with inexperienced investors being told about a purported “private trading platform” and that  “confidentiality and secrecy requirements prevented the defendants from providing details of the investments,” the SEC charged.

    Baylor “deceive[ed] investors into believing that the Milan investment was legitimate and that investors’ funds would be safe,” the SEC charged, adding that she provided notarized “Attorney Attestation” letters to some investors.

    Moreover, the SEC charged, Baylor “told investors that she had personally witnessed millions of dollars paid to investors through B&J’s trust account, consistent with Pavlico’s representations.”

    Pavlico “deceived investors by using the name ‘Frank Lorenzo’ and by failing to disclose that he pled guilty to a felony, served 10 months in prison, and was on supervised release at the time he was soliciting their investments,” the SEC charged.

    Investors were duped by high-sounding terms such as “standby letters of credit” and “bank guarantees,” the SEC said. Meanwhile, “Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns including, among other things, feigned illnesses, false representations that the European bankers supposedly involved in the transaction were on extended vacation, or that there were unspecified problems with processing the transactions through ‘Euroclear,’ a supposed necessary step in the transaction,” the SEC charged.

    The scheme began in August 2010 or earlier, the SEC charged. Prison records show Pavlico was released in November 2008. His probation ran through Nov. 5, 2011, according to records.

    “Pavlico offered returns of up to twenty times the original investment within forty-five days,” the SEC charged. “Investors were told that the investment involved no risk and that their principal would be returned if a successful bank instrument transaction was not completed.”

    Fake “screen shots” also were used to dupe investors, the SEC charged.

    Collyer also is presiding over the AdSurfDaily Ponzi case in the District of Columbia. The FBI alleged last month that Collyer was targeted with false liens by Kenneth Wayne Leaming, 55, of Spanaway, Wash.

    Read the SEC complaint against Pavlico and Baylor.