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Tag: California Ponzi schemes

  • Judge Sets Hearing Date On WCM777 Receiver’s Claim That Attorney Linked To Phil Ming Xu Is Refusing To Return Millions And That ‘Xu Uses Nominees To Hold The Proceeds Of Fraud’

    Screen shot of federal court file. Red redaction by PP Blog.
    Screen shot of federal court file. Red redaction by PP Blog.

    EDITOR’S NOTE: See related story from earlier today that outlines where about $2.133 million of the $5 million cited in the story below is being held for safe-keeping. The whereabouts of the balance is creating a mystery, according to court files.

    U.S. District Judge Christina A. Snyder has scheduled a hearing April 24 in Los Angeles to address a court-appointed receiver’s claim that a $5 million transfer by accused WCM777 Ponzi scheme operator Phil Ming Xu to a lawyer a month before an asset freeze was a “sham” designed to stash cash.

    The lawyer, Vincent Messina, now has retained a lawyer and is refusing to return most of the cash and explain what happened to more than $2.66 million that hasn’t been accounted for, insisting that the transaction was a “loan” for investment purposes and that he also was helping Xu set up a “political action committee,” according to receiver Krista L. Freitag.

    Messina has retained Maranda Fritz, an attorney in New York, according to court filings.

    Freitag, who wants the money returned and an accounting of how it was used, has asked Snyder to freeze Messina’s bank accounts.

    “There is not only a strong likelihood that monies transferred to Mr. Messina will be dissipated, but evidence they already have been,” Freitag argued.

    And, she continued, “[t]his poses a serious risk of irreparable injury to the receivership estate and investors. Once monies are disbursed by Mr. Messina, it will be difficult, if not impossible, to recover them for the benefit of investors.”

    The SEC has described WCM777 as a $65 million Ponzi- and pyramid scheme. Freitag says her early analysis suggests that WCM777 may have more than 479,000 “member accounts.”

    Moreover, Freitag argued, Messina refused to return the money even when asked by Xu in a March 20 letter.

    Xu, according to the letter, described Messina as his attorney, not as a business partner, and wrote he wanted the $5 million returned so he could use it “to settle any outstanding SEC issues that I may have.” (See screen shot above.)

    Other records show that the SEC had been investigating Xu since October 2013. Snyder granted an asset freeze on March 27, after the SEC appeared in federal court and alleged that WCM777 and related entities were conducting an ongoing fraud.

    Xu allegedly transferred the $5 million to Messina a month prior to the March 27 freeze.

    From the receiver’s motion to freeze Messina’s bank accounts (italics/carriage returns added):

    Considering the large sum of money at issue, the compelling evidence of fraud and that Defendant Xu uses nominees to hold the proceeds of fraud, as well as the proximity of the transfer to the filing of the case, and the fact that Mr. Messina refuses to provide any information about the whereabouts of the remaining $2.668 million, it is critical that Mr. Messina’s bank accounts be immediately frozen to protect the Receivership Entities’ investors from further dissipation of the funds.

    The temporary freeze should remain in place pending further investigation and a determination by the Court of the true nature of the $5 million transfer. To aid in this investigation and determination, Mr. Messina should be directed to provide an accounting of the funds, a relatively simple task considering he received them only about 40 days ago.

    The accounting will also assist in determining the appropriate scope of the freeze, which should cover accounts containing funds received from Mr. Xu or the Receivership Entities.

    Thanks to the ASD Updates Blog. View WCM777 case docs 29 through 29-2 here.

  • BULLETIN: U.S. Citizen Presiding Over New Zealand Firms Ran Ponzi, Stole Millions And Was Aided By Pitchmen In Utah And Louisiana, SEC Says

    secpedrasBULLETIN: The SEC has gone to federal court in the Central District of California and alleged that a U.S. citizen running companies in New Zealand and relying on pitchmen in Utah and Louisiana operated a Ponzi scheme and stole millions of dollars from investors.

    A federal judge has approved an emergency asset freeze, the SEC said.

    Named defendants, according to the SEC, were Christopher A.T. Pedras, a U.S. citizen who resides in Turlock, Calif., and operates firms in both America and New Zealand; Sylvester M. Gray II of Kaysville, Utah; and Alicia Bryan of Bossier City, La.

    Pedras presided over “sham investment opportunities ranging from a bank trading program to kidney dialysis clinics,” the SEC said. The agency added that Pedras “advised investors not to respond if contacted by the SEC.

    “He characterized SEC investor questionnaires as ‘fake’ and stated that the SEC’s investigation was motivated by a ‘personal vendetta’ against him,” the agency said.

    As part of the scam, the SEC alleged in its complaint, “In March 2012, Pedras conducted an in-person seminar at Paramount Studios in Los Angeles for actual and prospective investors. At the seminar, he described the nature and benefits of the Maxum Gold Trade Program and the safety of investors’  funds in escrow accounts.”

    Bryan, the agency said, has a criminal record and pleaded guilty in September 2008 “to a charge of attempted felony theft in the State of Louisiana, arising from her attempt to cash a counterfeit check from her then-employer, an internet company for whom she collected charitable donations and sent them to a purported disaster relief organization overseas.”

    “Rather than conducting any legitimate business activity, Pedras and his partners were simply operating a Ponzi scheme that was ultimately doomed to collapse,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “This emergency action stops them from fraudulently raising any more money from U.S. investors.”

    The scams gathered at least $5.6 million from U.S. investors, the SEC said.

    Corporate defendants include Maxum Gold Bnk Holdings Limited of New Zealand; Maxum Gold Bnk Holdings LLC of Nevada; FMP Medical Services LLC of Nevada; FMP Medical Services Limited of New Zealand.

    From a statement by the SEC (italics added):

    The SEC alleges that Christopher A.T. Pedras, who has residences in Turlock, Calif., and New Zealand, misled his initial investors into believing they were investing in a profitable trading platform in which his company served as an intermediary between global banks.  When Pedras and his companies encountered difficulty paying the promised 4 to 8 percent monthly returns, they began steering investors to a different investment program to purportedly increase the value of their investment by 80 percent by funding kidney dialysis clinics in New Zealand.  Pedras’s business partner Sylvester M. Gray II and lead sales representative Alicia Bryan helped him solicit investors for both programs, and the money was never invested as promised.  Earlier investors were paid supposed returns with funds received from newer investors, and Pedras stole more than $2 million and spent another $1.2 million on sales agents.

    Pedras also is known as Chris Pedras and Antone Thomas Pedras, the SEC said.

    The New Zealand Financial Markets Authority filed a prospectus cancellation against Pedras’ FMP Medical Services Limited last month, saying it that marked “the first time that FMA has cancelled an offer document.”

    The cancellation means “FMP must stop the offer and that it cannot allot any shares,” the New Zealand agency said. “FMP must immediately repay any investors who have subscribed to the offer.”

  • Judge Calls Ponzi Schemer Who Raised Conspiracy Theory His Attorney Was Working With The Government A Liar, Sentences Him To 16 Years In Federal Prison

    ponziblotterAnthony Vassallo pulled a page from Ponzi schemer Andy Bowdoin’s playbook when he advanced a conspiracy theory that his own defense counsel was working with the government to sell him down the river.

    It didn’t work for Bowdoin, the 78-year old recidivist securities fraudster now serving a 78-month prison term after claiming he’d been “hoodwinked” by his lawyer.

    Now, a similar claim hasn’t worked for Vassallo, 34. He is one of the purveyors of the Equity Investments Management & Trading (EIMT) Ponzi scheme in California, a crime that served up a heaping helping of the bizarre. Three individuals who led an alleged shakedown bid to recover money for investors were charged criminally in 2009, amid allegations they posed as federal agents.

    The Sacramento Bee reported that Vassallo pleaded guilty to wire fraud on Feb. 1. After that, he tried to change his plea, claiming that government prosecutors and agents and a defense attorney “ganged up on him to extract a guilty plea to a crime he didn’t commit.”

    But U.S. District Judge Garland E. Burrell Jr. called Vassallo a “liar” in court on Friday, sentencing him to 16 years in federal prison, prosecutors said.

    “This lengthy sentence is justice served, though it is small comfort to the victims of Vassallo’s crimes, many of whom lost their homes, health, and retirements to this fraud,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California. “This case was unusual in its scope, but not in the nature of the fraudulent conduct.”

    EIMT gathered more than $80 million before it began to unravel in late 2008, prosecutors said.

    With EIMT foundering, “Vassallo continued to recruit new investments,” prosecutors said. “One investor transferred $250,000 to Vassallo’s account less than two weeks before Vassallo admitted to a group of investors that he had ceased trading and their money had been lost.”

    “This was a classic Ponzi scheme, where you rob Peter to pay Paul,” said José M. Martínez, IRS-Criminal Investigation special agent in charge. “Eventually, you run out of Peters and Pauls.”

  • A BIG-BOAT PONZI: Man Wanted In Alleged California Ponzi/Securities-Fraud Caper Arrested In Florida; Edward Sellers Fitzgerald Charged With Ripping Off Senior Citizens, Others In Alleged ‘Yachts’ Swindle

    Edward Sellers Fitzgerald.
    Edward Sellers Fitzgerald. Source: Palm Beach County Sheriff’s Office.

    A 60-year-old man wanted in Orange County, Calif., on multiple felony charges in an alleged securities swindle involving yachts was arrested last week by police in Delray Beach, Fla.

    Edward Sellers Fitzgerald was booked into the Palm Beach County Jail to await extradition by California authorities. If convicted of all counts, Fitzgerald faces 58 years in state prison, authorities said.

    The office of Orange County District Attorney Tony Rackauckas says Fitzgerald stole more than $1.5 million from at least 26 investors “in various investment schemes related to the buying and selling of yachts.”

    Fitzgerald is charged with eight felony counts of theft from an elder, 19 felony counts of using untrue statements in the purchase or sale of a security, 17 felony counts of grand theft and 14 felony counts of issuing non-sufficient checks with the intent to defraud, prosecutors said.

    From a statement by Orange County prosecutors (italics added):

    Between 2007 and July 2009, Fitzgerald is accused of being the owner of a Dana Point yacht brokerage, Dana Island Yacht Sales and Charters. He is accused of defrauding 26 victims of over $1.5 million in various investment schemes related to the buying and selling of yachts.

    Fitzgerald is accused of defrauding some of his victims by securing loans from friends and acquaintances under the false pretense of purchasing boats for resale. He is accused of failing to purchase boats as promised, using new investors to pay off previous investors, and stealing the money to pay his personal expenses. In some cases, Fitzgerald is accused of selling yachts on behalf of clients, embezzling the sale funds from his escrow account, and either failing to return the funds to the victims or issuing checks to the victims that were returned as non-sufficient funds. The defendant is also accused of stealing deposits put down by victims for the purchase of boats and failing to secure the sale or return the deposit.

    The Orange County Sheriff’s Department and the Orange County District Attorney’s Bureau of Investigation led the Fitzgerald probe.

    Earlier this month, Leonard Ansill, 77, was booked into the Palm Beach County Jail on charges of swindling Floridians in a real-estate Ponzi scheme.

  • FBI: Affinity Fraudster Sued By SEC Launched Follow-Up Scam; Shervin Neman Allegedly Paid Law Firm, Earlier Victims With Money From New Mark — And Then Wrote A Bad Check For $2.35 Million

    ponzinews1Shervin Neman, the alleged affinity fraudster sued by the SEC last year in a Ponzi scheme targeted at the Persian-Jewish community, now has been arrested by the FBI in Los Angeles.

    Neman, 31, also is known as Shervin Davatgarzadeh, the FBI said. The Century City resident was arrested today on a three-count indictment charging him mail fraud and wire fraud, amid allegations he hatched a new fraud scheme after the SEC brought its civil charges in April 2012.

    The SEC described Neman last year as the operator of a “purported hedge fund” that married a real-estate flipping scheme involving purported foreclosures to purported opportunities to profit from IPOs conducted by Facebook, Groupon, LinkedIn and Angie’s List.

    “The month after the SEC filed its lawsuit, Neman solicited $2 million from another victim with false promises that Neman could obtain pre-IPO shares in Facebook, according to the indictment,” the FBI said. “Neman allegedly used the funds obtained from the new victim to pay, among other things, most of his earlier victims and the law firm representing him in the SEC action. Neman then had victims who had been ‘paid back’ write e-mails saying that Neman did not owe them money, according to the indictment, which goes on to say that Neman used these e-mails as part of his defense in the SEC case. In June 2012, Neman sent to the later victim a $2,235,800 check that purported to be the return on the Facebook investment, but that check bounced, according to the indictment.”

     

  • American Accused In Alleged California Ponzi Scheme And Wanted By INTERPOL Convicted In Drug Case In Ireland

    Scott Edward Cavell. Source: INTERPOL.

    A California man wanted by U.S. prosecutors in a Ponzi-scheme case was living in a rented house in Ireland and has been convicted in an Irish drug case, the Independent reported.

    Scott Edward Cavell, now 29, was described on the FBI website in 2009 as “still a fugitive, believed to be outside the United States.”

    At the time of this post, INTERPOL has a listing for Cavell on a warrant from the Eastern District of California.

    But that may change, according to details published by the Independent about comments made by an Irish judge (italics added):

    Judge Nolan said he was satisfied that Cavell had profited from the drugs operation but accepted that it is “highly likely” that he will face a lengthy prison term in America when the “federal authorities there have their say with him”.

  • RECOMMENDED READING: ‘Naras Funds’ Was Ponzi Scheme Tied To 2 Other Fraud Schemes, Prosecutors Say; 50-Count Indictment Returned After 4-Year FBI/IRS Probe

    “He marketed his plan as ‘simply the best financial plan ever created.’” — Office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California, Sept. 14, 2012

    A California man and his 76-year-old father-in-law ran a $7 million Ponzi scheme called Naras Funds, federal prosecutors said yesterday.

    The younger man — Lee Loomis, 54, of Granite Bay — joined with five others in two mortgage-fraud schemes that caused more than $10 million in losses, prosecutors said.

    Now, all seven individuals have been charged in a 50-count indictment after a four-year investigation by the FBI and the IRS, prosecutors said.

    Loomis, also known as Lawrence Leland Loomis, was arrested yesterday. His father-in-law, John Hagener of Granite Bay, is said to be cooperating with investigators.

    From a statement by prosecutors yesterday (italics added):

    The three frauds are connected to a wealth-building program offered to the public through Loomis Wealth Solutions (LWS) in California, Illinois, Washington, and elsewhere from 2006 through 2008. According to the indictment, Loomis encouraged members who joined LWS: (1) to purchase whole life insurance; (2) to “harvest” home equity and retirement accounts to buy shares in the Naras Funds; and (3) to serve as “nominees” in the purchase of residential real estate controlled by Loomis. Loomis promised members of Loomis Wealth Solutions that they could acquire real estate at no cost to themselves. Moreover, he said he would pay them more than $300 per month for each home they agreed to acquire and those payments could be applied to the life insurance premiums. He marketed his plan as “simply the best financial plan ever created.”

    In the Naras Funds Ponzi scheme, Loomis and Hagener are charged with falsely promising 12 percent annual returns in two investment funds: (1) Naras Secured Fund #1 and (2) Naras Secured Fund #2. According to the indictment, to induce people to invest in the Naras Funds, Loomis and Hagener falsely promised that the Naras Funds were invested in junior mortgages paying 14 percent annual returns. The two men also claimed that the Naras Funds were guaranteed by secured deeds of trust in residential real estate and by backing from a third-party company. According to the indictment, those statements were false. In fact, Loomis and Hagener used the money to pay operating expenses of various Loomis-controlled companies, to pay themselves, and to pay earlier investors. Loomis and Hagener are charged with mailing false monthly investment reports to victims and arranging wire transfers of victims’ home equity and retirement accounts to the failing Naras Funds in 2008.

    Meanwhile, the Sacramento Bee is reporting this (italics added):

    The alleged fraud was so complex that federal agents and prosecutors took years before they were ready to seek an indictment, and the cast of characters that Loomis surrounded himself with were worthy of a screenplay.

    One was a white supremacist, another a lifelong con man who fled the country and was eventually arrested coming in from Canada with $70,000 crammed in his cowboy boots.

    Read the report in the Sacramento Bee.

    Read yesterday’s statement by prosecutors on the website of the FBI.

  • BULLETIN: CFTC Says California Man At Helm Of Ponzi Scheme Targeted At Deaf Christians; Marc Perlman Charged With Fraud Amid Claim He Advised Investor To Sell House Quickly And Plow Proceeds Into Forex Scheme

    BULLETIN: The CFTC has gone to federal court in the Southern District of New York, alleging that Marc Perlman of Rancho Cucamonga, Calif., and his firm, iGlobal Strategic Management LLC, were running a commodity-pool and Forex Ponzi scheme targeted at deaf Christians.

    Perlman and the company have been charged with fraud. The CFTC said the scheme sucked in “at least $670,000 from at least 17 people.”

    In at least one instance, the CFTC charged, Perlman encouraged an investor “to sell a house at a price that would result in a quick sale, stating that the profits that the iGlobal Investor would earn with iGlobal would make up for the lost equity.”

    It is at least the third major fraud scheme targeted at the deaf community since 2009. In October 2010, the SEC charged an entity known as Imperia Invest IBC in a caper that sucked in millions of dollars and affected thousands of people with hearing impairments. In 2009, the FTC charged Affiliate Strategies Inc. (ASI) in a government-grants scam. The Noobing autosurf was in the ASI stable of companies, and promotions were targeted at the deaf.

    Both Imperia Invest and Noobing were promoted on the MoneyMakerGroup and TalkGold Ponzi forums — the same venues from which Ponzi schemes such as AdSurfDaily and alleged Ponzi schemes such as Zeek Rewards were promoted.

    “Perlman furthered his and iGlobal’s fraudulent scheme by playing upon the Christian faith of certain iGlobal investors, using claims about his own faith and references to scripture to obtain the trust of certain iGlobal investors,” the CFTC charged.

    Victims hailed from Arizona, California, Florida, Georgia, Michigan, Oregon, Utah, Washington and Pennsylvania, the CFTC said, noting that Perlman is deaf.

    “Perlman offered to have calls with certain potential iGlobal Investors through a video phone system that enables communication through sign language,” the CFTC charged. “During these calls, Perlman told certain potential iGlobal Investors that he was offering them the opportunity to invest in a forex investment system that would yield profits of 10 percent each month. He later revised this projected number to 5 percent after certain iGlobal Investors invested funds.”

    The U.K. Financial Services Authority assisted in the CFTC probe, CFTC said.

    Read the complaint.

  • SEC: California Scammer Traded On Agency’s Name To Sanitize $60 Million Fraud And Ponzi Caper; John A. Geringer And GLR Capital Management Charged With Fraud Amid Allegations ‘Fund’ Claimed Handsome Return Before It Even Existed

    “Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy. The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.” — Marc Fagel, director of the SEC’s San Francisco Regional Office, May 24, 2012

    A California investment adviser presiding for years over a $60 million fraud duped investors by making Ponzi payments and used the names of the Securities and Exchange Commission and the National Association of Securities Dealers to sanitize his scheme, the SEC charged.

    Named defendants in a fraud case filed in the Northern District of California were John A. Geringer, 47, of Scotts Valley, and his Scotts Valley-based companies: GLR Capital Management LLC; GLR Advisors LLC; and Geringer, Luck & Rode LLC. GLR Growth Fund L.P. of Scotts Valley was named a relief defendant amid allegations it received ill-gotten gains.

    The SEC said Geringer touted imaginary annual trading profits of between 17 and 25 percent to lure investors into his scam, describing the investigation as one that exposed internal inconsistencies. Fraud schemes are known for such inconsistencies.

    “Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 — before the fund even existed,” the SEC charged. “The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.”

    And Geringer “further lied” to investors when the claimed his venture was “MEMBER NASD SEC APPROVED,” the agency said.

    “The SEC does not ‘approve’ funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority — FINRA),” the SEC said.

    Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area, the SEC said.

    “To mask his fraud, Geringer paid millions of dollars in ‘returns’ to investors largely by using money received from newer investors,” the SEC said. “He also sent investors periodic account statements showing fictitious growth in their investments.”

     

  • UPDATE: 3 Women Sentenced To Jail For Ponzi Swindle In California; Scam Involved Bogus ‘Milk’ Sales To Disneyland And Allegedly Targeted Parents Of School Children

    The three Ponzi schemers who duped investors in a scam in which milk purportedly would be sold to Disneyland. The "opportunity" was targeted in part at PTA members in Greater Los Angeles. Photo source: Los Angeles County District Attorney's Office via the Los Angeles County Sheriff's Department.

    The three California women who hatched a Ponzi scheme involving purportedly “exclusive” milk sales to Disneyland and allegedly recruited investors  from the ranks of local PTA members at an elementary school in the Los Angeles region now have been sentenced to jail terms. (PTA stands for Parent-Teacher Association.)

    The PP Blog first reported on Maricela Barajas, 42, Juliana Menefee, 51, and Eva Perez, 52, here.

    Barajas also is known as Maricela Torres.

    Authorities identified Perez as the “ringleader” of the fraud. She was ordered to pay more than $1 million in restitution and handed combined prison sentences in two counties totaling 13 years.

    Barajas and Menefee each pleaded no contest, according to Los Angeles County District Attorney’s Office. Each was sentenced to three years in state prison. The sentences will be served at the county jail, prosecutors said.

    Both Barajas and Menefee also were ordered to make restitution that totals a combined $590,000.

    Deputy District Attorney James Belna of the Major Fraud Division said all three women told victims that they were investing in a contract with the Alta Dena Dairy to sell milk exclusively to Disneyland.

    More than 30 people from throughout Los Angeles County invested between $2,000 to $100,000 with the three women and were promised extraordinary rates of return, Belna said.

    The Ponzi scheme, which also reached into San Bernardino County, operated between June 2008 and August 2010. Perez was sentenced to 10 years in prison after pleading guilty to her role in San Bernardino, and was sentenced to an additional three years in Los Angeles County after pleading no contest.

    Those sentences will be served consecutively, prosecutors said.

    Investigators from the Commercial Crimes Bureau of the Los Angeles County Sheriff’s Department did the legwork on the fraud inside the county’s borders, prosecutors said.

    As the Ponzi was unraveling and payments stopped, the scammers “organized informational meetings, and attempted to pacify investors by explaining the delays in payment were a result of an internal audit of the business,” investigators said last year.

    It is somewhat common for Ponzi scammers to claim payments have been delayed by audits.

    Barajas and Menefee were described by investigators as Ponzi pitchwomen who defrauded seven investors.  All in all, more than 30 people from within Los Angeles County got scammed.

  • UPDATE: John Chiyuan Lee, Scammer Whose Case Shattered Ponzi-Board Myth, Sentenced To California State Prison And Ordered To Make Restitution

    John Chiyuan Lee

    In fleeing to Thailand, becoming a fugitive listed by INTERPOL and leaving dozens of U.S. victims in his wake when his Ponzi scheme collapsed, John Chiyuan Lee shattered the Ponzi-forum myth that “offshore equals safe.”

    “Safe — for a while while INTERPOL is beaming your picture 24/7 and U.S. authorities at the local, state and national level are on your trail” — might be more accurate

    Los Angeles County Sheriff’s Det. Simeon Plyler tracked Lee to Thailand, and U.S. Immigration and Custom Enforcement (ICE) and the U.S. Marshals Service worked with the sheriff’s office and Thailand’s government to locate and arrest the fugitive.

    He was found last year in Pataya, Thailand. U.S. Marshals brought him back to the United States to face justice.

    Lee, 40 at the time of his arrest, now has accepted responsibility for his crimes and accepted an early plea deal in Los Angeles Superior Court that includes a six-year sentence in California state prison and a restitution order of about $1.5 million, the Sheriff’s Department announced yesterday.