EDITOR’S NOTE: In a statement on the allegations against Senen Pousa, Joel Friant, Michael Dillard and their companies, the CFTC pointedly stressed that international agencies cooperated in a probe and that the alleged scammers created victims in multiple nations . . .
The CFTC has gone to federal court in the Western District of Texas, alleging that Senen Pousa of Australia and Joel Friant of Bellingham, Wash., were running a “fraudulent $53 million worldwide off-exchange Forex scheme” through an Australian enterprise known as Investment Intelligence Corp. (IIC).
Also charged in the alleged caper were Michael Dillard and Elevation Group Inc. of Austin, Texas.
“The scheme allegedly accepted at least $53 million from at least 960 clients worldwide, including at least 697 clients in the United States, and clients in Australia, the United Kingdom, Canada, Germany, the Netherlands, and Singapore, among other countries. None of the defendants has ever been registered with the CFTC,” the CFTC charged.
U.S. District Judge Lee Yeakel of the Western District of Texas issued an emergency freeze of the assets of Pousa, Friant and IIC and prohibited the destruction of books and records, the CFTC said.
Cooperating in the probe were the Australian Securities & Investments Commission, the U.K. Financial Services Authority, the Hungarian Financial Supervisory Authority, the Netherlands Authority for the Financial Markets, the Financial Markets Authority of New Zealand and the New Zealand Serious Fraud Office, the CFTC said.
From a CFTC statement (italics added):
The CFTC complaint alleges that from at least January 1, 2012 through the present IIC, through Pousa, Friant and its other agents, and defendants Dillard and Elevation Group, utilized “wealth creation” webcasts, webinars, podcasts, emails, and other online seminars via the Internet to directly and indirectly solicit actual and prospective clients worldwide to open forex trading accounts at IIC. The complaint further alleges that clients were promised by IIC, through Pousa, Friant, and other agents 1) a monthly return of 9 percent, 2) that IIC’s managed forex trading would risk less than 3 percent of a client’s capital per transaction, 3) that IIC was able to limit the risk inherent to forex trading by limiting its managed forex trading to 2 to 5 trades per month, and 4) that IIC has six “proprietary traders” working 24 hours a day trading clients’ funds. The CFTC complaint alleges that all of these representations to clients were false.
On or about May 16-17, 2012, the complaint alleges that clients suffered a loss of over 60 percent of their investment, when IIC, by and through its agents, entered over 200 forex trades in each client’s account in violation of the representations made by IIC, by and through its agents.
Also assisting the CFTC were the Texas State Securities Board, the Washington State Department of Financial Institutions, the U.S. Attorney for the Western District of Texas, the FBI and the SEC, the CFTC said.
BULLETIN: (UPDATED 5:35 P.M. EDT U.S.A.) The CFTC has gone to federal court in the Eastern District of Missouri, alleging that Grahame Rhodes of St. Louis was at the helm of a decade-long, commodity-pool Ponzi scheme aimed at family and friends.
Rhodes is charged with misappropriating the entire pool while “pretending to be a successful, but cautious, trader who earned annual rates ranging between 20 and 50 percent trading E-mini S&P futures contracts,” the CFTC said.
The scheme, which began in 2001, allegedly was aimed at family members and friends. About 12 investors plowed $2.1 million into the scheme, the CFTC said.
Rhodes “has never registered with the United States Commodity Futures Trading Commission . . . in any capacity,” the CFTC charged.
From the CFTC complaint (italics added):
Rhodes did not deposit any of the pool participant funds he collected during the Relevant Period into the non-existent pool or even a trading account. Instead, he misappropriated the funds and used them to pay for his personal expenses, including payments for luxury cars, credit card bills, private school tuition, and mortgage payments. Rhodes also used the funds he collected from the pool participants to pay fictitious profits to other pool participants in the manner of a Ponzi scheme.
Rhodes presided over a company known as Lincolnshire Trading LLC, the CFTC said.
And Rhodes even ripped of his then-mother-in-law, who was ill, the CFTC charged.
“During the Relevant Period, Rhodes and his then wife obtained power of attorney over his then mother-in-law’s financial affairs due to her deteriorating health,” the CFTC charged. “Rhodes has admitted that he facilitated the transfer of approximately $455,854 of his then mother-in-law’s money, including the proceeds of the sale of her home, to Lincolnshire or himself for the purported purpose of pooling her money with the pool participant funds for trading E-mini S&P 500 futures contracts. Rhodes never deposited these funds into a trading account and instead misappropriated them.”
A “forged trading statement” was part of his overall scam, the CFTC said.
As is typical in Ponzi schemes, Rhodes piled on the excuses when participants demanded their funds from the collapsing enterprise, the CFTC charged.
Rhodes tried to duck at least one investor by explaining he had created a “monster account” that would “produce more than enough to take care of the problem . . .” the CFTC charged.
But the “monster account was just a snow job, and Rhodes tried other excuses to mask his Ponzi, the CFTC charged.
“In a March 2012 e-mail to all pool participants, Rhodes claimed that he had lost 90% of a trading account when he inadvertently left a position open for two weeks, and that he was trying to obtain a statement that would prove the loss. In reality, no such loss had occurred, and consequently, no such statement ever existed,” the CFTC charged.
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.
EDITOR’S NOTE: The PP Blog first became aware of reports about the suicide bid of Russell R. Wasendorf Sr. last night, after being contacted by a reader who was defrauded in the Trevor Cook Ponzi scheme. Wasendorf apparently sought to take his own life on the sparkling Cedar Falls, Iowa, property of Peregrine Financial Group Inc., the company he founded in 1990 in Chicago. A deeply disturbing, multipronged mystery has emerged . . .
** ___________________________________ **
Russell R. Wasendorf Sr.
After a reported suicide bid yesterday, Russell R. Wasendorf Sr. is said to be comatose today. Regulators now say that more than $200 million in customer funds is missing from Peregrine Financial Group Inc. (PFG). By law, the customer money was supposed to have been segregated and separately accounted for.
“The whereabouts of the funds is currently unknown,” the CFTC said today in a court filing in Chicago that accused Wasendorf and PFG of fraud and sought an asset freeze.
Those alarming words followed on the heels of an emergency enforcement action yesterday by the National Futures Association, which alleged that Wasendorf “may have falsified bank records” to create the impression that PFG had about $400 million in segregated accounts in late June.
Of the $400 million, $225 million purportedly was held at U.S. Bank.
But when NFA checked with U.S. Bank yesterday, it learned that only about $5 million was on deposit, according to the emergency filing.
Wasendorf is a member of NFA’s Futures Commission Merchant Advisory Committee with a term ending in February 2015, according to NFA’s website. He’s now effectively been accused of fraud by the same organization he purportedly served as a committee member.
Whatever fraud was taking place at PFG, NFA and CFTC now say, appears to date back at least to February 2010. And that fraud, according to the NFA filing, appears to have carried over into both this year and last.
PFG does business online as PFGBest at PFGBest.com. The website features a photo of PFG’s glistening headquarters building in rural Cedar Falls, Iowa.
The building near the small city of about 40,000 nestled in America’s heartland, however, may belie the reality at PFG.
In February 2012, R.J. Zayed, the court-appointed receiver in the Trevor Cook Ponzi scheme case in Minnesota, sued PFG. Among the allegations was that the company turned a blind eye to Cook’s Forex fraud and checkered history with NFA.
Cook’s Ponzi scheme gathered about $194 million and rendered some investors destitute. About $30 million of that sum was lost in trading accounts at PFG, according to the receiver’s lawsuit.
PFG, according to the lawsuit, permitted Cook to open, manage and maintain trading accounts “in the face of overwhelming red flags of fraud or insolvency.”
Cook is now two years into a 25-year prison sentence for his Ponzi scheme, which has led to criminal charges and convictions of pitchmen Jason Bo-Alan Beckman, Gerald Durand and former radio huckster Pat Kiley.
During the same month Zayed sued PFG, the company agreed to settle an earlier NFA complaint in which it was accused of failing to diligently supervise introducing brokers. One of the respondents in the case was Russell R. Wasendorf Jr., Wasendorf’s son. Wasendorf Jr. is the president and chief operating officer of PFGBest and founded its Forex division, according to the PFGBest website.
The company agreed to pay $700,000 to settle the case with no acknowledgment of wrongdoing, according to NFA.
About five months later, Wasendorf Sr. was accused of fraud. Details remain sketchy. It is unclear how much — if any — of the fraud for which he now stands accused is related to the Cook fraud.
What is clear is that Cook himself was in trouble at least two prior times with NFA, with the self-regulatory organization alleging in 2005 that he manipulated an elderly woman and caused her to liquidate a $100,000 annuity with which she already was earning an annual return of 8.75 percent.
Cook told her she could earn more through him, according to the NFA complaint.
NFA documentation in that case references an entity known as Private Financial Group which, curiously, also used the acronym PFG, the same acronym used by Peregrine Financial Group.
UPDATED OCT. 19, 2013. George Sepero has been sentenced to 100 months in federal prison. Our earlier story is below and has been edited to correct spelling.
The word “proprietary” has been used again to mask a large financial swindle, federal prosecutors said.
George Sepero, 39, of Glen Rock, N.J., has been indicted on charges he was running a hedge-fund scam and a separate scam designed to steal the life savings of an elderly New Jersey woman with serious medical problems.
Sepero now has been charged in a 17-count indictment with 16 counts of wire fraud and one count of conspiring to commit wire fraud.
The caper involved Pelt Capital, Caxton Capital Management, SP Investors Inc. and CCP Pro Consulting Inc., prosecutors said.
As part of the hedge-fund scam, Sepero and co-conspirators “claimed they owned and controlled a proprietary computer algorithm for trading foreign currencies, that they had used the algorithm to achieve returns of more than 170 percent in the prior two years, and that any investment funds would be highly liquid and could be withdrawn on days’ notice,” the office of U.S. Attorney Paul J. Fishman of the District of New Jersey said.
In reality, “Sepero and others invested little money in foreign currency or any other investment vehicle, instead diverting the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures,” Fishman’s office said.
Any number of scammers have used the word “proprietary” as a part of explanations designed to cover up an underlying fraud, discourage investors from asking questions or to make an opportunity appear to be unique. Such explanations often also include the words “secret” or “algorithm.”
The Sepero scam gleaned more than $4 million, and Sepero and others spent investor money on credit card bills averaging about $25,000 per month, prosecutors said.
Here is how other money was spent, prosecutors said.
Bar tabs of approximately $18,241, including a $4,000 tip at Drai’s Hollywood nightclub in Los Angeles.
Luxury hotel rooms for tens of thousands of dollars, including suites costing more than $4,000 at W Hotels in New York.
Flights to Paris, Los Angeles, Chicago and elsewhere.
A customized Ford F-350 “Harley-Davidson Edition” pickup truck costing more than $80,000.
A Mini Cooper automobile.
A leased a BMW.
“Sepero also spent victims’ money on other personal expenditures, including mortgage payments, home improvements, meals at high-end restaurants, jewelry and limousines,” prosecutors said.
The hedge-fund scam also included the mailing of false statement to customers and emails sent by “Mel Tannenbaum,” whom prosecutors described as “a fictional character of the conspirators’ invention.”
And bogus “screen shots” also were used to dupe investors, prosecutors said.
“Sepero and others also emailed to several investors ‘screen shots’ of a computer-based trading program, which they claimed represented the investors’ funds being traded in the currency markets,” prosecutors said. “In reality, the shots reflected trading in fictional accounts set up by the co-conspirators to dupe investors.”
In the scam targeting the senior citizen in poor health, Sepero took charge of her annuity account” and drained it down to less than $17 while making the woman’s family believe the account contained more than $750,000.
The woman was a widow, and Sepero “convinced her to write checks to entities that Sepero controlled,” prosecutors said. “Sepero promised to add the money to the annuity account, but instead spent hundreds of thousands of dollars for his personal use.”
UPDATED 9:05 P.M. EDT (U.S.A.) The white-collar fraud epidemic has become a political football — one that actually uses a football analogy. This is a statement from Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission:
“The result of the House bill is to effectively put the interests of Wall Street ahead of those of the American public by significantly underfunding the agency Congress tasked to oversee derivatives – the same complex financial instruments that helped contribute to the most significant economic downturn since the Great Depression.
“The CFTC’s hardworking staff is just 10 percent more in numbers than at our peak in the 1990s, yet Congress has now directed the agency to oversee the swaps market that is eight times larger than the futures market. Picture the NFL expanding eightfold to play more than 100 football games in a weekend, leaving just one referee per game, and, in some cases, no referee. Imagine the mayhem on the field, the resulting injuries to players, and the loss of confidence fans would have in the integrity of the game.
“We would not want similar mayhem and loss of confidence in markets so critical to farmers, ranchers and end users that may result from this bill’s significant underfunding of the CFTC.”
The statement comes on the heels of vote by the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies to cut the CFTC budget, the agency said on its website.
It also occurred on the same day the CFTC announced that it had filed and simultaneously settled charges against Luis Salazar-Correa of Las Vegas.
Salazar-Correa and his Nevada-based company, Prosperity Team LLC, were accused of fraudulently soliciting at least 183 individuals and drafting them into a Forex Ponzi scheme that gathered at least $2.482 million.
Demonstrating that the fraud epidemic is a global plague and that the world’s antifraud agencies are cooperating in a bid to tame the beast, CFTC thanked the Cyprus Securities and Exchange Commission, the International Financial Services Commission of Belize, the Swiss Financial Market Supervisory Authority and the U.K. Financial Services Authority for assisting in the Salazar-Correa/Prosperity Team probe.
CFTC also thanked the FBI, the SEC and the U.S. Attorney’s Office in Nevada.
In March Congressional testimony, Gensler said the agency needed both more employees and more money to carry out its tasks.
The CFTC, Gensler said in March, needed to add about 305 employees to its current staff of 710 to keep up with its expanded responsibilities. It also needed an additional outlay of tens of millions of dollars, the chairman said.
But Rep. Jack Kingston, a Georgia Republican, apparently has joined other politicians in advancing a bill that would slash $25 million from CFTC’s current budget of about $205 million.
In the era of white-collar fraud, the proposed bill would provide the CFTC only $25,000 “for the expenses for consultations and meetings hosted by the Commission with foreign governmental and other regulatory officials.”
Keith F. Simmons, whose monumentally bizarre Ponzi scheme put a North Carolina bank in harm’s way, has been sentenced to 50 years in federal prison.
The Charlotte Observer was first with the story this afternoon.
Simmons is 47.
Among the allegations in case is that hucksters who’ve been charged both civilly and criminally conducted no real due diligence and helped Simmons grow the scheme to about $40 million.
See Feb. 17, 2011, PP Blog story that outlined some of the elements of a CFTC civil case against Simmons, the principal figure in the Black Diamond Capital Solutions LLC case.
See April 27, 2011, PP Blog story on how and why CommunityONE Bank N.A of Asheboro, N.C., was charged criminally in the aftermath of the Simmons’ caper for failing to maintain an effective anti-money laundering program. The bank entered into a deferred prosecution agreement with the government.
See Feb. 23, 2012, PP Blog story about individuals who allegedly assisted Simmons.
A Belize entity known as “Sovereign Grace Inc.” and and a second entity known as Divine Circulation Services Ltd. were part of the scam, investigators said.
This cash came from the Trevor Cook Ponzi scheme and was stashed, according to filings in the civil case against Cook. Cook is serving a 25-year-sentence in federal prison. Photo source: Court records.
EDITOR’S NOTE: As America’s fraud plague continues, some of the scammers are polluting the free market with incongruous and even bizarre schemes — even as they purport to represent the best that freedom offers.
The PP Blog highly recommends that readers check out this September 2011 document from the SEC that warns about scammers targeting holders of self-directed IRAs. Reading the document may help improve your understanding of the story below. There are differences between IRAs (emphasis added below):
“An Individual Retirement Account (IRA) is a form of retirement account that provides investors with certain tax benefits for retirement savings,” the SEC says. “Some common examples of IRAs used by investors include the traditional IRA, Roth IRA, Simplified Employee Pension (SEP) IRA, and Savings Incentive Match Plan for Employees (SIMPLE) IRA. All IRA accounts are held for investors by custodians or trustees. These may include banks, trust companies, or any other entity approved by the Internal Revenue Service (IRS) to act as a trustee or custodian.
“A self-directed IRA is an IRA held by a trustee or custodian thatpermits investment in a broader set of assets than is permitted by most IRA custodians,” the SEC continues. “Most IRA custodians are banks and broker-dealers that limit the holdings in IRA accounts to firm-approved stocks, bonds, mutual funds and CDs.
“Custodians and trustees for self-directed IRAs, however, may allow investors to invest retirement funds in other types of assets such as real estate, promissory notes, tax lien certificates, and private placement securities.While self-directed IRAs may offer investors access to an array of private investment opportunities that are not available through other IRA providers, investments in these kinds of assets may have unique risks that investors should consider. Those risks can include a lack of disclosure and liquidity — as well as the risk of fraud.”
Here, now, a story about how holders of self-directed IRAs allegedly had their pockets picked . . .
Meanwhile, there’s William Wise, a onetime international fugitive charged in California with a massive Ponzi scheme centering on offshore CDs. (Wise surrendered earlier this week.) And then there’s Robert Stinson Jr., the Pennsylvania Ponzi swindler now doing more than 33 years for his “Life’s Good” scam. (The FBI said he was wiring money even as a raid was under way.)
And who could forget Californian Daniel C.S. Powell, implicated by the SEC in a life-settlement scam? (The venture became known as “Christian Stanley,” and its website traded on the name of former President Bill Clinton.)
Then there’s Chris Cornett, implicated by the CFTC in a Forex swindle.
Here’s why these names are important: All of these individuals — and more — are listed as scammers or alleged scammers in a proposed class-action lawsuit against Ephren W. Taylor II, now implicated by the SEC in a massive Ponzi swindle known as “City Capital.” The alleged City Capital targets were people of faith.
Though not defendants in the Taylor/City Capital lawsuit, the other alleged (or proven) scammers all had something in common beyond their abilities to separate people from their money, according to the complaint: complicit bankers and/or a means of plowing customers’ money from self-directed IRAs (SDIRAs) into their fraud schemes.
SDIRAs are sold as freedom-celebrating devices that encourage personal responsibility and permit their holders to be more flexible in their investment choices. By law, the accounts are held by a custodian or trustee. Even so, sharks allegedly swim in these waters — and the worst of the worst may deny they have any duties to their customers and may be turning a blind eye to fraud schemes as a means of keeping a fee-generating, steady supply of fresh meat and blood in the water.
“I am encouraging our plaintiffs to raise their voices and to make their legislators and regulators aware of how Ponzi schemes continue to be perpetrated through the use of self-directed IRA investment vehicles,” said Cathy Lerman of Cathy Jackson Lerman PA, one of the firms involved the prospective class action.
Other attorney/firms involved in the litigation include California local trial counsel David Dorenfeld of Snyder Dorenfeld LLP; Michael W. Brown, an associate at Snyder Dorenfeld; and Jim Gitkin, principal of Salpeter Gitken LLP.
Among the defendants named in the Taylor class action are Bank of America; Missouri Bank and Trust of Kansas City; Equity Trust Corp. of Ohio (an SDIRA provider); Entrust New Direction IRA Inc. of Colorado; The Entrust Group of California (an SDIRA provider); Entrust Administration Inc. of California; and Sunwest Trust Inc. of New Mexico. Other defendants also are named, and there is an allegation that Taylor used as many as 50 shell companies as part of his long-running fraud.
A separate proposed class action has been filed against SDIRA providers named in the Taylor class action. That lawsuit alleges that as much as $94 billion may be tied up in SDIRAs nationwide, suggesting that fresh meat and blood could churn in the waters indefinitely.
In effect, the lawyers are arguing that SDIRAs, which are lightly regulated or not regulated at all, have become the tools of criminals and are being used to separate investors from their money in one scam after another. Unlike traditional IRAs, SDIRA vessels may end up steering vast sums of cash into “opportunities” that not only may be exceptionally risky, but also may be downright crazy — such as Taylor’s purported “sweeps machines.”
The Taylor lawsuit, for instance, argues that African American Christians effectively found themselves owning machines used in illegal gambling parlors and that churches that had invited Taylor to speak also got swept into incongruous schemes.
Liberty City Church of Christ in Miami lost $100,000, owing to Taylor’s scams, the lawsuit contends. William Lee of Raleigh, N.C., got duped of $160,000 because Taylor and associates caused him to believe he was making a “socially conscious” investment that would help the public at large while at once resulting in an individual profit.
The same thing happened to Gennet Thompson of Delray Beach, Fla. Thompson entrusted $17,200 to Taylor in one “opportunity” and $10,500 in another, according to the complaint.
Trudy Morgan of Lithonia, Ga, had a similar experience — one that sucked away $30,000, according to the complaint.
If you’re a fan of “Mad Men,” the award-winning AMC television drama now back on the air after a 17-month absence, you’ve seen the cigarettes, the boozing and the debauchery weekly. (Perhaps not only in the show itself, but also in AMC’s promos for the series, a key element of which is the tagline “DEBAUCHERY IS BACK.”)
“Mad Men” is a carefully crafted period piece about the advertising business as it existed at the fictional, New York-based Sterling Cooper Draper Pryce agency on Madison Avenue in the 1960s. The show is utterly believable: The audience can’t wait to see what the gifted and self-absorbed fools running the shop will do next. It’s a safe bet, though, that whatever they do will involve a vice.
Something reminiscent of “Mad Men” is coming to the Minneapolis/St. Paul region this week. Indeed, the real-life Forex fraud trials of Bo Beckman, Pat Kiley and Gerald Durand are scheduled to get under way Thursday. All three men are figures in Trevor Cook’s $194 million Ponzi caper, believed to be the second greatest financial crime in Minnesota history behind the epic, $3.65 billion fraud of Tom Petters.
Cook, an aficionado of life’s dark alleys, pleaded guilty two years ago and was sentenced to 25 years in federal prison. In a sense, the Cook case demonstrates that debauchery still is practiced in American business, though perhaps a bit less naturally than in the decade depicted in “Mad Men.”
We highly recommend this pretrial summary by the Star Tribune, which reports that the government has referenced booze, drugs, strippers and prostitutes in court filings — and a defense lawyer is worried that prosecutors will put on a “stripper-centric” case.
BULLETIN: (UPDATED 4:14 P.M. EDT U.S.A. APRIL 14) The CFTC has gone to federal court in Idaho, alleging that Brad Lee Demuzio of Chubbuck was running a Forex Ponzi scheme that tanked.
Unable to make payouts, Demuzio “fabricated a letter purporting to be from the CFTC and bearing the fraudulently copied signature of a CFTC officer, which falsely represented that the company’s funds had been frozen in connection with a purported CFTC investigation,” the CFTC charged.
But Demuzio didn’t stop there, the agency charged.
“The complaint also alleges that Demuzio subsequently fabricated a second letter fraudulently providing an update as to the status of the purported investigation as well as a third document purporting to be a dismissal of the investigation and bearing the fraudulently copied signature of an Administrative Law Judge,” the agency charged.
Meanwhile, the CFTC alleged, the official seal of the Commission was used in the bid to cover up the fraud and Demuzio “attempted to pass these documents off to investors as official Commission documents.”
Chubbuck now has been indicted on five counts of wire fraud, the CFTC said, noting that the FBI was involved in the probe.
“On or about January 13, 2012, Demuzio confessed to an agent of the Federal Bureau of Investigation that he had knowingly made false statements to investors and fabricated Commission documents,” the CFTC said.
The scheme, which operated through an entity known as Demuzio Capital Management (DCM) and netted $1.8 million, began to unravel during the summer of 2011, when certain investors told Demuzio they wanted their capital outlays and purported profits back, the CFTC said.
Checks were issued to investors in August 2011, but the checks bounced, the CFTC said.
By Aug. 5, Demuzio said he could not pay because “the Commission had frozen DCM’s funds in the course of an investigation,” the agency said.
As part of the scheme, Demuzio manufactured a document addressed to himself, with a CFTC official as the purported sender.
This document falsely stated in part that “the CFTC has opened an investigation into your activities. This investigation requires the temporary freezing of your current assets. The investigation along with the freezing of your assets is intended to be temporary.”
By October, the CFTC alleged, Demuzio had manufactured another letter to himself that purportedly had originated at the agency, thanked him for his cooperation and suggested that a decision would be forthcoming.
Among other things, the bogus October letter asserted that “This letter is being sent to express our appreciation to you for your cooperation during the investigation . . . We are also writing to confirm to you that a letter of resolution will be sent to you no later than Friday October 14, 2011.”
By Oct. 11, a third bogus document surfaced. This one was styled “Order of Dismissal” and purported “to have been signed by a Commission Administrative Law Judge,” the agency said.
This document, the CFTC alleged, included this false statement:
“At the parties’ request, the complaint is DISMISSED with prejudice and this proceeding is TERMINATED in its entirety. IT IS SO ORDERED.”
Demuzio confessed to the FBI in a signed statement, the CFTC said.
“The first and most important mistake that I have made has been to lie to each of these individuals, all of whom are close friends and family,” the confession read in part, according to the CFTC. “I have lied to them about the money we made and how we made it.”
And Demuzio further confessed in his statement that he had “engaged in a series of lies that culminated in my making letter [sic] from the cftc showing that I could not return their money because of an investigation,” the CFTC said.
BULLETIN: A federal judge has frozen the assets of three Florida companies and their operator, after the Federal Trade Commission alleged a “precious metals” telemarketing scam aimed at senior citizens was under way and had collected nearly $9 million.
Named defendants in the case were Anthony J. Columbo, Premier Precious Metals Inc., Rushmore Consulting Group Inc. and PPM Credit Inc., all of Deerfield Beach.
Customers got trapped in a boondoggle in which they were lured into buying precious metals on credit while their capital was eaten away by undisclosed or misrepresented fees. In some cases, the only way out of the thicket was to pay more money “or lose their investment,” the FTC charged.
“High-pressure” pitchmen picked the pockets of customers, the FTC charged.
“The majority of consumers who purchase precious metals from Defendants lose money,” the FTC charged. “Consumers’ equity in their precious metals investments is drained by the fees and commissions that are assessed at the inception of their transactions and by the constant accumulation of service fees and interest charges on the leverage portion of their accounts.
“These fees, commissions, and interest charges negatively affect consumers’ ability to break even or profit on the precious metals investments,” the FTC continued. “When a consumer’s equity decreases sufficiently, an equity call is issued and the consumer must either invest additional money or allow the precious metals to be liquidated at a loss, making the investments risky. In some instances, consumers’ accounts are liquidated without notice to consumers.”
Assisting in the FTC probe were the Better Business Bureau of Southeast Florida and the Caribbean, the Commodity Futures Trading Commission (CFTC), the Florida Department of Agriculture and Consumer Affairs, the State of Florida Office of the Attorney General, the Florida Office of Financial Regulation and the Broward County Sheriff’s Office, the FTC said.
EDITOR’S NOTE: In a statement on the allegations against Senen Pousa, Joel Friant, Michael Dillard and their companies, the CFTC pointedly stressed that international agencies cooperated in a probe and that the alleged scammers created victims in multiple nations . . .
