PatrickPretty.com

Tag: CFTC

  • BULLETIN: Judge Finds That Purported Forex ‘Experts’ Used Bogus Website, Former High School Coaches And J.C. Penney Sales Clerks In Scheme That Funneled Millions To Ponzi Schemer Now Jailed With Bernard Madoff

    EDITOR’S NOTE: Both the CFTC and SEC have encountered incredibly elaborate fraud schemes — some with elements that only can be described as bizarre and deeply disturbing. The story below is based on  a fraud case brought by the CFTC against Gary D. Martin and Brenda K. Martin of St. Augustine, Fla. The Martins are husband and wife. Their company, Queen Shoals Consultants LLC, also was named in the March 2011 complaint. The complaint was filed in the Western District of North Carolina.

    The CFTC now has obtained a consent order against the defendants. Chief U.S. District Judge Robert J. Conrad Jr. presided over the case. In issuing the uncontested order, Conrad highlighted testimony by Gary Martin. Martin’s testimony and the fact set against him and his co-defendants was disturbing in several ways. The PP Blog previously has written about “fraud creep” on the Internet, and the Martin/Queen Shoals case provides another compelling example of viral larceny that traded in part on religion and devastated senior citizens . . .

    A Florida couple scammed investors in an elaborate Forex and commodities swindle in which they posed as “experts” to recruit customers while funneling $22 million to a criminal scammer now serving a 22-year prison sentence in the same North Carolina facility that houses Bernard Madoff.

    Among the alarming consent findings by Chief U.S. District Judge Robert J. Conrad Jr. against Gary D. Martin and his wife Brenda K. Martin were that they used the Internet and pitchmen who had minimal or no trading credentials to fuel a fraud turbine that put money in their pockets as well as the pocket of Ponzi schemer Sidney S. Hanson.

    Hanson controlled a similarly named entity known as Queen Shoals LLC and was running a $33 million Ponzi scheme that targeted senior citizens and people of faith by using QSC and other entities as feeders, according to court filings.

    In March 2011, Hanson, 63, was sentenced to 22 years in federal prison. He is listed as an inmate at the Butner Federal Correctional Complex in Butner, N.C. The Martins and QSC drove $22 million to the Hanson scheme, receiving referral fees of up to 5 percent while maintaining the illusion that legitimate commerce was taking place, according to court filings.

    Said Noth Carolina Secretary of State Elaine F. Marshall upon Hanson’s sentencing, “What made this case even more sickening was that the scam was crafted to appeal to victims through their deeply held religious beliefs.”

    Through a process that remains unclear, the Martins and QSC managed to recruit at least 53 “consultants” to pitch their scheme, according to Conrad’s ruling.

    “Although the Martins represented via the QSC website that ‘[our consultants have a vast background in financial services … ,’ Martin admitted that this representation was false,” Conrad wrote. “Of the 53 known QSC consultants, only 8 to 10 had taken a four day course to become ‘certified estate planners, but even these consultants had no other background in financial services. None had any experience trading forex. Martin admitted that a number of the QSC consultants represented to customers as possessing a ‘vast background in financial services’ were actually former high school coaches, J. C. Penney sales clerks, or insurance salesmen . . .”

    The ruling makes in clear that, not only were unqualified reps acting as QSC pitchmen, the QSC scheme was a fraud itself — one that was enabling an even larger fraud operated by Hanson.

    “All of the representations concerning the Defendants’ alleged experience and expertise in trading forex were false,” Conrad ruled. “Martin admitted in his testimony under oath as the corporate designee of QSC that, contrary to the Defendants’ in-person and website representations to prospective and actual customers, he and his wife had no training or experience in buying or selling foreign currency, commodity futures contracts, options on commodity futures contracts, or any other financial instrument.”

    Promises of “guaranteed” annual earnings of between 8 percent and 24 percent were used by the Martins to lure customers as part of the fraud, Conrad ruled.

    Fancy terminology such as “non-depletion,” “leveraged” trading and “proprietary trading practices” also were part of the fraud, according to court filings.

    Customers also were told that “no less than 18 different profit centers” existed and that the purported profit centers “allowed the creation of the profits claimed to be achieved by the Defendants,” Conrad ruled.

    “Indeed, the website touted that all customer funds were ‘immediately placed into our approximate (sic) 60 sub accounts’ and that the forex accounts traded by the Defendants were ‘profit generating,’” Conrad ruled.

    But “[a]ll of the representations concerning trading and guaranteed profits were false,” Conrad ruled.

    “[Gary] Martin admitted under oath that the Defendants never engaged in any forex trading on behalf of customers,” Conrad ruled. “In fact, Martin admitted that the Defendants never engaged in any type of trading or investing with customer funds. There were no forex accounts, gold accounts, silver accounts, or ’60 sub accounts.’

    “All of the Martins’ representations regarding ‘profitable accounts’ were false,” Conrad ruled. “There was no ‘leveraging’ on behalf of customers, no ‘profit centers,’ and, because there was no trading, there were no profits. Instead, the Martins simply turned over customer funds to Sidney S. Hanson . . . in return for a payment of approximately $1.44 million Martin described in his testimony as a ‘referral’ fee.”

    Read earlier story.

    Read the consent order.

  • BULLETIN: Church Pastor Accused Of Running Forex Ponzi And Fraud Scheme Ordered To Pay More Than $2 Million; Jeremiah C. Yancy Promised Monthly Returns Of 40 Percent And Told Customers His Firm Managed Funds For ‘Orphanages,’ Judge Says

    BULLETIN: A federal judge in Texas has ordered the former pastor of an Idaho church and his firm to pay more than $2 million in restitution and penalties in a Forex Ponzi scheme that affected 64 customers, including church members allegedly targeted in the preacher’s scam.

    The order, which was entered by consent, applies to Jeremiah C. Yancy, who now resides in Atoka, Okla. Yancy also is known as Jeremiah C. Glaub. He ran a Texas-based firm known as Longbranch Group International LLC. The order also applies to the firm.

    U.S. District Judge Vanessa Gilmore of the Southern District of Texas issued the order.

    Yancy and Longbranch told Forex customers they managed money for churches and orphanages. Customers were told they could expect monthly returns of between 20 percent and 40 percent, and were shown bogus trading results and account statements, the CFTC said.

    The agency charged Yancy and the firm in August 2010. Yancy and Longbranch neither admitted nor denied the allegations.

  • BULLETIN: Vincent McCrudden Pleads Guilty To Threatening Regulators, Government Officials

    BULLETIN: Vincent McCrudden, who was arrested in January amid allegations he threatened to kill 47 regulators and government officials, has pleaded guilty to two counts of transmitting threats to kill.

    McCrudden, 50, faces up to 10 years in prison. He has been jailed since his arrest in New Jersey.

    “Mr. McCrudden made bone-chilling and graphic threats against dozens of public officials,” said Assistant Attorney General Lanny Breuer. “As this prosecution reflects, the Department of Justice will act swiftly to identify and prosecute anyone who attempts to retaliate against public officials. Public servants must be able to carry out their duties without fear of being targeted.”

    On Sept. 30, prosecutors said, McCrudden sent an email to an employee of the National Futures Association (NFA) that made a death threat.

    “[I]t wasn’t ever a question of ‘if’ I was going to kill you, it was just a question of when,” the email read, prosecutors said. “And now, that question has been answered. You are going to die a painful death.”

    McCrudden also published an “Execution List” on his website. The list included the names of 47 current and former officials of the SEC, FINRA, NFA, and CFTC.  Included on the list were the names of the “the Chairperson of the SEC, the Chairman of the CFTC, a former Acting Chairman and Commissioner of the CFTC, the Chairman and CEO of FINRA, the former chief of Enforcement at FINRA, and other employees of the NFA and CFTC,” prosecutors said.

    “[T]hese people have got to go,” McCrudden wrote, prosecutors said. “And I need your help, there are just too many for me alone.”

    And McCrudden “posted a $100,000 reward on his website for personal information of several government officials and proof that those officials were punished,” prosecutors charged.

    On Dec. 16, according to the complaint, McCrudden sent a CFTC official an email with a subject line of, “You corrupt mother[*!&$$%]!”

    A top FBI official said such behavior would not be tolerated.

    “The conduct of McCrudden was way beyond mere speech,” said Janice K. Fedarcyk, assistant director in charge of the agency’s New York office. “By his admission, he not only directly threatened to kill government and regulatory officials, but he also listed dozens of officials and offered a reward to others to kill them. This outrageous conduct is not only dangerous, but an affront to civil society.”

    Fedarcyk was backed by U.S. Attorney Loretta E. Lynch of the Eastern District of New York.

    “This defendant crossed the line when he directly threatened to kill public officials who were working to keep our financial markets fair and open, and invited others to join him,” Lynch said. “He thought he could hide in the shadows of the Internet and disseminate his threats and instructions. He was wrong. This office will not tolerate, and will vigorously prosecute, those who threaten to kill men and women who dedicate their lives to public service.”

  • URGENT >> BULLETIN >> MOVING: KABOOM! Feds, SEC, CFTC Move Against Alleged U.S. Huckster Who Ran Forex Ponzi Scheme From Panama And Fled To Peru; Self-Styled ‘Christian’ Jeffery A. Lowrance Registered Business In New Zealand And Routed Ponzi Payments To And From The Netherlands, Officials Say

    URGENT >> BULLETIN >> MOVING: A U.S. citizen who told investors he was a “Christian” who shared their political philosophy of “limited government” ripped off hundreds of people in a $21 million Forex Ponzi scheme involving “fictitious trading,” used some of the cash to start an alternative newspaper, preyed on followers of U.S. Rep. Ron Paul and fled to Peru when his Panama-based scheme collapsed, U.S. officials said today.

    Jeffery A. Lowrance, 50, was arrested in Lima earlier this year. He was extradited to the United States yesterday and arraigned today on criminal charges filed in the Northern District of Illinois, federal prosecutors said. Separately, the SEC charged Lowrance with fraud in a civil complaint, as did the CFTC.

    The office of U.S. Attorney Patrick J. Fitzgerald of the Northern District of Illinois said this afternoon that Lowrance operated his Forex swindle from Panama, involving as many as 400 investors and causing losses of at least $5 million.

    Fitzgerald is perhaps the most famous prosecutor in the United States, and has served during both Republican and Democratic administrations in Washington. Lowrance was jailed in the United States today after his arraignment in Chicago on charges of wire fraud and money laundering.

    In bringing the case, government officials described Lowrance’s alleged crimes as a form of affinity fraud targeted at Christian voters with a keen interest in politics. Investigators have fretted that certain types of schemes have been designed deliberately to trade on sentiment against big government and that scammers have lined up to take advantage of the sentiment while leaving investors holding the bag.

    Investors in 26 states, including California, Oregon, Illinois and Utah, were targeted in the scam, the SEC said.

    Paul, R.-Texas, is an advocate for limited government and is a candidate in a crowded GOP field for next year’s Presidential nomination.

    During the 2008 U.S. election cycle, Lowrance showed up at a Paul political rally in Minnesota, placing a copy of a newspaper Lowrance produced with investor funds he had “secretly” diverted “on every seat at the rally,” the SEC charged.

    Even as he was touting his newspaper and his investment program at the Paul rally, the Ponzi scheme already was in a state of collapse, the SEC charged.

    And, the SEC added, Lowrance’s purported investment firm — First Capital Savings & Loan Ltd. — actually was registered in New Zealand. Investors were instructed to send money to a “money converter” in Maryland, where it was whisked overseas to the Netherlands.

    Ponzi payments were made from the Netherlands, the SEC alleged.

    A Lowrance predecessor entity known as Mentor Investing Group had been ordered by the state of California in 2006 to “cease and refrain” from selling commodities and Forex contracts, according to records.

    “[Lowrance]  used a significant portion of the money he raised from investors to fund the creation of his alternative newspaper, USA Tomorrow, which claimed to promote ‘truth in journalism’ and contained articles and advertisements advocating a limited government ideology,” the SEC charged. “He then included in at least one edition of USA Tomorrow a flyer advertising the First Capital investment opportunity which he distributed at the September 2008 Ron Paul Rally for the Republic in Minneapolis, Minnesota. USA Tomorrow was placed on every seat at the rally,” the SEC charged.

    Lowrance specifically targeted Christians and inexperienced investors in his sales pitches, the SEC charged.

    Along the way to ruin, “Lowrance and First Capital knowingly and/or recklessly made the materially false claim that First Capital used investor money to trade foreign currency and in return, pay them a high,  fixed, monthly rate of return,” the SEC charged.

    “Before February 2008, First Capital offered monthly rates of return ranging from 4% to 7.15% (resulting in annual rates of return up to 85.8%),” the SEC charged. “It also offered to pay referral fees for new investors ranging from 5% to 6% of the amount invested. As of July 2010, First Capital’s website offered monthly rates of return ranging from 1.104% to 1.558% (resulting in annual rates of up to 18.7%) and referral fees ranging from 1 % to 2%.”

    Like other investment scams, the Lowrance Forex Ponzi used “a chart and spreadsheet purporting to show its multi-year history of profitable trades,” the SEC alleged.

    But “First Capital never entered into the trades detailed on First Capital’s website,” the SEC charged. “Moreover, First Capital never was profitable.”

    Even after the scheme collapsed, Lowrance continued to solicit funds, telling some investors in early 2009 that “the millions lost [did] not shake [him],” the SEC charged.

    He urged investors that he had just acknowledged swindling to continue to have faith in him and said that he would trade foreign currency “to pay them back,” the SEC charged.

    When some of his investors told others that Lowrance had swindled them, Lowrance sent “purported updates to other investors disparaging the character of those persons who circulated his earlier admissions and disparaging the character of anyone who questioned L[o]wrance’s integrity,” the SEC charged.

    What he did not do was stop soliciting prospects for money and take his website offline. The site remained active until “at least” July 2010, despite the scheme’s 2008 collapse, the SEC charged.

    On March 5, 2009, a month after Lowrance acknowledged that investors had lost their money, the Netherlands bank account contained $121, the SEC charged.

    “In addition to failing to disclose First Capital’s true financial condition and operations to investors solicited between June 2008 and February 2009, Lowrance did not use any new investor money to trade foreign currency,” the SEC charged. “Rather, he used new investor money to pay himself, pay some 6 investors’ returns, and to pay for expenses associated with his start-up newspaper.”

    Also involved in the probe are the FBI and the IRS. Elements of the investigation were assembled by member agencies of the interagency Financial Fraud Enforcement Task Force created by President Obama in 2009.

  • INCREDIBLE: Texas Forex Fraudster Allegedly Scammed Georgia Attorney Now Jailed In $40 Million Ponzi Scheme; Mark E. Rice Accused By CFTC Of Ripping Off Seminar Swindler Robert P. Copeland

    In a case that could provide even more inspiration for lawyer jokes and black comedy on America’s epidemic of white-collar crime and hucksterism, the CFTC has gone to federal court in Texas to accuse an alleged Forex scammer of defrauding a Georgia attorney now serving a 10-year prison sentence for ripping off senior citizens in a $40 million Ponzi and fraud scheme.

    Mark E. Rice, the alleged Forex fraudster, was not registered with the CFTC “in any capacity,” the agency said. He is accused of ripping off attorney Robert P. Copeland of Marietta, Ga.

    In August 2009, Copeland, whom federal prosecutors said practiced “elder law,” was sentenced to 10 years in federal prison for swindling retirees in a five-year, $40 million Ponzi caper involving bogus real-estate investments and at least 125 victims. Copeland recruited victims at seminars and doled out “commissions” to people who helped him line up business, according to prosecutors.

    U.S. District Judge Lee H. Rosenthal of the Southern District of Texas has frozen the assets of Rice and his company, Financial Robotics Inc. (FinRob) of Houston.

    Copeland surrendered his law license and received the equivalent of a disbarment in June 2009 from the Supreme Court of Georgia, according to records in Georgia.

    Prior to his 2009 conviction for wire fraud in the Ponzi swindle, Copeland plowed $10.4 million into Rice’s alleged Forex swindle — and the money came from Copeland’s investors in the Ponzi scheme for which he was imprisoned, the CFTC alleged.

    Rice, of Sugar Land, Texas, began to pitch Copeland on managed Forex in 2006, prior to the 2009 exposure of the Copeland real-estate Ponzi scheme, according to court records. Rice told Copeland that his investment was “risk free” and “insured against loss,” the CFTC said.

    While soliciting Copeland, Rice told him that he and his firm had developed automated Forex software trading programs that had generated “phenomenal returns” of 30 percent a month while being tested in Europe and the United States and 30-day returns of between 10 percent and 15 percent in actual trading, the CFTC alleged.

    Copeland’s trading with Rice initially started with a $502,000 investment in 2007. Between March 2007 and August 2008, Copeland plowed an additional $9.9 million into the Forex scheme after Rice allegedly told him that Rice was “going to move all of his investments to England, as that market could provide greater returns than the American market,” the CFTC said.

    By September 2008, Rice presented Copeland a “spreadsheet” that showed the value of Copeland’s investment had grown to $15 million — and Copeland contemplated cashing out, the CFTC said.

    But Rice persuaded him that the $15 million would turn into $20 million by January 2009, and Copeland decided not to liquidate his account.

    In November 2008 — just two months after Rice told Copeland that $20 million would be on the table for him in January — Rice told Copeland that “all” of his funds “purportedly” had been lost in trading, the CFTC said.

    Later, in February 2009, Rice told Copeland that the account never had been insured against loss.

    By April 2009, according to records, Copeland’s own Ponzi scheme had come tumbling down — and the SEC was investigating.

    “This case is particularly disturbing because the defendant was a lawyer and many of his victims were senior citizens, some of whom lost their life savings,” said then-U.S. Attorney David E. Nahmias in April 2009. “[Copeland] is now cooperating in the ongoing investigation and in our efforts to recover whatever assets are left, but he will still face the punishment that this devastating crime requires.”

    In August 2009, Copeland was sentenced to 121 months in federal prison.

    The CFTC did not say whether the cooperation Copeland pledged two years ago had resulted in the charges against Rice.

    Whether victims of Copeland’s Ponzi scheme can expect a recovery from assets frozen in the emerging Rice case was not immediately clear. At his August 2009 sentencing, Copeland was ordered to pay about $16.7 million in restitution.

  • June Ends With MULTIPLE Fraud Filings By CFTC; Air-Traffic Controllers Who Allegedly Solicited Colleagues Into Fraud Scheme Charged In Georgia; Investigators Link Georgia Scheme To Alleged Botfly Caper In Florida, Saying Federal Aviation Administration Employees Became Investors

    EDITOR’S NOTE: The disturbing information that follows this intro is presented largely in capsule form, with links to CFTC charging documents in three new cases. Perhaps the most notable case in this summary is the one filed in Georgia. As things stand, it demonstrates:

    Interconnectivity: Ties between and among scams and scammers are common in the fraud universe, contributing to a condition the PP Blog has described as “fraud creep.” The CFTC says two of the defendants charged in the Georgia case were investors in Botfly LLC, an alleged Ponzi scheme that operated internationally from Florida. The Botfly case is just plain creepy. Elements of it are reminiscent of the AdSurfDaily case. ASD, too, was based in Florida.

    Familiarity/Affinity: Two of the Georgia defendants are employees of the U.S. government — specifically air-traffic controllers employed by the Federal Aviation Administration (FAA). Based on court filings, it appears as though the FAA employees were moonlighting as Forex managers and that other FAA employees got sucked into one or more scams.

    Vulnerability: Can anybody be truly safe in this unprecedented era of white-collar crime and rampant hucksterism? Government employees allegedly got sucked into a Ponzi caper operated by Kenneth “Wayne” McLeod, a Florida man who reportedly killed himself last year after the SEC opened a probe. If the allegations by the CFTC in the Georgia case are true, it may mean that other government workers saw their wealth eviscerated in a fraud scheme. It is unclear if retirement savings were plowed into the alleged Georgia scam. What is clear, however, is that the U.S. government now has at least two cases on its books in which it is alleged that federal workers were drafted into fraud schemes by individuals either employed by the government or paid by the government.

    We are presenting summaries because the information is voluminous. Here, now, the capsules . . .

    In an extraordinary series of actions on the Ponzi and fraud front, the CFTC has closed out the month of June by filings fraud cases in federal courts in Georgia, Colorado and Nebraska.

    Georgia Case

    Charged civilly with fraud and misappropriation in the Georgia case were Louis J. Giddens Jr. of Fayetteville, Ga., and Anthony W. Dutton of Peachtree City, Ga. Giddens and Dutton are air-traffic controllers, the CFTC said.

    Also charged in the Georgia case was Michael Gomez of Valrico, Fla. Gomez is a commodity trader, the CFTC said.

    The men are charged with operating a Forex fraud scheme that gathered about $1.4 million and involved at least four companies: Currency Management Group LLC, Pinnacle Capital Partners LLC, Pinnacle Trade Group LLC and Elyon LLC.

    Giddens, the CFTC said, was an air-traffic controller in Atlanta. In “late 2008,” according to the CFTC, he learned about Botfly LLC, a Florida Forex company that offered investors a return of 10 percent a month.

    After meeting with a “principal” of Botfly, Giddens became a Botfly investor and solicited fellow Federal Aviation Administration (FAA) employees in Georgia to become Botfly investors, the CFTC charged.

    Dutton, Giddens’ fellow air-traffic controller, became a Botfly investor, the CFTC said. So did other FAA employees.

    In April 2010, the state of Florida charged Botfly in a Ponzi case and froze its assets.

    Giddens and Dutton used essentially the same business model as Botfly, and started their own pooled Foex business, using their unregistered companies to do so, the CFTC charged.

    Eventually, Gomez, who also was unregistered, became part of the mix, the CFTC charged.

    Investors plowed $1.4 million into the fraud scheme, the CFTC charged.

    Read the Georgia charging document.

    Colorado Case

    Shawon McClung of Denver and Flint-McClung Capital LLC (FMC) of Englewood, Colo., have been charged civilly with fraud and misappropriation in an alleged $1.9 million Forex Ponzi scheme.

    The scheme operated in part through a website, and McClung positioned himself and the company as “sophisticated” players with a cash reserve of nearly $100 million.

    Investors were told their funds were “guaranteed” against loss, the CFTC charged.

    Prospects were lured “with the prospect of quickly making large profits with returns such as 50 percent in thirty days or 15 percent per month for six months,” the CFTC charged.

    McClung “has never been registered” with the CFTC, the agency charged, adding the FMC also “has never been registered.”

    Read the Colorado charging document.

    Nebraska Case

    Grace Elizabeth Reisinger of Grand Island, Neb., and ROF Consulting LLC (ROF) have been charged civilly with operating a fraudulent commodity pool scheme known as NCCN LLC (NCCN), the CFTC said.

    The unregistered scheme gathered about $4 million and falsely claimed registration exemptions, the CFTC said.

    Read the Nebraska complaint.

  • BULLETIN: FLORIDA — AGAIN: CFTC Says Man With 3 Aliases Ripped Off Church Members And Prayer-Group Attendees In Forex Ponzi Scheme And Then Moved To Canada

    BULLETIN: The CFTC has gone to federal court in the Southern District of Florida, alleging that a former Miami man who conducted prayer services in his home ripped off church members, friends, neighbors and others in a Forex Ponzi scheme.

    Some investors bought into the scheme with cash payments that totaled in the hundreds of thousands of dollars, the CFTC alleged.

    Charged in the alleged caper were Juvenal Eduardo Machado and his Miami-based company, Invers Forex LLC. Invers was in the interior-remodeling business prior to morphing into a Forex firm, and Machado used at least three aliases, according to the CFTC.

    The aliases included Juvenal Eduardo Machado Bogadi, Edward Kaufman and Eduardo Machado, the CFTC said. Machado moved to Canada after the scheme collapsed and customers demanded their money, and is believed to be living in Ontario.

    Machado and his firm gathered at least $786,000 from customers, but did not open individual trading accounts for customers and deposit their money into individual accounts as promised, the CFTC said.

    Rather, Machado and the firm opened a “single” trading account in Machado’s name. Although customers had forked over at least $786,000, Machado deposited only about $135,000 of that sum — and lost almost 90 percent in trading.

    When the scheme apparently was collapsing in March 2010, Machado made excuses about why customers weren’t receiving their promised payouts, the CFTC said. In at least one instance, a customer who’d originally been told she could withdraw her money with 30 days’ notice was told she could not have her money for six months.

    When the six months expired, the customer was told she needed to wait another 30 days to get her money, the CFTC said.

    Authorities believe Machado moved from Miami to Canada during the summer of 2010. Despite demands from customers to return their money, the money has not been returned, the CFTC said.

    Neither Invers nor the interior-remodeling firm — Interior Remodeling USA Inc. — was registered with the CFTC  “in any capacity,” the agency said, alleging that the scheme began in December 2008 and operated “at least” through March 2010.

    Machado, who allegedly solicited Forex funds from church members and people who attended prayer meetings in his home, told prospects that a “God had put him on the earth to help people financially,”  the CFTC said.

    Among Machado’s other claims was that he was “one of the best [F]orex traders in Miami”  and that people paid him to share his techniques, the CFTC said, alleging that Machado offered “guaranteed” profits of 5 percent a month.

    At least 28 customers invested with Machado — and three customers alone turned over $344,000 in cash to him, the CFTC said.

    Investigators believe some customers received disbursements in cash from Machado, the CFTC said.

    Meanwhile, Machado and his firm used an accountant that also was a Forex customer and “caused” the accountant to send “false IRS forms” with earnings information to customers, the CFTC alleged.

  • BULLETIN: Christopher Pettengill Pleads Guilty In Trevor Cook Ponzi Scheme

    BULLETIN: Christopher Pettengill, a figure in the $194 million Trevor Cook Ponzi scheme, has pleaded guilty in Minneapolis to securities fraud, money-laundering and conspiracy, the FBI said.

    Read Breaking News coverage in the Star Tribune, which is reporting that Pettengill says he has been cooperating with federal investigators since January.

    Pettengill, 54, of Plymouth, Minn., was charged criminally on June 13. He potentially faces up to 20 years in federal prison.

    Cook is serving a 25-year sentence. Pettengill conceivably could be sentenced to a prison term shorter than 20 years, depending on his level of cooperation and his ability to persuade a federal judge that he deserves less time behind bars.

    Part of the Cook scheme traded on the acronymn UBS, a famous financial company, according to court records.

    It is common in the fraud universe for hucksters and criminals to leech off the brands of famous companies and to use famous names to sanitize fraud schemes.

    The Cook scheme also traded on the name “Oxford.” Some of the money ended up in  a company known as Crown Forex, which had a regal theme.

    Cook, former radio host Pat Kiley, and Jason Bo-Alan Beckman have been sued by the SEC. Cook and Kiley also confront a lawsuit from the CFTC.

    Jon Jason Greco, 40, of Minneapolis, was charged criminally in March with making false statements to federal agents. Greco was accused of hiding loot from the scheme.

     

  • BULLETIN: Defendant In January CFTC Sweep Ordered To Pay $280,000 Penalty; ‘ForInvest’ Also Ordered To Remove Forex Solicitation Pages From Internet; Firm Used Same Payment Processor As Imperia Invest IBC, Ponzi Forum Darling And Defendant In SEC Action

    BULLETIN: A Delaware company accused by the CFTC in January of illegally hawking Forex offers has been hit with a $280,000 penalty and ordered to remove its Forex solicitation pages from the Internet.

    U.S. District Judge James B. Zagel of the Northern District of Illinois entered the order against ForInvest Group of Delaware. ForInvest also is known as ForInvests Group LLC.

    ForInvest also was banned permanently “from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC,” the CFTC said.

    The company was one of 14 Forex outfits sued by the CFTC in what was described as a nationwide sweep of unregistered firms illegally targeting U.S. residents.

    ForInvest advertised that it accepted payments via Perfect Money, a murky firm purportedly based in Panama that allegedly was used by a company that defrauded thousands of deaf investors in a scheme known as Imperia Invest IBC. The SEC said in October 2010 that Imperia Invest had stolen millions of dollars from investors.

    In the same CFTC sweep, the agency also sued InstaTrade Corp., doing business as InstaForex. InstaForex is an advertiser on the TalkGold Ponzi scheme and criminals forum, and research showed that InstaForex — like Imperia Invest and ForInvest — also used Perfect Money.

    Imperia Invest and InstaForex also were promoted on TalkGold and other Ponzi forums, according to records.

    Zagel ordered “[a]ny person or entity providing web-hosting or domain name registration services” for ForInvest  to preserve documents and “[a]ny person or entity providing web-hosting or domain name registration services to “remove or cause to be removed from the Internet all webpages within their control . . .”

    See earlier story.

    Read the ForInvest court order.

  • Second Man With Trevor Cook Tie Charged Criminally In Massive Minnesota Ponzi Scheme; Christopher Pettengill Faces Securities-Fraud, Conspiracy And Money-Laundering Accusations

    A Minnesota man has become the second person with ties to convicted Ponzi schemer Trevor Cook’s Forex scam to be charged criminally.

    Christopher Pettengill, 54, of Plymouth, “knowingly concealed information from investors concerning the foreign currency program sold by Pettengill, Cook, and others,” federal prosecutors said.

    He has been charged with securities fraud, money-laundering and conspiracy to commit wire fraud, the office of U.S. Attorney B. Todd Jones of the District of Minnesota said.

    Cook pleaded guilty in the $194 million caper last year and was sentenced to 25 years in federal prison.

    Jon Jason Greco, 40, of Minneapolis, was charged in March with making false statements to federal agents. Greco was accused of hiding loot from the scheme.

    Pettengill was accused of lending credibility to the scam and encouraging people to invest money.

    “Pettengill allegedly conducted numerous wire transfers during the course of the conspiracy, and on September 3, 2008, he allegedly made a credit card payment of $11,369.19, which was derived from the proceeds of the securities fraud,” prosecutors said.

    He faces up to 20 years in prison, if convicted on all counts.

    The SEC and CFTC sued Cook and former radio personality Pat Kiley in November 2009. Earlier this year, the SEC filed suit against Jason Bo-Alan Beckman, another alleged promoter of the scam.

  • CFTC Revokes Registrations Of 2 Texas Firms That Operated Forex Ponzi Scheme Targeted At Elderly Churchgoers And Others In At Least 4 States; Firms Used ‘Charts’ Showing Magnificent Earnings And Cherry-Picked Name Of Warren Buffett For Fraud Pitch

    SCREEN SHOT OF SECTION OF OCT. 25, 2010, FINDINGS OF FACT: M25 and M37 used a "chart" projecting magnificent earnings and encouraged investors to roll over their returns by plying them with a purported "renewal bonus." After 11 years, $100,000 would turn into $1 million, according to the firms' claims. The firms also claimed they outperformed legendary investor Warren Buffett, according to uncontested findings of fact by U.S. District Judge Barbara M. G. Lynn. It is common in online fraud schemes for pitchmen to use charts and spreadsheets that promise spectacular returns. It also is common for scammers to trade on the name of Warren Buffett or other well-known business titans as a means showing off, sanitizing fraud schemes and gaining "legitimacy" by osmosis. (Red Emphasis added by PP Blog.)

    EDITOR’S NOTE: The cases against M25 Investments Inc. (M25) and M37 Investments LLC (M37) include elements that are common in online fraud schemes. For starters, the offers were targeted at senior citizens and people of faith. Moreover, the firms relied on PowerPoint presentations and charts that wowed victims with tales of fantastic earnings. The fraud schemes also traded on the name of a celebrity — in this case, famed investor Warren Buffett.

    Much of the information in the story below comes from uncontested findings of fact by a federal judge. Taken line by line, the CFTC’s allegations upon which the judicial findings were based paint a picture of the sort of fraudulent sales pitches that occur daily on the Ponzi forums and personal websites of hucksters. Spreadsheets that show fabulous earnings projections are in common use in the universe of fraudsters, for instance. So is the use of the name of a celebrity or famous company to sanitize a scheme and disarm skeptics.

    And appeals to faith are used daily online to separate Believers from their money.

    Even as this story is being published, members of Club Asteria are doing the sorts of things that led to a two-year legal quagmire for M25 and M37, a litigation nightmare the firms brought on themselves by relying on cheerleaders to drive business, engaging in affinity fraud and then trying to cover it up, according to court filings.

    Club Asteria members, for example, are using spreadsheets and earnings charts to lure prospects. Meanwhile, they’re trading on the name of the World Bank, citing guaranteed earnings, mixing in appeals to charity and using religious imagery to drive business to the Virginia-based firm . . .

    Two Texas firms that targeted a Forex Ponzi scheme at elderly people of faith and others in at least four states have had their registrations revoked by the Commodity Futures Trading Commission.

    The revocations against M25 Investments Inc. (M25) and M37 Investments LLC (M37) of Waxahachie mean that the firms no longer are registered Commodity Trading Advisors. CFTC’s issuance of the revocations follows on the heels of an administrative action the agency filed in February. The CFTC also sued the firms in federal court two years ago, gaining restitution and penalties of more than $16 million.

    An administrative law judge found the firms “unfit for registration” last month. Neither firm contested the administrative action.

    On Oct. 25, 2010, U.S. District Judge Barbara M. G. Lynn found that the firms operated a Ponzi scheme that gained a head of steam by luring customers with promissory notes that guaranteed interest payments of 2 percent a month or 24 percent a year.

    Neither M25 nor M37 contested the findings. Both firms agreed to an issuance of a consent order with specified penalties and a demand for restitution. The firms neither admitted nor denied the allegations.

    Business was solicited online and through word-of-mouth, and clients often did not even know the difference between the two firms, Lynn ruled.

    “Some or all” of the firms’ customers were unqualified investors who did not have the required millions of dollars of assets to become an “eligible contract participant,” the judge ruled.

    Sales pitches for both firms claimed the ability to outperform famed investor Warren Buffett while making ancillary claims the companies could turn $100,000 into $1 million if customers stayed with them for 11 years and plowed their interest payments and annual renewal bonuses of 2 percent back into the companies.

    The scheme gathered about $8 million from about 213 customers, the judge ruled, noting that company “representatives” solicited business after church services and in customers’ homes.

    On March 31, 2009, according to the judge’s uncontested findings of fact, the firms owed customers $7.6 million but had only $3.9 million in total assets. Investors were shielded from the news and issued false account statements showing gains.