PatrickPretty.com

Tag: CFTC

  • BULLETIN: Feds Charge Minneapolis Man Amid Suspicions He Used Loot From Trevor Cook Ponzi Scheme To Party And Gamble With Strippers While Victims Suffered

    BULLETIN: Five days after Ponzi swindler Trevor Cook pleaded guilty to defrauding victims in an elaborate international scam that reduced investors to ruin, a Minneapolis man hid proceeds from the caper from law enforcement and the court-appointed receiver, federal prosecutors said.

    Victims of the Cook scheme — many of whom were people of faith — were defrauded of tens of millions of dollars. Court records strongly suggest that some of the recoverable money was spent on booze, exotic dancers and gambling — after the scheme was exposed by the SEC and CFTC in November 2009 and Cook’s assets were frozen.

    Jon Jason Greco, 40, now has been charged with making false statements to federal agents. The case was filed under seal Tuesday, and the seal was lifted yesterday.

    Cook, 38, pleaded guilty on April 13, 2010, and is serving a term of 25 years in federal prison. His plea agreement in the $190 million swindle required him to disclose the whereabouts of assets and cooperate with investigators. Investors immediately expressed fears that money that could be used to help them recover from the devastating scam had been hidden and that Cook could not be trusted in any context.

    Some of the hidden loot was found months after the plea and cooperation agreement. Part of it had been concealed behind a toilet-paper dispenser and in air ducts in an apartment occupied by Cook’s brother, Graham Cook. Loot also was found in a storage locker at the Mall of America.

    Although the recovered loot made up only a tiny percentage of the $190 million scam, victims said every dime was needed and that justice demanded that no third party should be permitted to profit from Cook’s colossal fraud.

    Prosecutors now say that Greco came into possession of some of the loot on April 18, 2010 — five days after the Cook guilty plea. Greco helped hide the loot and lied about it when questioned by investigators, according to prosecutors.

    Court records suggest investigators established links among Cook, Graham Cook and Greco, who once worked briefly for Trevor Cook as a purported security guard at the Van Dusen mansion in Minneapolis. The big break in the case appears to have occurred in July 2010, when Greco’s roommate told federal agents that Greco was “holding assets” for the Cook brothers and impeding a federal investigation.

    Investigators had believed since at least June 2010 that Greco had stashed money from the caper, according to court filings.

    The case against Greco was bolstered when an exotic dancer told an IRS criminal investigator who was following leads that Greco, believed to have been unemployed for months, suddenly began to spend generously at a Minneapolis strip club and to plow $100 bills into slot machines at a gambling emporium.

    “Greco placed some of the assets in his possession in a locker at the Mall of America,” prosecutors charged. “On July 24, 2010, law enforcement seized the assets, valued at approximately $150,000. Subsequently, Greco allegedly claimed to investigators that the seized assets belonged to him.”

    But the assets were from the Ponzi caper, prosecutors charged.

    Greco faces up to 10 years in federal prison if convicted on two counts of making false statements.

    When interviewed last summer, Greco told agents that he had no knowledge of concealed assets belonging to Cook, when, in fact, he did,” prosecutors said.

  • FLORIDA — AGAIN: CFTC Charges Sunshine State Couple Amid Spectacular Allegations They Posed As Forex Experts, Targeted Seniors And Handed Off More Than $22 Million To Man Who Was Trying To Cover Up Previous Ponzi Scheme

    Gary and Brenda Martin of St. Augustine, Fla., posed as Forex dealers and experts, operated a website advertising their purported expertise, bragged about the talents of their unqualified sales “consultants” — and collected more than $22 million in an incredibly elaborate fraud scheme, the CFTC has charged.

    Neither of the Martins was registered with the CFTC. In fact, the agency said, they had “no expertise or experience in trading forex or any other commodity” and had “no trading accounts.”

    “[N]o forex trading occurred and no profits were ever realized,” the CFTC said.

    Unbeknown to customers, what the Martins did, according to the CFTC’s disturbing allegations, was funnel money from their customers to Sidney S. Hanson.

    Hanson, in turn, paid the Martins “referral fees” of up to 5 percent, based on the sums the Martins’ customers provided the couple. In this way, the Martins racked up $1.44 million in undisclosed commissions paid by Hanson, while the Martins’ customers believed they were doing business with the couple.

    And just who is Sidney S. Hanson?

    Why, Sidney S. Hanson is none other than the Sidney S. Hanson charged criminally in North Carolina by the Feds two years ago in a money-laundering, wire-fraud and securities-fraud case that alleged he was operating schemes dating back at least to 2000.

    And Sidney S. Hanson is the same Sidney S. Hanson charged in this companion action by the SEC in 2009. Also charged in the SEC case was Charlotte Hanson, Sidney Hanson’s wife. The CFTC also charged the Hansons in 2009.

    The first scheme was a loan scheme known as Apollo Trust, which promised “extraordinary rates of return,” according to federal prosecutors.

    Apollo, the CFTC said, was a Ponzi scheme — and a new scheme known collectively as the Queen Shoals Group emerged to cover the Apollo fraud.

    Along the way, customers’ money was used to finance “luxury resort vacations, private plane rentals, daily living expenses, and the purchase of an 88 acre farm,” the CFTC said in 2009.

    Sidney Hanson is scheduled to be sentenced on the criminal charges March 31.

    The Martins operated a Queen Shoals website and a Florida company known as Queen Shoals Consultants LLC, the CFTC said.

    They “simply” turned over huge sums to Hanson to plumb a commission, the CFTC charged.

    When Gary Martin was asked what Hanson did with the money, he replied, “I don’t know,” the CFTC charged.

    And this occurred after the Martins assured their customers that they were Forex experts with “vast experience.”

    Retirees and persons nearing retirement were lured into the scheme with the promise of high profits, the CFTC charged.

    “The Martins allegedly targeted customers at or near retirement who held individual retirement accounts (IRAs), luring them with promises of guaranteed annual returns of between eight to 24 percent generated by trading forex and other instruments,” the CFTC charged.  “The Martins also guaranteed an’ additional 1%’ to customers who held IRAs and agreed to rollover their IRAs into the defendants’ scheme.”

  • Sea Of Incongruity Surrounds Club Asteria: As ‘Ken Russo’ Pushes ‘Opportunity’ On TalkGold Ponzi Board, World Bank Qualifies ‘Director’ Claims Made By Promoters

    The World Bank confirmed to the PP Blog this morning that a person named Andrea Lucas left its employment in December 1986, nearly 25 years ago. But Lucas was never a member of the World Bank’s board of directors, as many members of business “opportunity” known as Club Asteria have implied in online, MLM-style promotions for the firm.

    Rather, the World Bank described Lucas as a former department head among “many” department heads who held the internal title of director of an individual department. Lucas, the World Bank said, was director of the management systems and account department. She worked in Washington, D.C., according to the World Bank’s records.

    The PP Blog initially sought comment from the World Bank on March 3 about Lucas and various claims about Club Asteria made by members of the purported opportunity. Some of the claims have been made on the TalkGold Ponzi scheme and criminals’ forum. The World Bank’s name is being used in Club Asteria promos on TalkGold and other websites.

    A blurb for Andrea Lucas on the slow-loading Club Asteria website describes her in the first sentence as “former Director of the World Bank,” using an uppercase “D” in “Director” with no other qualifiers. The reference to the World Bank begins seven words into the profile. The profile also lists Andrea Lucas as  “founder and Managing Director of Club Asteria.” No other entities are referenced in the Andrea Lucas blurb.

    The blurb makes no mention that Andrea Lucas left her staff job at the World Bank more than two decades ago, when Ronald Reagan was President of the United States and Mikhail Gorbachev was General Secretary of the Communist Party of the now-dissolved Soviet Union.

    When Andrea Lucas last worked at the World Bank, George Herbert Walker Bush was Vice President of the United States and still more than two years away from his term as President. The “Black Monday” market crash of October 1987 had not yet occurred, and Iraq’s August 1990 invasion of Kuwait that led to the Gulf War was still nearly four years away. Modern-day accused shoplifter and actress Lindsay Lohan was five months old, and few people outside of Arkansas recognized the names of Bill Clinton and Hillary Clinton. Barack Obama, a community organizer in Chicago, had yet to enter Harvard Law School or meet Michelle Robinson, who’d become his wife and, later, First Lady of the United States.

    Regardless, Lucas and the World Bank are referenced repeatedly in online promos by Club Asteria members. Why the company and promoters had seized on the World Bank’s name when Andrea Lucas last was employed there nearly a quarter of a century ago as a young woman was not immediately clear.

    “Real Profit Sharing Program ! No Ponzi !” one affiliate promo preemptively screams. “Club Asteria from the Former Director of World Bank – Andrea Lucas.” The affiliate site includes a photo of a letter dated Dec. 14, 2010, and the letter appears to feature the World Bank’s letterhead and verify the former employment of Andrea Lucas at the World Bank.  It is positioned by the affiliate as a reason to trust Club Asteria.

    Why the affiliate would preemptively argue that Club Asteria was “No Ponzi” was unclear.

    Another promo describes Club Asteria as “a perfect home based business that specializes in the remittance business of sending funds back home.

    “We provide training, opportunities, consultation and one of the most sensational pay plans of our time,” the promo continues. Club asteria (sic) is run by a former Director of the World Bank and it (sic) set to take the net by storm.”

    “Ken Russo,” who posts at TalkGold as “DRdave” and promotes one highly questionable scheme after another, announced yesterday that Club Asteria’s membership ranks had soared to 187,481.

    The announcement occurred against the backdrop of a December warning by the Financial Fraud Enforcement Task Force led by U.S. Attorney General Eric Holder that visitors to websites and forums should be skeptical of claims.

    “Be wary of people you meet on social networking sites and in chat rooms, where investment fraud criminals have been known to troll for victims,” the Task Force warned.

    Except for its confirmation this morning that a person named Andrea Lucas once worked for the World Bank and its release of certain details about her employment nearly a quarter of a century ago, the World Bank declined to comment immediately about the linkage of its name to Club Asteria and the promos at TalkGold and other websites.

    The bank, however, confirmed it is aware of the claims. Meanwhile, some Club Asteria members are grumbling in forums about the firm’s slow-loading website and spotty customer support. Among the concerns is that the company recruited members under one set of rules, but may be trying to implement a new set that may force higher costs on participants who expect to get paid.

    Some Club Asteria members appear to be confused about whether Club Asteria conducts business from the United States or Hong Kong.

    How the company makes money beyond membership fees is unclear. Also unclear is whether the firm has significant revenue streams beyond membership fees. Club Asteria appears to publish no verifiable financial data.

    The World Bank is the most recent prominent international entity to have its name appear on TalkGold and other Ponzi forums that push highly questionable business pursuits. Last year, members of the purported MPB Today “grocery” program, which operates as an MLM, flooded websites and social-media sites such as YouTube with references to Walmart.

    It is common in the MLM sphere for affiliates to trade on the names of prominent business entities even if no ties exist. Walmart’s name also appeared in promos on the Ponzi boards.

    TalkGold, MoneyMakerGroup and ASAMonitor are referenced in federal court filings as places from which international Ponzi schemes are promoted. Even if Club Asteria is a legitimate enterprise, the mere fact it is being promoted on the Ponzi boards raises troubling questions about whether its revenue stream is polluted by proceeds from any number of fraud schemes operating globally.

    In recent weeks, federal agencies such as the SEC and CFTC have taken actions against schemes promoted on the Ponzi boards. Meanwhile, the FTC announced an action this week against an online enterprise that allegedly was not policing its affiliate sales force properly.

    The FTC charged Lester Gabriel Smith and Legacy Learning of Nashville, Tenn., with disseminating “deceptive advertisements by representing that online endorsements written by affiliates reflected the views of ordinary consumers or ‘independent’ reviewers, without clearly disclosing that the affiliates were paid for every sale they generated.”

    In bringing the case, the agency held Smith and Legacy accountable for claims made by affiliates.

    “Whether they advertise directly or through affiliates, companies have an obligation to ensure that the advertising for their products is not deceptive,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “Advertisers using affiliate marketers to promote their products would be wise to put in place a reasonable monitoring program to verify that those affiliates follow the principles of truth in advertising.”

    See the FTC news release on Legacy Learning, which was assessed a $250,000 penalty.

  • Report By Small-Town Newspaper In Colorado Leads To Forex Ponzi Scheme Arrest In Chicago; FBI Nabs Mark Akins After Durango Herald Readers Provide Tips

    A fugitive suspected of helping organize a Forex Ponzi scheme that traded on a claim that a special “algorithm” led to hefty profits has been arrested in Chicago after a small-town Colorado newspaper 1,350 miles away reported he was wanted.

    The Durango Herald, which has a circulation of 9,400 and has received awards from the Associated Press, the Society of Professional Journalists and the Colorado Press Association over the years, reported earlier this month that Mark Akins was wanted for a scheme that allegedly had operated in Durango.

    Akins was accused of being the “gatekeeper” for the scheme, which netted at least $1.2 million and affected 70 investors.

    Also charged in the case was Frederick H.K. Baker of Utah. Baker already has made an initial court appearance in Utah. Akins is scheduled to make an appearance in Illinois next week, the Herald reported.

    After reading the Herald report that Akins was wanted, a woman contacted the newspaper to say she believed Akins was living in Chicago. The newspaper referred her to law enforcement.

    A reader in Chicago, meanwhile, said he contacted the FBI after reading the story, the Herald reported.

    The reader then emailed the paper to report that Akins had been arrested in the Windy City.

    “We saw your article and notified the FBI and he was arrested on Thursday night,” the reader told the newspaper.

    Read the Herald’s first story.

    Read the Herald’s follow-up story about the arrest of Akins.

    Claims of miraculous trading algorithms and fool-proof software are common in the universe of Forex hucksters.

    Robert Mihailovich Sr., a convicted felon, was charged by the CFTC last year with presiding over a Forex fraud that purportedly used a “mass sub-algorithm.” Mihailovich allegedly started the new scam after his release from prison in 2007.

    Enrique F. Villalba was charged last year with presiding over a futures fraud that allegedly used a unique “momentum filter.”

    Earlier this month, Jacob Juma Omukwe was charged in a Forex caper in which it was alleged he used software to trick customers into believing their money was segregated for safety.

    Anthony Eugene Linton was charged in January in a case that alleged he told customers that his miraculous software system let them “profit every time.”

  • BULLETIN: CFTC Shuts Down Forex Scam Allegedly Operated In Wisconsin By Canadian Who Claimed Belize Incorporation; Website Of JadeFX Taken Offline; Federal Judge Orders Asset Freeze

    BULLETIN: A Canadian man was running a Forex scheme in the United States that touted its incorporation in Belize, the CFTC said.

    The scheme was operating from Wisconsin Dells, Wisc., and had at least six corporate bank accounts and two PayPal accounts into which customers sent money, the CFTC said.

    Named defendants in a case of solicitation fraud were Jacob Juma Omukwe, JadeFX Ltd. and Jade Investments Group LLC, all of Wisconsin Dells. Omukwe is a citizen of Canada, and the CFTC said that he “misappropriated more than $3.2 million from more than 500 customers in the United States and throughout the world to trade forex.”

    A federal judge has issued an emergency asset freeze. The JadeFX website has been taken offline. Neither Omukwe nor the companies was registered with the CFTC, and the website contained “many contradictory statements that appear to be the product of the Defendants having ‘lifted’ statements from various other websites hosted by legitimate forex dealers,” the CFTC charged.

    The case originally was filed under seal March 1. The seal was lifted after U.S. District Judge William M. Conley of the Western District of Wisconsin ordered an asset freeze and Omukwe consented to a permanent injunction.

    Omukwe told a sea of lies, according to the complaint. Among the lies was a claim that “JadeFX is operated out of Belize and does not conduct business in the United States,” the CFTC charged.

    Between June 2009 an Jan. 27, 2010, Omukwe and his fraudulent companies received more than $400,000 from investors “all over the world,” the CFTC charged.

    “However, during this eight month period, JadeFX had no forex trading account to place forex trades on behalf of customers,” the agency alleged.

    After Jan. 27, 2010, investors plowed more than $3 million into the scheme, and Omukwe kept about $2 million, according to the CFTC.

    Alarmingly, the CFTC added, “In order to foster the false impression that customer money is segregated from that of JadeFX, customers can download a software program from the Defendants’ website that purportedly enables customers to place forex trades in the customer’s account.

    “While Defendants create the appearance of segregated accounts for customers using the software program, in fact no such accounts exist,” the agency continued. “In reality, customers who send funds to the JadeFX or Jade bank accounts have no control over their funds once the money is sent to the Defendants’ bank accounts, which are controlled by Omukwe.”

    And Omukwe also falsely claimed to be “immune” to both U.S. law and laws of the individual states, the agency charged.

    All in all, the agency said, Omukwe had 12 bank accounts as part of the scheme, and used six of them to accept money from U.S. customers.

  • Judges Across United States Hammer Forex Ponzi-Schemers And Commodities Fraudsters; Nearly $100 Million In Penalties Announced Last Week Alone

    Federal judges in California, New York, Tennessee and Arizona last week ordered spectacular financial penalties against Forex and commodities fraudsters.

    Dennis R. Bolze was assessed a penalty of more than $36.6 million and ordered to pay restitution of more than $13 million to investors he scammed. The orders were entered by Chief U.S. District Judge Curtis L. Collier of the Eastern District of Tennessee.

    Bolze was sentenced last year to more than 27 years in federal prison by U.S. District Judge Thomas A. Varlan, also of the Eastern District of Tennessee.

    Meanwhile, Robert D. Bame was assessed restitution and a financial penalty totaling $46.9 million by U.S. District Judge R. Gary Klausner of the Central District of California.

    In May 2009, Bame was sentenced to 97 months in federal prison for wire fraud and engaging in monetary transactions with property derived from specified unlawful activity.

    The cases against Bame and Bolze alone resulted in monetary sanctions of more than $96.6 million.

    Separately, a restitution order and penalty totaling more than $1.1 million was entered against Helmut H. Weber by U.S. District Judge David G. Campbell of the District of Arizona. Weber was indicted in October 2008 by state authorities for fraud and the misappropriation of customer funds.

    In New York, meanwhile, Jeffrey Shalhoub was ordered to pay more than $700,000 in restitution and penalties. Those orders were entered by U.S. District Judge Joanna Seybert of the Eastern District of New York.

    The CFTC, which brought the civil cases against each of the defendants referenced in this story, said Shalhoub ran a Ponzi scheme, using customers’ money to “pay for computer and golfing equipment, clothing, car payments on a Land Rover and a $3,500 tab at a Manhattan restaurant.”

    Bolze, one of the earliest of the so-called “mini-Madoffs,” also ran a Ponzi scheme. Bolze bolted from Tennessee in December 2008, the same month the Madoff Ponzi was exposed.

    After his arrest in Pennsylvania, Bolze asked for an opportunity to recoup the money he had fleeced from victims. All he needed, he argued to a federal judge, was the Internet, a computerized program — and a little time.

    Bame, the CFTC said, “diverted about $19 million of investors’ money either to pay off other investors or for his personal use, such as purchasing automobiles or traveling in private jets.”

    In the case of Weber, the CFTC said, “the majority of the funds were misappropriated to pay for [his] lavish lifestyle.”

  • Florida Serves Up Another Bizarre One: CFTC Files Emergency Action To Halt Alleged Ponzi Scheme; David L. Ortiz Charged Amid Allegations ‘Holistic’ Health Firm Was Collecting Forex Funds

    A Florida man who operated a website known as “Forex Futures Trader” to drive business to his Ponzi scheme has been sued for fraud in an emergency action, the CFTC said.

    Some of the cash was routed through a firm that continued to do business despite the fact it was dissolved by the state in 2005, the CFTC said. At the same time, the agency alleged, customers were told to send money to a firm in the holistic health business, not in the Forex business.

    Named defendants were David L. Ortiz of Vero Beach, Goyep International Inc. of Vero Beach, and Royal Returns Inc. of Hollywood. Neither Ortiz nor the firms was registered with the CFTC, and a federal judge has frozen their assets, the agency said.

    Royal Returns was “involuntarily dissolved” by the state of Florida in 2005 after being operational for less than a year, but continued to do business after the dissolution, the CFTC said.

    In May 2008, after Royal Returns had been dissolved for nearly three years, it began soliciting money for a Forex program, the CFTC said. Despite advertising the Forex program, Ortiz told some customers to send their money to a company known as Natural Health Matters LLC, which purported to be in the business of “holistic health care and freelance services.”

    Natural Health Matters has been named a relief defendant in the case because it allegedly received ill-gotten gains. Loredana Ortiz also was named a relief defendant.

    At least 10 investors plowed at least $420,000 into the scheme, which the CFTC described as a Ponzi in which at least $232,000 was misappropriated for things such as shopping trips, travel, resort hotels, restaurants, utility bills, car payments and making payments on personal credit cards.

    Investors were lured by promises of guaranteed returns of 10 percent a month, the CFTC said.

    One customer tried to close her account and be reimbursed in August 2009, but met resistance from David Ortiz, who explained reimbursement was not possible “due to multiple factors beyond his control,” the CFTC charged.

    Ortiz then ignored the woman’s “repeated” emails and calls for weeks, but eventually sent her a bad check. After that, the CFTC said, Ortiz “wired a refund to this customer from funds from another investor.”

    Another customer was paid purported “profits” on his investment, but the funds came from the man’s own investment principal, the CFTC alleged.

    Other customers falsely were told not to withdraw principal or profits because doing so “would result in significant trading losses due to a premature liquidation of open trading positions,” the CFTC alleged.

    Ortiz also told a lie that he was registered with the SEC and had 30 years’ investment experience, the CFTC said.

    In reality, Ortiz had no SEC registration, had traded Forex for less than three years, had a record of futility — and covered up his losses by providing bogus statements to customers, the CFTC said.

    Read the CFTC complaint.

  • BULLETIN: Another Alleged Forex Ponzi Scheme — This One In Texas; CFTC Says Convicted Felon And Known Securities Swindler Ran New Scam By Trading In Accounts In Wife’s Name

    A Texas man with federal convictions two decades ago in Utah on charges of securities fraud, mail fraud, making false statements and conspiracy started a Forex Ponzi scheme in 2008 and stole at least $750,000 from investors, according to a CFTC complaint originally filed under seal earlier this month.

    U.S. District Judge Richard Schell of the Eastern District of Texas now has frozen the assets of Larry Benny Groover of Gunter, and the seal on the case has been lifted.

    Groover, 70, consented to a judgment in a 1986 registration and antifraud case brought by the SEC, and was the recipient of a five-year civil ban in 1987 from associating with a broker, dealer or investment adviser, the CFTC said.

    Criminal charges were brought against him in 1989, resulting in his 1991 conviction and a jail sentence of two years, the CFTC said.

    His wife, Joanne Groover, has been named a relief defendant in the new CFTC action, and the agency is seeking the return of what it described as ill-gotten gains.

    Like her husband, Joanne Groover never has been registered with the CFTC “in any capacity,” the CFTC said.

    The agency advised Schell that it believed Larry Groover “needed Mrs. Groover’s name” to open forex trading accounts because of his past encounters with regulators and his prison record.

    While on five years’ federal probation after his criminal conviction, Groover’s probation was revoked in 1997 for not making good on a $16,000 restitution order, the CFTC said. Federal records show he was released from prison in 1999.

    Investor funds were commingled with the personal funds of both Groover and his wife in Groover’s most recent scam, the CFTC charged.

    One of Groover’s customers formed a company and plowed $250,000 into the scheme, the CFTC alleged.

    On Aug. 21, 2008, Groover faxed the customer an account statement indicating that the customer’s funds had grown “5% monthly” over a sustained period and that the customer now had a balance of $393,378.09.

    “This account statement was completely false,” the CFTC charged. “In reality, in less than a month’s time, Groover lost nearly the full balance of the . . . account trading forex.”

    The CFTC charged in the complaint that the customers account actually had incurred “$211,505 in trading losses and $17,226 in fees.”

    Some it not “all” of Groover’s customers were not “eligible contract participants” because they lacked sufficient assets, the CFTC alleged.

  • SEC: 77-Year-Old Amish Man Ran $33 Million Fraud Scheme Targeted At Fellow Amish; Meanwhile, CFTC Says North Carolina Pastor And Colleague Ran Forex Ponzi Scheme

    UPDATED 2:50 P.M. ET (U.S.A.) A 77-year old Amish man in Sugarcreek, Ohio, ran a fraud scheme that gathered at least $33 million and affected 2,600 investors in 29 states, the SEC has alleged.

    Monroe L. Beachy’s long-running scheme mostly targeted fellow Amish, the agency charged. The scheme, which operated under the name of A&M Investments and began in 1986 during the Reagan administration, eventually got out of control and resulted in a June 2010 bankruptcy filing by Beachy.

    “Because Beachy’s offer and sale of investment contracts continued for such a long period of time, some members of the older generation of Amish investors recommended to their children that they invest with Beachy,” the SEC said. “Amish children did in fact purchase investment contracts from Beachy.”

    Investors opened accounts by hand-delivering money to Beachy or sending checks and cash in the mail.

    “At the time of the investment, Beachy did not give his investors any documents regarding the investment other than a handwritten receipt showing the amount invested,” the SEC alleged.

    Meanwhile, the CFTC has gone to federal court in North Carolina to accuse a church pastor and his business colleague of operating a Forex Ponzi scheme that used a business address at a UPS store.

    It was at least the second time since November that the CFTC has alleged that a pastor presided over a Forex Ponzi scheme.

    Charged in the North Carolina case were Timothy Bailey, the pastor of Mount Olive AME Zion Church in Monroe, and Michael Hudspeth of Statesville.

    Bailey and Hudspeth operated a company known as PMC Strategy LLC.

    While Hudspeth solicited funds for the scheme and interacted with customers, Bailey performed the trading as losses mounted, the CFTC charged.

    Neither man was registered with the CFTC in “any capacity,” the CFTC charged.

    The scheme began in 2008 and ultimately involved at least 22 investors while raising about $669,000, the CFTC charged. Hudspeth, Bailey and the firm “misappropriated” $129,000 of customer funds for their personal use, according to the CFTC.

    A federal judge has frozen their assets. The CFTC alleged the defendants concealed their losses and sent “false profit checks to customers.”

    “As recently as November 2010, the defendants were still soliciting funds from current and prospective customers, but since February 2010, they failed to make promised monthly customer payments and to honor customers’ redemption requests,” the CFTC charged.

    In November, the CFTC accused Rev. Ronald E. Satterfield, the now-former pastor of St. John’s Reformed Episcopal Church in Charleston, S.C., of operating a Forex Ponzi scheme from inside the historic church facility.

    Satterfield, 63, was arrested last month on criminal charges of bank fraud.

    Satterfield claimed he traded Forex between 3 a.m. and 6 a.m., went back to bed until 8 a.m., and then resumed trading until 10 a.m. or 11 a.m., according to court records.

    Mixing Forex trading with his ministry worked well, Satterfield wrote in a letter to a federal judge, because most church activities were in the afternoon or evening. And because Forex is a 24-hour activity, he advised the judge, he had the “ability to respond even in the morning hours if a pastoral need or commitment emerged.”

    Beachy, the alleged Amish fraudster, told his investors that he was purchasing “risk-free U.S. government securities,” the SEC charged.

    In reality, the SEC charged, Beachy plowed the money into junk bonds and made speculative investments in mutual funds and stocks.

    He settled the SEC case without admitting or denying the allegations. The agency said Beachy’s illegal investment-contract scheme ultimately put him upside down to the tune of $15 million and that his assets were under the control of a bankruptcy trustee.

    “During at least the last decade of Beachy’s scheme, based on the loss of investor principal, Beachy would not have had the ability to meet redemptions if there were a ‘run on the bank,’” the SEC said.

    “Beachy did not disclose his losses to investors,” the SEC said. Instead, he issued “fabricated statements” and “maintained the charade that the investors were making money.”

  • MIND-BOGGLER: Forex Scammer Who Never Traded Forex Charged In $35 Million Ponzi Scheme; CFTC’s Real-Life Complaint Against Keith F. Simmons And Co-Defendants Reads Like Bizarre Fiction

    And people actually are questioning President Obama’s November 2009 decision to create the interagency Financial Fraud Enforcement Task Force when things such as this are going on?

    An unregistered North Carolina company that churned tens of millions of dollars in a long-running shell game and described itself as a Forex dealer was operated by a now-convicted felon who worked with another now-convicted felon and told the FBI he never actually traded Forex, the Commodity Futures Trading Commission has alleged in court filings that only can be described as alarming.

    Black Diamond Capital Solutions LLC, operated by convicted felon Keith F. Simmons of West Jefferson, N.C., became a cancer on the legitimate Forex landscape, the CFTC charged. The firm and associated companies combined to create a sales force consisting of scammers who ultimately stole from investors and each other, pocketing huge sums to fund businesses not disclosed to investors and to pay for things such as luxury cars, real estate, maid service and sky-diving vacations.

    One of the alleged scammers — Deanna Salazar, a purported alternative-investments specialist and the owner of Life Plus Group LLC of Yucca Valley, Calif. — herself is a now-convicted felon. She has been linked to multiple fraud schemes, including a local one in California in which investors allegedly were told they were financing B-movies, and now has been linked by the CFTC to Simmons’ spectacular Forex Ponzi scheme.

    Salazar, according to the CFTC, never conducted “any due diligence” on Simmons or his Black Diamond companies. Instead, she simply passed along his bogus claims, including a claim that Simmons used an “exclusive” computerized trading system that had led to an “actual result” of $5,000 turning into $194,340 in three years.

    In 2008 alone, according to the bogus “actual” trading results, an account-holder purportedly enjoyed monthly Forex returns that ranged between 4.765 percent and 13.357 percent, according to the CFTC.

    Two other alleged Simmons’ associates — Bryan Coats of Clayton, N.C., and Jonathan Davey, a CPA from Newark, Ohio — also blindly followed Simmons and helped him orchestrate the massive Ponzi scheme, the CFTC alleged.

    Davey, according to records, organized a Belize company known as Divine Circulation Services Ltd. that assisted Simmons in pulling off the scam, which the CFTC alleged traded on religion. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said.

    Coats, meanwhile, was at the head of companies known as Genesis Wealth Management LLC and Genesis Wealth Partners LP, both of Delaware.

    Multiple companies with high-sounding names were created by the defendants and either assisted in pulling off the scam or benefited from the scam, the CFTC said. Among the names of the companies were Safe Harbor Ventures Inc., owned by Shari Davey, Davey’s wife, and Safe Harbor Wealth Inc.

    Salazar’s husband — Lawrence Salazar — also benefited from the scheme, the CFTC alleged.

    All in all, the CFTC charged, the scheme netted at least $35 million from at least 240 investors. It is believed that most if not “all” of the customers were not even eligible to become investors in the purportedly private program because they lacked assets totaling at least $5 million and thus were not “eligible contract participants.”

    Adding yet-another layer of the bizarre, Simmons allegedly told the FBI and the CFTC that Black Diamond did not engage in Forex — despite the fact it had gathered tens of millions of dollars by holding itself out as a Forex company and customers received statements showing their purported gains, the CFTC charged.

    When the Ponzi began to collapse in early 2009 — and with Black Diamond never having done any actual Forex trading — Salazar, Coats and Davey continued either to work for the firm or to steer business to it, the CFTC alleged.

    On March 19, 2009 Simmons sent an email to Salazar and Coats, instructing them that the company “would be shutting down for restructuring” and that all accounts would be liquidated with investors profits paid out, the CFTC alleged.

    Incredibly, the CFTC alleged, Simmons claimed a month later — in April 2009 — that Black Diamond’s trading was only hypothetical, despite the fact customers had sent in tens of millions of dollars to conduct real trading and received statements showing their gains.

    A months-long round of excuse-making about why customers weren’t getting paid then began, starting with Simmons’ assertion that a restructuring was under way. Coinciding with the restructuring claim were bank statements showing  that Black Diamond had “less than $200,000” in its accounts, the CFTC alleged.

    The CFTC, alleging that Simmons had purported to be an active Forex dealer who’d turned $5,000 from one investor into more than $194,000 and then insisted he had not executed a single trade despite issuing account statements showing gains of more than 13 percent a month, then defaulted to a strategy of claiming multiple “accounting reviews” were under way.

    He then claimed “excessive withdrawal requests by customers were causing delays in the return of funds.”

    Simmons also claimed a “non-existent German liquidity provider by the name of Klaus was attempting to provide $120 million to Black Diamond to payout customers and replace Black Diamond on the purported platform, but his alleged transfer of funds was frozen by bank or regulatory procedures,” the CFTC charged.

    At the same time, Simmons said “interventions” by the Federal Reserve, the U.S. Department of the Treasury and the CFTC had led to a situation that made it impossible for Black Diamond to pay customers, the CFTC alleged.

    Simmons made excuses from March 2009 through Dec. 17, 2009, the date he was arrested on criminal charges to which he already has pleaded guilty.

    Salazar, Coats and Davey strung customers along while Simmons was piling on excuses that were becoming increasingly “complex and outrageous,” the CFTC alleged.

    By passing on the excuses after earlier having performed no due diligence — and by continuing to forward the excuses to investors — Salazar, Coats and Davey “recklessly failed to ascertain the cause of the funding problem at Black Diamond” and helped perpetuate lies, the CFTC alleged.

    Salazar even helped Simmons shape the lies, according to the CFTC.

    In July 2009, Salazar worked with Simmons “to draft the excuse” about why Black Diamond wasn’t making payments, the CFTC charged.

    Coats, meanwhile, also worked with Simmons on creating an excuse that payments were not immediately forthcoming because of “stricter capital requirements imposed on our banking system,” the CFTC charged.

    Davey informed customers that payouts could not be made because the Federal Reserve had forced Simmons to fill out “anti-money laundering” forms and had frozen $16 million until he completed the task.

    In an approach often employed on Ponzi scheme and criminals’ forums such as TalkGold and MoneyMakerGroup, Simmons and Coats warned investors not to contact regulators or attempt to interfere with payment facilitators.

    “Simmons threatened certain customers that if they contacted the alleged paymaster, Black Diamond would lose access to the paymaster services and the payout to customers would be jeopardized,” the CFTC alleged.

    The agency did not identify the alleged paymasters in the complaint.

    And in an act reminiscent of some of developments in the AdSurfDaily Ponzi scheme case, Coats allegedly warned investors that the CFTC was “randomly calling all Forex . . . clients across the America to try and identify possible Madoff scams,” the CFTC alleged.

    It was Coats’ “suggestion,” the CFTC alleged, that “members not have any discussions with the Commission.” The suggestion occurred while Black Diamond was refusing to return clients’ money.

    In the ASD case, members were urged not to cooperate with the U.S. Secret Service and not to fill out forms that would identify them as victims of a scam.

    Salazar, Coats and Davey continued to solicit funds for Black Diamond even though the company was not paying out and was engaged in chronic excuse-making, the CFTC alleged.

    Despite assertions that Black Diamond had a miraculous trading platform and expert software developers, “the so-called system developers and the Black Diamond trading platform never existed, the CFTC charged.

    Although Salazar’s customers plowed more than $7 million into the scheme — including more than $2 million paid directly to Salazar that was supposed to go to Black Diamond — she “failed to send Black Diamond approximately $1.5 million,” the CFTC charged.

    Black Diamond transmitted more than $1.9 million to Salazar, but she returned only $600,000 of that sum to customers and kept $1.3 million for herself, the CFTC alleged.

    Of the $2.8 million Salazar cherry-picked in the scam, the CFTC alleged, she used more than $400,000 to purchase cars and took “expensive personal trips.”

    Coats’ customers plowed more than $27 million into the scam, and Coats took purported management fees or owner gains of more than $400,000, including about $200,000 after Black Diamond quit paying customers, the CFTC alleged.

    Customer funds were used by Coats to acquire an “expensive car,” maid service, home improvements and “a sky diving trip,” the CFTC said.

    Davey used customer funds to make $1.3 million in “loans” to his “Sovereign Grace” firm and other companies he controlled. He also bought 47 acres of land and built a “lavish home,” the CFTC charged.

  • BULLETIN: Bench Warrant Issued For Ponzi Schemer Who Ran Commodities Caper, Ripped Off Condo Association To Keep Scheme Afloat And Appeared On CNBC As Trading Analyst, CFTC Says

    Brian Kim appeared on CNBC repeatedly and offered commentary on Asian derivatives and other matters, according to a photo exhibit in the CFTC case filed today and information published on Kim's website.

    BULLETIN: A federal judge has frozen the assets of a trader and television analyst charged criminally by a New York County grand jury with multiple felonies in an alleged commodity-pool Ponzi scheme and charged civilly by the U.S. Commodity Futures Trading Commission in the same caper.

    Brian Kim, 35, is a “fugitive,” declared Manhattan District Attorney Cyrus R. Vance Jr., noting that the criminal and civil charges announced today were not Kim’s first encounter with the law.

    Indeed, Vance said, Kim failed to appear for his January trial in New York State Superior Court after being charged in late 2009 with stealing $430,000 from Christadora House, the New York condominium complex at which he resided.

    In the civil filings today, the CFTC accused Kim of taking the money from the condo association by forging documents and using the cash to keep his long-running fraud scheme afloat. The theft allegedly occurred in June 2008, months prior to appearances Kim made on an American television network to offer commentary on issues such as the Dubai debt crisis, derivatives trading in Asia and so-called “dark pools” that provide institutional investors outlets to trade anonymously in murky conditions.

    The commodities scheme continued while Kim was free on bail and awaiting trial on the charges of ripping off the  condo association, the CFTC charged, alleging that Kim also lied to the National Futures Association about his business practices.

    “The defendant induced his clients to make risky and speculative investments by portraying himself as an accomplished trader and money manager,” said Vance. He added that a bench warrant has been issued for Kim’s arrest.

    It was not immediately clear if either Vance or the CFTC knew Kim’s current whereabouts. Manhattan investigators said he stole about $4 million from “at least” 45 investors.

    Vance is the current, real-life embodiment of the fictitious Manhattan district attorney portrayed on the long-running “Law & Order” crime drama on the NBC television network. Adding to America’s real-life Ponzi drama and its often bizarre nature, Kim has appeared multiple times on CNBC, a prominent business channel, as an expert financial commentator.

    Kim, the operator of a hedge fund known as Liquid Capital Management LLC, appeared on CNBC at least three times in 2009, according to his website.

    While reporters were asking Kim to analyze marketplace developments and share his thoughts with the TV audience, he was at the helm of a complex, ongoing Ponzi and fraud scheme and presiding over a cover-up, according to court filings.