PatrickPretty.com

Tag: CFTC

  • EXPLOSIVE REVELATION: FBI, IRS Find More Than $400,000 In Stashed Loot In Trevor Cook Ponzi Case, Including More Than $200,000 In $100 Bills, Gold Coins, Watches, Baseball Cards

    Part of the loot the FBI and the IRS found under the alleged control of Graham Cook on July 23.

    Trevor Cook’s brother was hiding more than $400,000 in cash and valuables from a $190 million Ponzi scheme, according to an extraordinary statement by the court-appointed receiver in the case.

    The loot was found July 23 — after Trevor Cook, whose plea agreement in the case required him to submit to a lie-detector test if requested by the government — “flubbed” the test, according to the Star Tribune of Minneapolis/St. Paul.

    Graham Cook, Trevor Cook’s brother, has not been charged in the case. But the revelation that proceeds from the scheme allegedly were under his control and concealed for months from investigators and two federal judges presiding over elements of the case raise troubling, new questions about Trevor Cook’s capacity to tell the truth in any context and whether Cook and others had stashed money elsewhere.

    Trevor Cook was jailed in January by Chief U.S. District Judge Michael J. Davis for concealing assets and spending money frozen by court order on Nov. 23, 2009. Davis, who is presiding over the civil elements of the case filed by the SEC and the CFTC, said the government had established that Cook had violated the court order.

    Another part of the loot.

    At the time, Cook made a technical argument that he had not been properly served in the case at the Van Dusen mansion in Minneapolis on Nov. 24 and thus was not bound to follow the order, a position that gave short shrift to the hundreds of victims in the case, some of whom had been rendered destitute.

    Victims complained that Cook was thumbing his nose at both the court and investors. Cook also asserted his 5th Amendment right against self-incrimination, which caused victims to wonder what else he could be hiding.

    Davis did not buy any of Cook’s story, and jailed him.

    “[C]opies of said Orders were shown to Cook, and the relevant portions of the Orders were explained to him by the Receiver” on Nov. 24, 2009, Davis ruled. Regardless, Cook later used frozen assets to purchase $7,510 in gift cards from Cub Foods and $16,000 in gift cards from Target.

    “Given the amount of investor money at issue, and Cook’s repeated violations of the Asset Freeze Orders, the Court finds that the appropriate remedy for the contempt finding in this case is to incarcerate Cook until such time as he purges such contempt.”

    Jail was an appropriate remedy for Cook, even in a civil case, a top SEC official said at the time.

    Sports collectibles, such as this baseball card of Minnesota Twins' immortal Kirby Puckett, also were part of the stash.

    “Mr. Cook has elected to disregard the court’s orders and will now be a guest of the federal correctional system until he mends his ways,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office.

    In March, while Cook was jailed in the civil case, prosecutors charged him criminally with mail fraud and tax evasion, opening up a new round of litigation over which U.S. District Judge James M. Rosenbaum is presiding.

    Cook pleaded guilty to the criminal charges in April. His plea required him to take a lie-detector test “if requested” by prosecutors to determine “whether he has truthfully disclosed the existence of all of his assets and the use of the fraud proceeds.”

    It is believed the test was administered in mid-July, prior to Cook’s scheduled sentencing date of July 26. Sentencing has been postponed until Aug. 24, and Rosenbaum may have to determine whether Cook once again has thumbed his nose at the court, prosecutors, victims and the receiver in a bid to prevent the discovery of funds that could be used to make the victims as whole as possible.

    The discovery of the funds also raises questions about whether Cook failed to disclose the whereabouts of assets in a bid not to implicate others in the scheme.

    The stash also included Rolex and other expensive watches.

    Cook’s plea agreement also required him to to “fully and completely disclose to the United States Attorney’s Office the existence and location of any assets in which he has any right, title, or interest and the manner in which the fraud proceeds were used.”

    Prior even to Cook’s polygraph exam, R.J. Zayed, the court-appointed receiver, raised questions about Cook’s cooperation and level of truthfulness. The plea agreement, as written, conceived a 25-year sentence for Cook, although prosecutors said Rosenbaum had the final say.

    Victims fretted that Cook, who is in his late thirties, could emerge from prison as a relatively young man in his early sixties and have access to money that had been hidden from the court, investigators and the receiver.

    Zayed now says that federal prosecutors, the FBI and the IRS found the hidden loot July 23.

    Seized from Graham Cook were “$202,600.00 in cash, 2891 gold and silver coins, 27 watches, some sports memorabilia cards and other personal property belonging to the Receivership,” Zayed said yesterday.

    “A rough estimate of the value of the coins is approximately $200,000.00 to $225,000.00,” Zayed said.

    Read the Star Tribune story.

    Read this PP Blog story from April in which victims said they believed Cook was lying about the whereabouts of assets.

    Read this June PP Blog story in which Cook victims said they sought a meeting with prosecutors to delay Cook’s sentencing until more facts emerged. Victims said they feared he stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.

    Read this July 12 PP Blog story in which a source told the PP Blog that Cook would be subjected to a lie-detector test.

    Read Zayed’s remarkable statement and see photos of the loot.

  • CFTC: Convicted Felon Was Running Texas-Based Forex Firm; Robert Mihailovich Sr. And Robert Mihailovich Jr. Charged In Case That Alleges Pattern Of Marketing, Webinar Deception

    Investors turned over more than $30 million to a felon who hid his conviction and even managed to persuade clients to give him power of attorney, the CFTC said.

    Robert Mihailovich Sr. was released from federal prison on June 27, 2007, after serving 21 months for mail fraud, the CFTC said. On Oct. 14, 2008 — while on court-supervised probation — Mihailovich Sr. formed a Texas-based company known as Growth Capital Management (GCM) with his son and namesake, Robert Mihailovich Jr., listed as president.

    Now both father and son are charged civilly with misleading investors and regulatory agencies about GCM’s business practices.

    Mihailovich Jr. is accused of making false statements in regulatory filings and not disclosing that his father was a principal in the firm. Meanwhile, Mihailovich Sr. is charged with fraudulent solicitation.

    Together the father, son and company “fraudulently solicited and accepted more than $30 million from approximately 93 customers,” the CFTC said. Both men reside in Rockwall, Texas.

    Mihailovich Sr. did not disclose his felony conviction to investors, the CFTC charged.

    “There was no disclosure in GCM’s filings concerning Mihailovich, Sr. and/or his involvement with GCM,” CFTC alleged.

    But Mihailovich Sr. “directed the day-to-day business of GCM” and “solicited most, if not all, managed account customers to trade commodity futures and forex,” CFTC charged.

    Mihailovich Sr. used claims about an “electronic trading system” to woo customers on the Internet, the CFTC said.

    Webinars and sales presentations were conducted on Saturdays.

    “Mihailovich, Sr. presented the GCM electronic trading system by employing graphs that purportedly showed trading in live commodity futures accounts and forex accounts,” the CFTC charged. “Mihailovich, Sr. claimed that his GCM electronic trading system virtually guaranteed substantial profits and minimized the risk of loss trading commodity futures and forex. His recurring theme and reassurance was that trading using GCM’s electronic trading system was protected at all times from loss.”

    Actual trading accounts managed and controlled by Mihailovich Sr., however, realized net losses, CFTC said.

    One GCM customer told investigators that Mihailovich Sr. also used a “mass sub-algorithm” to make manual trades and gain extra profits.

    Numerous misrepresentations were made to clients, including a claim that a $1 million investment would result in a $1 million profit and that “it does not matter what the markets do during the trading day for the computerized trading software to make an account profitable,” the CFTC charged.

    Some customers were falsely told that GCM had not closed a trade at a loss since 2000 and that Mihailovich Sr. “had over twenty years of continuous trading experience,” the CFTC charged.

    “Defendants’ marketing materials stated that their software ‘has never closed a managed position at a loss. Not on Forex . . . Not on Bond positions . . . Not on the S&P . . . Or even on the many other types — commodities, stocks and indexes — it has managed over the years,’” CFTC alleged.

    Meanwhile, the agency said Mihailovich Sr. tried to have his felony conviction overturned by claiming ineffective assistance of counsel, “but that petition was denied.”

    Despite claims of safety and assurances that the firm did not lose clients’ money, “approximately half of Defendants GCM’s and Mihailovich, Sr.’s customers lost money from their investments, and overall, their trading resulted in net losses of approximately $2.2 million in customer accounts,” the CFTC alleged.

    “From June 2008 through June 2009, GCM’s and Mihailovich, Sr.’s trading of forex on behalf of customers resulted in overall realized losses of approximately $711,000,” the agency said. GCM and Mihailovich, Sr. received approximately $241,000 in performance and management fees related to this trading.”

    “Between September 2008 and through November 2009, GCM’s and Mihailovich, Sr.’s trading of S&P e-mini futures resulted in realized net losses totaling approximately $1.5 million,” the CFTC said. “GCM and Mihailovich, Sr. received approximately $147,000 in performance and management fees related to this trading.”

    “Despite these mounting losses, GCM and Mihailovich, Sr. continued to solicit new customers by highlighting the profit potential of investing with GCM using GCM’s proprietary trading software, without disclosing the fact that many of their customers lost most, if not all, of their investment,” the CFTC charged.

    Read the CFTC complaint.

  • Clawback Actions Begin In Trevor Cook Case; Receiver Says Millions Of Dollars Of ‘Preferential Transfers’ To Investors Occurred After SEC Paid ‘Surprise’ Visit

    EDITOR’S NOTE: R.J. Zayed, the court-appointed receiver in the Ponzi and Forex fraud case brought by the SEC and CFTC against Trevor Cook and Pat Kiley, has said many investors were made destitute by the scheme. Not all investors lost their money, however. Yesterday Zayed filed petitions to claw back millions of dollars in “preferential transfers”  made to investors as the scheme allegedly was unraveling.

    Zayed, who is seeking to make victims as whole as possible, also filed actions against two banks to recover mortgage payments made by Cook on two Minnesota properties. All in all, the clawback actions are targeted at 22 individuals or entities on the legal theory they are not entitled to benefit from proceeds that flowed from Cook’s illegal scheme. The precise number entities or people who allegedly received tainted money is not known. One of the investors named in the clawback actions was the grandmother of a Cook employee, according to court filings.

    Chief U.S. District Judge Michael J. Davis has given Zayed the authority to pursue “any third party recipient of asset transfers from Cook or any named Receivership entity,” meaning more clawback actions could be in the offing as the probe by the receivership continues.

    Here, now, the clawback story . . .

    Acknowledged Ponzi swindler Trevor Cook knew in 2008 that Crown Forex S.A., a Swiss entity in which the CFTC alleged Cook held a majority ownership stake, “was insolvent and incapable of paying its investors,” according to new petitions filed by the court-appointed receiver in the case.

    And Cook also knew that the Financial Industry Regulatory Authority (FINRA) was asking questions as early as April 2009. “No later” than May 2009, according to receiver R.J. Zayed, Cook knew Swiss regulators had placed Crown Forex S.A. in “liquidation.”

    On June 22, 2009, according to Zayed, “the SEC conducted a surprise investigation of the scheme’s headquarters and personally served Cook with a subpoena.”

    Up to six SEC attorneys and accountants were poking around in Minneapolis for five days in June 2009. The clamor surrounding the scheme set in motion a series of events in which certain investors with links to Clifford Berg, a carpet salesman and Cook’s father-in-law, suddenly began to receive back their money, according to court filings.

    Neither Berg nor the investors has been accused of wrongdoing. Events in the case demonstrate the risks that confront both investors and individuals who drive business to Ponzi schemes and other forms of investment fraud. Neither Ponzi principal nor interest is safe because the money comes at the expense of other investors, not as a result of legitimate commerce. Zayed is seeking to force Berg, his wife and the investors to return money traced to the scheme. The Bergs already have agreed to return $948,848.36.

    Clifford Berg worked as a Cook recruiter and brought investors’ money into the scheme, according to court filings. The Bergs also were investors.

    One of Cook’s investors is believed to be the husband of Berg’s dental hygienist, who learned of the purportedly profitable trading program from Berg. Other investors are believed to have known Berg from the carpet business, according to Zayed.

    On June 29, seven days after the SEC appeared unannounced in Minneapolis, the investor married to the dental hygienist received two checks totaling $916,570 from the scheme, according to court filings. The investor had placed $785,162.44 in the program and did not complete paperwork for the withdrawal.

    Some of the investors received calls from Berg. One of the investors placed $147,233 in the program. Although he did not request a withdrawal, he received a check for $360,700 on June 29, 2009, a week after the SEC appeared, according to Zayed.

    Another investor believed to be an acquaintance of Berg placed $1,519,999.51 in the program. This investor called Cook “during the last week in June 2009” to inquire about investing money for his nephew, according to court filings.

    Cook told the investor that there were problems in “another part” of the company, according to Zayed.

    On the very next day, according to Zayed, the investor called Cook and requested withdrawal of his money, but did not complete paperwork for the withdrawal.

    Regardless, Berg “delivered” a check to the investor at his place of business “[s]everal days later,” according to Zayed. The investor’s wife also was an investor and also received a check. Together the couple had placed more than $1.62 million in the program. The total paid to the couple exceeded their outlay, according to Zayed.

    Another investor believed to be a Berg acquaintance from the carpet business placed $618,000 in the program. This investor — in late June 2009 — received a call from Berg during which Berg told him that there were “problems with the company,” according to Zayed.

    “Berg also mentioned a possible investigation,” Zayed said.

    The investor then went to Berg’s house to pick up a check for $747,500, according to Zayed. The check was dated June 29, a week after the SEC came to town. The investor then received three smaller checks, including a check for $2,200 drawn on a gold and bullion business, a check for $2,100 drawn on the bank account of Cook’s brother and a check for $2,100 drawn on the account of Oxford Global Partners LLC.

    Another married couple believed to be acquaintances of Berg invested $243,500 in the program, according to Zayed. Although the husband and wife requested no withdrawals, Berg contacted them in late June 2009, telling the husband that accounts had been closed and that checks were in the mail, according to Zayed.

    This couple received a total of $280,950 in three separate checks after the SEC came to Minneapolis, Zayed said.

    On June 28, another Berg acquaintance received a call from Berg. This person had placed $375,000 in the program and did not complete paperwork for a withdrawal.

    Berg told this investor that there was going to be “some sort of investigation,” according to Zayed. The investor later received a check for $413,600. The check was dated June 29, seven days after the SEC appeared in Minneapolis.

    Yet another investor believed to know Berg from the carpet business plowed $752,134 into the program, according to Zayed.

    This investor had “received a call from Berg” and was told  “that there was some kind of investigation” and that Berg had “cashed everyone out,” according to Zayed.

    Berg then “delivered” two checks totaling $795,911.53 to the investor, according to Zayed.

    It appears as though Berg’s supervisor also was an investor, and placed $250,000 in the program, according to Zayed. The grandmother of a Cook employee also was an investor, placing $102,000 in the program.

    When the grandmother “saw a newspaper article regarding the Receivership Entities and mentioning lawsuits filed against them,” she called her grandson  “and told him to get her money out,” according to Zayed.

    Each of the investors named clawback targets “received payments preferentially over hundreds of other investors who were defrauded by Cook and unable to withdraw the money they had invested in the Trading Program,” Zayed said in court filings.

    Read the clawback petition filed by Zayed against 20 investors. Read an earlier filing against the Bergs.

  • BULLETIN: Pedro de Sousa, Guillermo Rosario Arrested By FBI; CFTC Lays Out Yet-Another Florida Fraud Case

    BULLETIN: Pedro de Sousa and Guillermo Rosario of FX Professional International Solutions Inc. (FXP) have been arrested by the FBI. The Commodity Futures Trading Commission (CFTC) said the men operated a Forex fraud that issued false account statements, falsely claimed no losing months between 2005 and 2008 when they had lost money in 31 of 40 months reviewed by investigators and claimed winning months through FXP dating back to 2002 — even though the company did not exist prior to 2004.

    “Rosario and de Sousa falsely represented to customers that since 2002 FXP had annual forex trading profits of 21 percent to 85 percent with no losing years,” the CFTC said.

    “However, FXP did not exist prior to 2004,” the agency said.

    Although de Sousa and Rosario sent customers false monthly account statements showing profits every month from 2005 through 2008, their forex trading “resulted in monthly losses in 31 of 40 months during this period,” the CFTC said.

    Rosario also is known as Guillermo Rosario-Colon. He lives in Coral Gables, Fla. Meanwhile, de Sousa also is known as Pedroiz J. Sanz. He lives in Orlando, according to the CFTC.

    Neither Rosario nor de Sousa was registered with the CFTC. Their company also was known as FX Professional Solutions LLC. Both entities were dissolved for failure to file an annual report, and FXP was never registered with the CFTC, the agency said.

    “Rosario asserted to one of the [c]ustomers that he had devised a system of trading forex that he was confident would, at a minimum, consistently return 20% in annual profits,” CFTC charged.

    “Beginning in May 2005 and continuing to February 2009, Defendants sent false monthly account statements to the Customers,” CFTC charged. “With very limited exceptions, these statements claimed profits of between 0.16% and 2.55% every month when, in fact, actual forex trading conducted by Defendants during this period (with or without the Customers’ funds) resulted in net monthly losses more than 75% of the time.”

    When the scheme was collapsing last year and customers were asking questions and demanding their money back, FXP acknowledged losses to customers, according to the CFTC.

    When a customer asked to see trading records, Rosario refused on the basis of “customer confidentiality,” the CFTC said.

    De Sousa, meanwhile, told customers that the company started sending out bogus account statements because it feared that acknowledging losses would lead to redemption requests it could not fund, the CFTC said.

    “In April 2009, one of the Customers asked de Sousa why FXP continued to send monthly statements indicating profitable trading during the latter half of 2008 if, in fact, FXP was losing money during this period,” CFTC said. “De Sousa replied that Rosario was afraid that if they told customers about the losses, customers would request to withdraw their money, and that Defendants would not have the funds to honor the withdrawal requests.

    “For this reason, according to de Sousa, beginning in or about September 2008,
    Defendants ‘started faking the statements’ that they sent to the Customers,” CFTC charged.

    Investigators determined that the company had been “issuing false statements from as far back as 2005,” CFTC said.

  • BULLETIN: Another Ponzi Scheme In South Florida; SEC Alleges $28 Million Fraud Against Trade-LLC

    A Florida company — Trade-LLC — and its operators have been accused of running a $28 million Ponzi scheme that fleeced members of three investment clubs.

    Named defendants by the SEC were Trade-LLC and its managing members, Philip W. Milton and William Center. The scam operated in the Palm Beach Gardens area, and affected more than 800 members of the investment clubs, the SEC said.

    Investors were persuaded to “entrust Trade-LLC with money so that it could trade securities on the clubs’ behalf using its purported proprietary software trading program,” the SEC said.

    “With claims of a sophisticated trading program and extraordinary returns, Milton and Center persuaded the clubs and their members to increasingly invest millions with Trade-LLC,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “They then blatantly lied to the clubs about the returns that were being achieved and hid the clubs’ losses by running a Ponzi scheme.”

    U.S. Attorney General Eric Holder gave a speech in the Palm Beach area in January, warning fraudsters that they were writing their own tickets to jail. Florida has been pounded by both Ponzi schemes and cases of real-estate and mortgage fraud.

    Milton already has agreed to settle the SEC charges against him, the SEC said.

    Trade-LLC will be placed in receivership and also “has also consented to pay a civil money penalty to be determined by the court,” the SEC said. Milton has been ordered to return $2.3 million and pay a civil penalty of $130,000.

    “Milton and Center used the clubs’ funds to pay themselves salaries of more than $2 million and $1 million, respectively, and to cover more than $1.3 million in business and other unrelated expenses,” the SEC said. “Milton and Center also transferred, without any legitimate basis, over $4.8 million of the clubs’ funds to three Florida companies they controlled.”

    The case against Center remains unresolved.

    Named relief defendants in the case were the three companies controlled by Milton and Center. They were identified by the agency as BD LLC, TWTT-LLC and CMJ Capital LLC. All of the companies have been placed in receivership and have agreed to a settlement and to disgorge ill-gotten gains, according to the SEC.

    Assisting in the probe were the CFTC and the Florida Office of Financial Regulation.

  • Head Of Justice Department’s Criminal Division Announces Guilty Plea Of Texas Man In Commodities Ponzi Case; Multiagency Crackdown Against Scammers Continues

    In yet another sign that U.S. policy is to turn up the heat on Ponzi and HYIP purveyors, the head of the Justice Department’s Criminal Division announced the guilty plea of a Texas man accused both criminally and civilly of running a Forex HYIP and Ponzi scheme.

    Ray M. White, 51, of Mansfield, faces up to 10 years in federal prison after pleading guilty yesterday to a criminal count of commodities fraud. The announcement was made by Assistant Attorney General Lanny A. Breuer, who was appointed to the post by President Obama in 2009.

    White also faces civil prosecutions by the SEC and CFTC.

    Breuer was joined in the announcement by U.S. Attorney James T. Jacks of the Northern District of Texas. Multiple news releases by the government yesterday in the White case referenced President Obama’s Financial Fraud Enforcement Task Force.

    The Obama administration has made Ponzi- and financial-fraud busting one of its top priorities. Ponzi schemes have drained tens of billions of dollars from the economy during a period in which the United States and much of the world are trying to rebound from a growth-killing recession.

    In January, U.S. Attorney General Eric Holder announced that fraudsters were writing their own tickets to jail.

    “White admitted that in July 2008 he contracted with an investor to sell $50,000 in commodities through CRW Management LP,” the Justice Department said. “[F]rom July 2008 until January 2009, he knowingly and willfully cheated and defrauded, made false statements to, and deceived the investor by making several misrepresentations in connection with the contract to sell commodities.”

    The scheme featured a claim “to the investor that his funds would be used to trade off-exchange foreign currency contracts and that CRW averaged 7 percent per week returns through off-exchange foreign currency trading,” the Justice Department said.

    Like many Ponzi schemes, “White provided written account statements showing purported returns, and represented to this investor that CRW would maintain separate bank accounts for each investor,” the Justice Department said. “White admitted that in fact, these account statements were false and that he did not maintain separate bank accounts for the investors.”

    Prosecutors said “the vast majority of the funds were never used to trade off-exchange foreign currency.”

    White, in fact, lost money in his trading scheme, despite his 7- percent- per-week profits claim, prosecutors said.

    White solicited at least $10.9 million from late 2006 until March 2009 from more than 250 investors,  according to the SEC and CFTC.

    “White used at most $93,900 of the $10.9 million he raised to trade in the foreign currency market,” prosecutors said. “The remaining approximately $10.8 million was either misappropriated or returned to CRW customers as part of the Ponzi scheme.”

    Prosecutors were quick to point out that White’s Ponzi meant pain for his family and others.

    “White used the funds to finance his son’s car-racing career, to purchase a company called Hurricane Motorsports LLC, in Arlington, Texas, and to purchase a home and other real property,” prosecutors said.

    He faces a maximum prison sentence of 10 years and a maximum fine of $1 million. U.S. District Judge Barbara M.G. Lynn is scheduled to sentence White on Sept. 17.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.

  • KABOOM! Alleged Commodities Ponzi Scheme Run By Mexican Nationals On U.S. Soil Dumped Money Into TWO Other Failed HYIP Fraud Schemes, Investigators Say; Ruben Gonzalez, Jose C. Naranjo Charged By CFTC

    UPDATED 10:17 A.M. EDT (May 25, U.S.A.) It has been another nasty day for the HYIP and autosurf “industries” and their apologists. Investigators have charged two Mexican nationals with operating a Ponzi scheme on U.S. soil. The alleged scheme, which used names such as New Golden Investment Group LLC (NGI), NGI Group LLC, New Golden Management, New Golden Entertainment LLC, Grupo NGI International Inc. and NGI International Inc., targeted Latinos in Greater Los Angeles, authorities said.

    Charged by the CFTC is the case were the companies and their operators, Ruben Gonzalez of West Covina, Calif., and Jose C. Naranjo of La Mirada, Calif. Both men are Mexican nationals. Their ages were not immediately known. Gonzalez was jailed in October on immigration charges, authorities said.

    Gonzalez also has been indicted on criminal charges of mail fraud and wire fraud, the CFTC said.

    The alleged NGI scheme has ties to other fraud schemes, including the Traders International Return Network (TIRN) scheme and the alleged Finanzas Forex scheme, authorities said. Criminal charges have flowed from the TIRN scheme, and the Finanzas Forex scheme — allegedly part of an international scheme known as Evolution Market Group (EMG) — has resulted in allegations that proceeds from the EMG scheme found their way into bank accounts seized by the U.S. Drug Enforcement Administration in a narcotics investigation in Arizona.

    Meanwhile, the TIRN scheme, which operated from Florida and claimed a presence in Panama, also has a tie to the alleged INetGlobal autosurf Ponzi scheme. Both TIRN and INetGlobal used the same debit-card company to pay members, according to court filings.

    Gonzalez and Naranjo gathered $3.65 million in the NGI scheme beginning in August 2008, dumping at least $100,000 into TIRN and $290,000 into Finanzas Forex, the CFTC said. All of the money appears to have been misappropriated, with Gonzalez transferring “at least” $260,000 from NGI member funds to his personal bank account and Naranjo transferring “at least” $267,000 from NGI member funds to his personal bank account.

    About $62,000 transferred into Naranjo’s bank account was withdrawn in cash, the CFTC said.

    The men “used investor funds to purchase a Mercedes-Benz, airline tickets, various other retail items and to make payments on a home,” the CFTC said.

    It is possible that as much as $1 million was directed at Finanzas Forex, the CFTC said.

    Gonzalez and Naranjo tricked investors by making them believe NGI was a real commodities-trading business.

    “Gonzalez, Naranjo and NGI falsely presented NGI as a successful trading company by displaying trading software on NGI’s office computers to make it appear to customers and prospective customers that NGI was engaged in electronic commodity futures trading,” the CFTC said.

    In reality, “NGI did not trade commodity futures for customers and did not make any of their advertised profits. Instead, Gonzalez and Naranjo allegedly ran a Ponzi scheme using new investor money to pay purported profits to existing investors,” the CFTC said.

    Part of the NGI sales pitch was similar to the sales pitch of yet another Ponzi scheme: the Learn Waterhouse scheme, which operated from California and also has a tie to INetGlobal, according to court records.

    INetGlobal operator Steve Renner provided payment-processing services for the Learn Waterhouse Ponzi scheme through an entity known as Cash Cards International, according to court records.

    Learn Waterhouse talked about purported investments in “gold” in Mexico. According to the CFTC complaint in the NGI case, NGI did the same thing, falsely claiming to customers that “they would double their money within a year in oil, gold, silver and other commodities.”

    NGI stopped making payments to investors in about June 2009, the CFTC said. At least 165 investors were affected.

    Gonzalez and Naranjo told customers that the payments stopped because a bank in Mexico was holding the funds and refused to release them. The men then told investors to have patience because a new deal involving oil was on the horizon and that investors who left their money with NGI son would have “huge” profits, the CFTC said.

    Investors were encouraged to fund accounts with money from credit cards or retirement savings, the CFTC said.

    NGI had been operating since about August 2008, according to records. That’s the same month INetGlobal was coming onto the autosurf stage, and AdSurfDaily was exiting the stage.

    The U.S. Secret Service said it believed both INetGlobal and AdSurfDaily were operating Ponzi schemes.

  • Feds, State Team Up In Virginia To Short-Circuit White-Collar Crime Wave; ‘All Too Clear’ Problem National In Scope, Top Federal Prosecutor Says

    Neil H. MacBride

    Calling it an “unprecedented partnership” brought about by a financial-fraud problem that is national in scope, federal and state officials today announced the creation of the Virginia Financial and Securities Fraud Task Force.

    The Virginia Task Force, which is part of President Obama’s interagency Financial Fraud Enforcement Task Force, brings together criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia.

    “It has become all too clear that the complex financial crimes we confront are national in scope,” said U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. “They require criminal and civil authorities across the country to utilize every tool at their disposal to ensure that the guilty are held accountable. The Eastern District of Virginia has the legal authority to bring cases here with national significance, regardless of where the fraud occurs.”

    Virginia’s Eastern District encompasses nearly 5 million residents in cities such as Alexandria, Richmond, Norfolk, Newport News and other communities.

    Financial crime is jumping across local and state borders, a top SEC official said.

    “Financial fraud schemes can be sophisticated, difficult to detect, and span multiple jurisdictions,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Opportunities to coordinate civil and criminal law enforcement efforts, such as those provided by this task force, are vital to combating financial fraud.”

    America’s economic future must be safeguarded, a veteran investigator said.

    “Financial fraud is a threat to economic integrity and can harm individual investors,” said Stephen Obie, acting director of enforcement for the CFTC.

    A centerpiece of the strategy is “to root out unscrupulous financial activity and protect market participants,” Obie said.

    Virginia’s attorney general agreed.

    “This partnership presents a tremendous opportunity to share information and resources among the experts in order to prosecute and deter fraud perpetrated against our citizens,” said Attorney General Ken Cuccinelli. “The efficiencies of state and federal cooperation and of law enforcement working together should not only prove more helpful in protecting consumers, but it should also save the taxpayers money.”

    Another part of the strategy is to create a force-multiplier to weed out fraudsters and send a message that they’ll get caught, a veteran FBI agent said.

    “Large-scale financial crimes are on the rise and as such law enforcement agencies are working together to become force-multipliers in investigative and prosecutorial efforts,” said FBI Special Agent in Charge Michael Morehart. “The Richmond Division of the FBI welcomes the opportunity to work with our partners on this task force to demonstrate a commitment of aggressive investigative efforts and discourage criminal activity.”

    The top postal official in North Carolina’s largest city said he’s on board the effort.

    StopFraud.gov - Financial Fraud Enforcement Task Force“The Postal Inspection Service embraces the formation of the Virginia Financial and Securities Fraud Task Force,” said Postal Inspector in Charge Keith Fixel of the Charlotte Division. “This partnership with other state and federal agencies will enhance our ability to thoroughly investigate mail fraud and other financial related crimes that involve the nation’s mail system and ensure public trust in the mail.”

    Tax criminals and money-launderers also will be targeted, said the chief tax-fraud investigator in the District of Columbia.

    “Financial-fraud crimes create huge losses of tax revenue,” said C. Andre’ Martin, special agent in charge of the IRS Criminal Investigations Division. “This type of fraud threatens the integrity of our tax system and erodes the financial health of our communities. IRS-Criminal Investigation is proud to be part of a formidable law enforcement team that is focused on investigating these fraud schemes and we will continue our efforts to investigate the tax-evasion and money-laundering aspects of these types of crimes.”

    State securities regulators have a key role on the Task Force.

    “The State Corporation Commission [SCC] looks forward to working with our state and federal partners to enhance our ability to enforce the provisions of Virginia law governing the financial services industry, assist investors who have lost their money, and enhance the integrity of markets by targeting and eliminating financial and securities fraud,” said Philip R. “Duke” de Haas, SCC deputy general counsel—Financial Services.

    Officials said the Task Force will build on successes such as the prosecution of Edward Okun, sentenced to 100 years in prison for a $132 million fraud scheme.

    In cases in which it is appropriate for civil regulators to share information with criminal investigators, such information will be shared, officials said.

    The task force “is focused on facilitating the exchange of information on specific investigations,” officials said. “The independent legal responsibilities of each task member may limit the ability to share information; however, the task force members are committed to conduct parallel investigations and share as much information as they are allowed so every member may benefit from the different tools and resources each agency can provide.

    President Obama formed the interagency Financial Fraud Task Force in November.

  • Is Trevor Cook Lying To Ponzi Investigators In $190 Million Case After Accepting Plea Deal? Investors Say Story Too Incredible To Believe

    EDITOR’S NOTE: Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme in Minnesota say they believe Cook is lying to investigators about the whereabouts of assets and perhaps other elements of the probe.

    “We do not believe this much money could be totally lost in such a short period of time,” an investor told the PP Blog this evening.

    The comment followed on the heels of a grim statement issued today by R.J. Zayed, the court-appointed receiver in lawsuits brought against Cook by the SEC and CFTC in November. Cook, 37, pleaded guilty to criminal charges earlier this month and is required to cooperate in unraveling the money mystery as part of his plea agreement.

    Zayed said he met with Cook April 23 — and Cook shed little new light on the probe.

    Here is the verbatim statement of the receiver (coloring added to distinguish Zayed’s statement from the PP Blog’s Editor’s Note):

    The Receiver met with Trevor Cook on April 23, 2010 at the United States Attorney’s office in Minneapolis, Minnesota for about 4½ hours for the purposes of identifying, locating, and retrieving assets belonging to the Receivership Estates. Also present at the meeting were representatives of the SEC, the CFTC, the FBI, the IRS, and the United States Attorney’s Office.

    Other than the $362,700 in cash and the collection of “Fabergé” eggs or purses resembling “Fabergé” eggs that Cook caused to be turned over to FBI on April 12, 2010, and which were identified at Cook’s change-of-plea hearing on April 13, 2010, Cook provided the Receiver with little new information with respect to the nature and location of any Receivership assets. Almost all of the information that Cook provided to the Receiver was already known to the Receiver as a result of the Receiver’s own investigation in this matter.

    Cook informed the Receiver that he had no submarines, houseboats, or hidden cash. He also identified no real estate, personal property, cash, bank accounts, safe-deposit boxes, jewelry collections, art collections, bonds, stocks, precious metals, buried treasures, or assets of any kind that were not already known to the Receiver. Cook further informed the Receiver that he has not given any assets to others to hold or hide for him. In sum, Cook identified little more than what the Receiver had previously identified, through the Receiver’s investigation, as assets belonging to the Receivership Estates.

    Cook identified three gambling accounts that were not included in the public Receiver reports; however, the Receiver already was aware of them. Those accounts contain over $100,000, but the Receiver has not been able to retrieve the money because the accounts are located in places outside of the Receiver and the Court’s authority (Costa Rica, Cyprus, and Jamaica). With Cook’s cooperation, these funds may be recoverable.

    According to Cook’s plea agreement, “his currency trading during the period from July 1, 2006 through August 31, 2009 at PFG in Chicago generated trading losses in excess of $35 million.” Cook also filed a claim against Crown Forex, S.A. for $67 million in investor funds that he claims were being held by Crown Forex, S.A. Crown Forex, S.A., however, is insolvent. Therefore, the timing and the amount of any potential recovery is speculative, uncertain, and unknown.

    R. J. Zayed
    Court-Appointed Receiver for Trevor Gilson Cook et al.

  • U.S. Marshals, FBI, Police Capture Ponzi Figure Who Ducked Sentencing; Michael Derrick Peninger Returned To Jail Amid Reports He Cut Transmitter On Electronic Monitoring Device

    Michael Derrick Peninger was captured yesterday, nine days after he failed to show up for sentencing court in a South Carolina Ponzi scheme case.

    Authorities said he cut the transmitter on an electronic monitoring device he was ordered to wear prior to fleeing April 12. A federal magistrate judge jailed Peninger yesterday after he was arrested on a warrant issued by the federal judge in Charleston presiding over the Ponzi case.

    Peninger, 50, was convicted in October of eight counts of mail fraud and one count of making a false statement to an FBI agent. Though jailed briefly after the conviction, Peninger was freed pending sentencing after his 72-year-old mother appealed to U.S. District Judge P. Michael Duffy to permit her son to leave jail to assist with the care of her husband, who has Alzheimer’s disease.

    Duffy structured a release by which Peninger would wear an ankle monitor and submit to supervision pending sentencing. The sentencing date was set for April 12, and Peninger did not show up in court. He faced a maximum penalty of nearly two decades in prison, and prosecutors unsuccessfully argued last fall against the release.

    The U.S. Marshal’s Service “developed information that Peninger was on Daniel Island” yesterday, the agency said.

    Daniel Island is within the borders of Charleston and is the home of Peninger’s mother, although it was not immediately clear if Peninger — who had been living with his mother since his release last year — was attempting to return to her home.

    Deputy U.S. Marshals, Charleston City Police Officers and FBI Agents immediately responded to the Daniel Island area, the U.S. Marshals Service said.

    “K-9 officers tracked Peninger into a wooded area and followed his trail into the business district where Peninger was spotted walking in the 300 block of Seven Farms Drive and taken into custody,” the agency said.

    Peninger was captured as a result of teamwork, the agency said.

    “We appreciate the support from our fellow law enforcement community in apprehending Peninger,” said U.S. Marshal Kelvin Washington. “[H]e will now face the courts for his original sentence to be imposed.”

    Peninger may face more jail time for ducking sentencing court and faces the prospect of a contempt-of-court hearing.

    Prosecutors again argued yesterday that Peninger was a flight risk, and the magistrate judge jailed him.

    Just days prior to Peninger going on the lam, the CFTC obtained a judgment of more than $3.9 million against him in a civil fraud case brought in 2008.

  • Ponzi Guilty Pleas In New York, Tennessee; New Ponzi Case Filed By CFTC In Florida; Relief Defendant Misspelled Its Own Company Name

    EDITOR’S NOTE: There was significant action in Ponzi cases today. Earlier we reported on the guilty plea of Trevor Cook in Minnesota and the issuance of a bench warrant in South Carolina for Michael Derrick Peninger. The brief below summarizes action in the Ponzi and affinity-fraud case case of Steven Byers in New York, the Ponzi case of Barron A. Mathis in Tennessee, and new allegations of a Forex Ponzi scheme against Claudio Aliaga in Florida.

    New York: Steven Byers, 47, of Oak Brook, Ill., pleaded guilty today to felony counts of conspiracy and wire fraud in a Ponzi case said to involve $255 million. U.S. District Judge Denny Chin, who sentenced Bernard Madoff to 150 years in prison, is the presiding judge in the case. Byers will be sentenced in September. He faces a maximum of 25 years in prison.

    Byers was the former president and chief executive officer WexTrust Capital LLC, a private-equity firm. Orthodox Jews were targeted in the scheme, which involved real estate and specialty finance.

    “From at least 2003, Byers and others raised money from investors pursuant to private placement offerings and then used material amounts of that money for other purposes, and did not disclose their diversion of funds to investors,” prosecutors said. “In one such private placement, Byers and others raised approximately $9.2 million in investor funds by representing that the funds would be used to purchase and operate seven commercial properties that were leased to the United States General Services Administration (GSA).

    “According to the GSA private placement memorandum issued to investors by WexTrust Capital,” prosecutors said, “the $9.2 million raised from investors, together with a mortgage of approximately $21 million, would be used to purchase the seven GSA properties and cover related acquisition expenses.

    “The seven GSA properties, however, were never purchased. Instead, virtually all of the funds raised from investors to purchase the properties were diverted by Byers and others to other purposes, but investors were never informed that the funds were used for any purpose other than to purchase and operate the seven GSA properties. Byers and others later agreed to make up a story that they would then tell the GSA investors regarding what happened to their investment,” prosecutors said.

    The guilty plea was entered as a result of a plea deal with prosecutors. Byers “agreed to forfeit $9.2 million and is subject to mandatory restitution and faces criminal fines up to twice the gross gain or loss derived from the offense,” prosecutors said.

    Tennessee: In Nashville, Barron A. Mathis, 29, pleaded guilty to wire fraud. He formerly was vice president and portfolio manager for J.C. Reed & Co., a failed financial services company headquartered in Franklin.

    Mathis sold his Ponzi and fraud scheme to friends, acquaintances and clients, collecting $11 million in the process, prosecutors said. Most of the investors were elderly, inexperienced traders.

    “Cases like these are egregious examples of predators who target vulnerable and innocent victims through false and fraudulent business practices,” said U. S. Attorney Edward M. Yarbrough. “By his own admission, Mathis encouraged people to invest by falsely promising security, growth and inflated returns on their money, but instead the investors lost their savings as part of an elaborate fraud scheme.”

    U.S. District Judge Robert L. Echols will sentence Mathis. A sentencing date has not been set.

    Florida: Claudio Aliaga, of Davie, has been charged civilly by the CFTC with operating a commodity-pool and Forex Ponzi scheme that gathered $4.5 million.

    Also charged was Aliaga’s company, CMA Capital Management LLC of Miami Lakes.

    Named relief defendants were Aliaga’s wife, Betty Aliaga, and a company known as CMA Global Investement (sic) Fund LLC. The CFTC noted that the company misspelled its own name and “received funds as a result of defendants’ fraudulent conduct.”

    U.S. District Judge Marcia G. Cooke ordered an asset freeze.