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Tag: commodities fraud

  • Illinois Forex Ponzi Schemers Get Combined Prison Sentences Of Nearly 30 Years; Feds Identify More Than 1,000 Victims Of $17 Million Swindle In Which $1 Million Went To ‘Strip Club And Restaurants’

    Charles G. Martin has been sentenced to 17 years in federal prison — and fellow Forex Ponzi schemer John E. Walsh has been sentenced to more than 12 years — in a case in which investors’ money went to pay for strippers, fine meals, fine hotels, a piano, high-end electronics, artwork, jewelry, flashy cars and private jets, prosecutors said.

    Martin, 46, formerly resided in Glencoe, Ill., and Malibu, Calif. Walsh, 63, lived in Lake Forest, Ill.

    More than 1,000 investors “worldwide” got sucked into the scheme, which gathered more than $17 million. The fraud gained a head of steam even though Martin previously had been in trouble with the National Futures Association and had been barred from being a principal in a commodities firm, prosecutors said.

    Martin and Walsh were principals of an entity known as One World Capital Group LLC.

    “One World’s trading platform operated as a front to placate customers whose margin funds were being systematically misappropriated by them,” the office of U.S. Attorney Patrick J. Fitzgerald of the Northern District of Illinois said.

    After investigators peeled back layers of the One World onion, they found that tax evasion had occurred, in addition to wire fraud and securities fraud, prosecutors said.

    U.S. District Judge Virginia Kendall ordered restitution of more than $16.9 million.

    Customers who provided money did not realize they were getting scammed out of the gate, prosecutors said. New money went to cover existing shortfalls in One World’s trading account, and tremendous sums were diverted to fuel extravagant lifestyles.

    “Credit card and bank records show that Martin spent more than $1 million at a strip club and restaurants, nearly $1 million at elite hotels and another $1 million renting flight time on private jets,” prosecutors said.  “He purchased a fleet of luxury vehicles, donated hundreds of thousands of dollars to celebrity charity events, and hired personal security guards to accompany him in public.”

    Walsh also frittered away investors’ funds to live the high life, using his One World “credit card to charge personal expenses, including more than $140,000 of jewelry,” prosecutors said.  “He also used $70,000 in One World funds for country club expenses and $1,425,000 to purchase a second home in Lake Forest.”

    About $500,000 from investors was diverted to finance a movie “that had listed Martin as a contributing producer,” prosecutors said.

    The FBI and the IRS handled the criminal probe, and the CFTC and NFA assisted, prosecutors said.

    In December 2007, the CFTC obtained a trading halt and asset freeze. At the time of the freeze, One World had only $677,932 in assets and unpaid customer liabilities of more than $17.6 million, prosecutors said.

    U.S. law enforcement has been counting victims of some individual fraud schemes in the thousands — or even the tens of thousands. The cases present unique logistical challenges because of their size and international reach.

    In some scams, criminals have used dozens of shell companies and bank accounts to funnel money, hide it or spirit it away. Reverse-engineering a single scheme can take years.

  • BULLETIN: FLORIDA — AGAIN: CFTC Says Civil, Criminal Charges Filed Against Miami Resident Oscar Hernandez In Alleged Commodity-Pool Ponzi Scheme In Which A Customer Was Check-Waving Cheerleader

    BULLETIN: Civil and criminal charges were filed in Florida today against Miami resident Oscar Hernandez, amid allegations he was operating a $3 million Ponzi scheme through Midway Trading Company LLC and Conquest Investment Group Inc., the CFTC said.

    The office of U.S. Attorney Wifredo A. Ferrer of the Southern District Of Florida said Hernandez has been charged criminally with fraud and conspiracy.

    In its complaint, the CFTC painted a picture of a noxious financial fraud that proliferated in part because a Hernandez customer led cheers for the scheme. The customer displayed copies of checks presented him by Hernandez, and the checks became a form of social proof that Hernandez was on the up-and-up, according to the complaint against Hernandez.

    The customer ultimately persuaded about eight others to invest with Hernandez, which caused at least $1 million more to flow to the Hernandez Ponzi, the CFTC alleged.

    The scheme operated between 2005 and 2009, netting more than $3 million. Hernandez and the firms “misappropriated approximately $1.8 million of participants’ funds for personal use, including car, mortgage, and credit card payments, and used misappropriated funds for so-called profit payments to participants,” the CFTC said.

    Investors were told Hernandez had developed a “special program” to trade futures and that annual returns of 180 percent were possible, the CFTC said.

    The CFTC, the FBI and federal prosecutors in the Southern District of Florida cooperated in the probe, the CFTC said.

    “By late 2008, Defendants made payments only intermittently, not monthly,” the CFTC charged. “Participants received their last payments in early 2009, and have not received a monthly payment or the return of their principal since that time.”

    Neither Hernandez nor the companies was registered with the CFTC “in any capacity,” the agency said.

    A Hernandez customer named Omar Aguilera began trading with Hernandez with $50,000 in 2005, according to the CFTC. By 2007, Aguilera and his wife upped their stake to $1 million with borrowed money.

    “Aguilera began to recommend the investments that Hernandez was making through Midway and Conquest to many of his friends and relatives, showing them copies of the checks he had received as proof of the profits he was earning,” the CFTC said. “Aguilera repeated what Hernandez had told him — that he would use any funds they invested for futures day trading, and that the investment carried no risk.”

    Over time, the scheme spread by word-of-mouth — to the point where “some participants invested without ever talking to Hernandez,” the CFTC said. “Early participants in the scheme received considerable ‘returns.’”

    But “the checks that Hernandez sent to Aguilera from the Midway and Conquest bank accounts were not profits from futures trading, but were funds that Hernandez had received from other participants and deposited in the Midway and Conquest bank accounts,” the CFTC charged. “Hernandez used only a portion of the funds he obtained from participants to trade futures in the Midway and Conquest trading accounts, losing approximately $1.3 million in the process, and used the remainder either to pay off obligations to other participants, or to pay for his own personal living expenses.”

    When the Ponzi collapsed, Hernandez told “a variety of false stories,” the CFTC said.

  • BULLETIN: FBI Seeks Arrest Of Perry and Rachelle Griggs; Agency Alleges Husband-And-Wife Team Ran Ponzi Scheme While Husband Was Federal Prisoner In Nevada; Manhunt Under Way

    WANTED BY FBI: Perry and Rachelle Griggs

    BULLETIN: UPDATED WITH INFORMATION FROM THE CFTC AT 7:03 P.M. EDT (U.S.A.) Perry and Rachelle Griggs are on the lam after running a Ponzi scheme while Perry Griggs was a federal prisoner in Nevada, the FBI said.

    The alleged commodities scheme consumed about $3 million and was targeted principally at inmates and family members of inmates, the FBI said.

    Separately, the CFTC said Perry Griggs ran a previous Ponzi scheme that resulted in convictions for wire fraud and money-laundering, a restitution order for more than $3 million and a 96-month prison sentence. Perry Griggs began serving the sentence in 2003, but hatched the new scheme while incarcerated.

    Yet-another scheme grew out of the scheme Perry Griggs hatched from prison, according to the CFTC. If the allegations are true, it means that Perry Griggs has been at the center of at least three fraud schemes since 2003, and launched two of them while in federal custody.

    The scheme for which Perry Griggs began serving time in 2003 involved coffee futures, the CFTC said. Even as he was serving time, Perry Griggs executed trades for the new scheme from prison by using the Internet and a telephone, according to court filings.

    Perry Griggs and his wife lost investors’ money in the new scheme and made Ponzi-style payments to cover up the fraud, while also stealing about $1 million to pay “for personal expenses, including luxury car leases, renting a home in Hawaii, purchasing jewelry and chartering a private jet,” the CFTC said.

    The couple went missing from a halfway house after Perry Griggs’ release from prison. Perry Griggs was on parole for the earlier Ponzi scheme when he fled while the second scheme was unraveling, the CFTC said.

    Perry Griggs was housed “with a large number of inmates from Hawaii,” the FBI said. He was released from prison in late 2008, and went missing with his wife from Las Vegas in January 2010.

    Indictments against the husband and wife were returned by a federal grand jury in Hawaii yesterday.

    The FBI has launched what it described as a “national fugitive manhunt with a primary focus on the states of Nevada, Washington, and California.”

    PERRY JAY GRIGGS is 49 years old, 5’10” tall, 180 pounds, with grey hair and blue eyes. He is known to have expensive tastes in sports cars, high-end clothing, cigars, and golf, the FBI said.

    RACHELLE LOUISE GRIGGS, also known as RACHELLE RUTLEDGE, is 42 years old, 5’4” tall, 150 pounds with blonde hair and green eyes.

    Anyone recognizing PERRY and RACHELLE GRIGGS or having information as to their current location is asked to call the Honolulu FBI at 808-566-4300.

    Perry Griggs also spent time in federal prisons in California and Texas. The Ponzi that put the couple on the lam operated through a scam company known as Aloha Trading Co., which purported to be in the business of trading commodities, the FBI said.

    Meanwhile, the CFTC said investors in the second scheme were lured by the promise of high returns. Some investors refinanced their homes and liquidated retirement accounts to invest with Perry and Rachelle Griggs.

    A third scheme grew from the second scheme and involved a company known as Paradise Trading LLC, the CFTC said.

    Read the CFTC complaint.

  • Paul Greenwood To Forfeit $331 Million; Pleads Guilty In Massive Fraud Scheme That Put Public Pension Funds At Risk While He Collected Teddy Bears

    Perhaps he’ll be remembered best for his collection of Steiff teddy bears paid for by investors, but there now are other reasons to remember Paul Greenwood.

    Greenwood has pleaded guilty to swindling institutional investors, universities and pension funds in a Ponzi-like scheme. He is believed to be cooperating with prosecutors in the ongoing probe of WG Trading Co. — and has agreed to forfeit “at least” $331 million.

    Prosecutors called the sum “the amount of funds that Greenwood and others personally misappropriated and diverted . . .” Greenwood, who potentially faces decades in prison, pleaded guilty to a total of six charges: conspiracy, securities fraud, commodities fraud, wire fraud (two counts), and money-laundering.

    His business partner, Stephen Walsh, also is charged in the criminal case, which was brought by the FBI. The SEC and the CFTC filed civil actions.

    The CFTC described the case as a “$1.3 billion investment scam.”

    “Greenwood and others caused companies that he ran to divert approximately $80 million to Greenwood for his benefit,” the agency said.

    Greenwood, who claimed to own 1,350 collectible teddy bears, is the former town supervisor of North Salem, N.Y.  The CFTC said he and Walsh “misappropriated at least $553 million from commodity pool participants.”

    For its part, the SEC called the scheme “brazen.”

    “[S]ince at least 1996, Greenwood and Walsh promised investors that their money would be invested in a stock index arbitrage strategy,” the SEC said. “Instead, Greenwood and Walsh essentially treated their clients’ investments as their personal piggy bank to purchase multi-million dollar homes, a horse farm and horses, luxury cars, and rare collectibles such as Steiff teddy bears.”

    Federal prosecutors said Greenwood and others told investors they employed a strategy known as “equity index arbitrage,” defining it as “conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years.”