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Tag: Elaine F. Marshall

  • NORTH CAROLINA: Teen Allegedly Swindled Senior Citizens In ‘Stark Innovations’ Scam That Purportedly Sold Overseas ‘Electronic Consumer Goods In Bulk’

    David Alan Topping. Source: Brunswick County mugshot.
    David Alan Topping. Source: Brunswick County mugshot.

    A North Carolina teenager who allegedly swindled senior citizens in an investment scam known as Stark Innovations was arrested yesterday, North Carolina Secretary of State Elaine F. Marshall said.

    Bond for the suspect, David Alan Topping, 19, of Oak Island, was set at $250,000. The Brunswick County Sheriff’s Office assisted with the case.

    “I am glad the citizens of Brunswick County will no longer be victimized by this individual’s deceit,” said Brunswick County Sheriff John Ingram V.

    Topping was charged with felony securities fraud  and  felony solicitation to obtain property by false pretense. He also was charged with a misdemeanor count of the latter.

    The scam gathered more than $100,000 investigators said.

    Investigators said that Topping already was on probation for previous thefts. Those cases  “involved felony convictions related to larceny and motor vehicle theft,” and Topping did not tell his Stark Innovations investors about them.

    Stark Innovations purported to be a company that “bought and shipped electronic consumer goods in bulk from overseas and sold them at a markup in the U.S.,” Marshall’s office said.

    “Investors told investigators that Topping said they could earn 6.5-percent interest per month with no risk to their principal,” Marshall’s office said.

    The scheme allegedly traded on Facebook and LinkedIn, investigators said.

    Scams regularly use social media to build heads of steam, according to regulators.

    “Calling our Securities Division would have revealed that Mr. Topping was never licensed to sell securities, and that in itself should always raise a huge red flag for potential investors,” Marshall said.

    A Facebook site that appears to be associated with Stark Innovations implies that the company was headquartered in a skyscraper in a bustling city. Other photos, however, suggest that Stark Innovations was renovating a trailer and turning it into a headquarters.

    “Hard at work renovating out [sic] new building!” the Facebook site roars in a post dated Aug. 27. “Will be completed in three months! Come in and talk to us about investing with the highest interest rate anywhere!”

    The site also prompts visitors to “Check out our newly designed site for Stark Card! The only card you can earn a 2.12% monthly interest rate.”

    “We believe that among Mr. Topping’s victims were retirees, some of whom invested tens of thousands of dollars in his scheme that they may well never get back,” Marshall said.

  • Another Scam In Zeekland Region

    breakingnews72A 48-year-old resident of Lexington, N.C., has been charged criminally in an alleged “precious metals investment scam,” the office of North Carolina Secretary of State Elaine F. Marshall said.

    Huge profits purportedly would flow within two weeks from gold transactions in the Middle East, according to related state filings.

    Rondell Scott Hedrick  was taken to the Davidson County Jail under $150,000 secured bond, Marshall’s office said.

    He was charged with 10 counts of securities fraud, five counts of obtaining property by false pretense, five counts of securities-dealer registration violation, five counts of security-registration violation and two counts of violation of a cease-and-desist order.

    Hedrick “was not registered to sell financial securities during the alleged incidents and his company was shown on the Secretary of State website to be not in good standing,” Marshall’s office said.

    “We always ask people to check before they invest,” Marshall said. “In this case, checking first would have shown a corporation that had been dissolved and that neither the suspect nor his investment offering were registered to be doing this business. Plus, he and the company had already been issued a cease and desist order for pursuing this type of activity.”

    The activity that led to Hedrick’s jailing involved trawling for investor cash on Craigslist, amid claims he was using the cash “to buy gold overseas and then re-sell[ing] for huge profits within a matter of days,” Marshall’s office said.

    In November 2012, Marshall’s Securities Division accused Hedrick in a cease-and-desist order of posting an ad a month earlier on Craigslist in Los Angeles that said, “$5,000 Investment pays $15,000 in about 10 days.” He also made at least one more Craigslist pitch during October 2012, according to the order.

    Hedrick “is or was” the president of “Hedrick Consulting, Incorporated” in Lexington, according to the November 2012 order.

    Upon seeing the ad, a California investor called Hedrick and was told Hedrick “was raising capital to buy gold bars in Dubai,” according to the order.

    Dubai is a city in the United Arab Emirates.

    The investor, according to the order, wired Hedrick $5,000 to a Hedrick account at a North Carolina credit union, after Hedrick had provided instructions and claimed he’d be leaving for Dubai soon and providing the investor a return of 200 percent.

    No evidence emerged that Hedrick made the promised trip to Dubai to purchase gold, and the investor received neither the promised return nor the return of the principal, according to North Carolina filings.

    “[H]e has refused to return Investor’s money,” the state said.

    Hedrick also operated a website styled “HedrickConsulting.com,” according to the order.

    HedrickConsulting.com is still viewable online. Alongside photos of glistening buildings in Dubai, these word appears (italics added):

    Gold Buyer
    International Consultant and Broker
    Introduction to MTN – BG – SBLC Sellers
    Coming Soon: Electronic Sales Division

    United States – West Africa – Dubai

    Contact information for for Hedrick Consulting in “Raleigh, North Carolina” and “Malibu, California” also appear at the site.

    Lexington is a small town known for delicious barbeque, rather than crime.

    But Lexington also was the home of Zeek Rewards, which the SEC described in August 2012 as a $600 million Ponzi- and pyramid fraud. Prior to the filing of the SEC complaint, Zeek complained publicly on its Blog about purported interference in its operations by unnamed “North Carolina Credit Unions.”

    “All” criticism of Zeek had been “unprofessional” and based on “false information,” the firm bizarrely contended on Aug. 4, 2012, 13 days prior to the SEC action.

    Among other things, Zeek planted the seed that it would provide a daily return in excess of 1 percent and an annualized return in the hundreds of percent. The SEC later said Zeek duped members into believing that such returns came through legitimate means, alleging that Zeek operator Paul R. Burks “unilaterally and arbitrarily” determined the daily dividend rate so that it would average “approximately 1.5% per day, giving investors the false impression that the business is profitable.”

    With the Zeek debacle still in the news 14 months after the SEC action, Lexington again unwillingly found itself back in the headlines, in a story on yet another fraud scheme aimed at its residents. Earlier this month, state investigators charged an out-of-town vendor at the Lexington wholesale market with two felony counts of trademark violations.

    In the trademark case, Hua Wu, 40, of Raleigh, was accused of possessing nearly $60,000 worth of “counterfeit designer handbags and designer labels.”

    “The sale of counterfeit trademarked goods harms people across the economic spectrum, from consumers to the legitimate manufacturers and retailers who build our economy,” Marshall said earlier this month.

    News about the arrest of Lexington resident Hedrick followed the news of Wu’s arrest by about three weeks.

     

     

  • UPDATE: North Carolina Says Profitable Sunrise Investors Have Been Targeted In ‘Reload Scams’ Like Zeek Rewards Investors Before Them

    From a warning by North Carolina that Profitable Sunrise investors are being targeted in reload scams.
    From a warning by North Carolina that Profitable Sunrise investors are being targeted in reload scams.

    UPDATED 11:28 A.M. EDT (U.S.A.) The Securities Division of North Carolina Secretary of State Elaine F. Marshall has issued a warning that Profitable Sunrise investors are being targeted in “reload scams.”

    North Carolina issued a similar warning in August 2012, saying then that members of the Zeek Rewards “program” — an alleged $600 million Ponzi- and pyramid scheme operating online — also were being targeted in reload scams.

    From a statement by Marshall’s office (italics added):

    The NC Securities Division has learned that Profitable Sunrise investors are being contacted with promises of help in getting their money back for them. The Securities Division is issuing this alert to warn investors that such promises may be yet another attempt to scam them again through a “reload scam”.

    Reload scams hit consumers when they’re down, offering to help them make back money they lost to a previous scam or bad business decision. These scams have been popular for years with telemarketing fraud rings but can also follow other types of fraud, including investment fraud.

    Such reload scams were aimed at victims of the Zeek Rewards Ponzi scheme last year. Reload scammers used social media sites and online news releases to tout opportunities to help investors replace the income they were receiving from Zeek Rewards. Similar opportunities are being touted in the case involving Profitable Sunrise. Investors are warned to stay away from such “opportunities”.

    On Feb. 27, North Carolina issued a cease-and-desist order against the Profitable Sunrise “program” and purported operators Roman Novak and Radoslav Novak. Profitable Sunrise operated through a British entity known as Inter Reef LTD.

    At least 35 U.S. states or provinces in Canada went on to issue Investor Alerts or cease-and-desist orders against Profitable Sunrise. The SEC filed an action on April 4, alleging that Profitable Sunrise was an online pyramid scheme that may have gathered tens of millions of dollars.

    Promoters of Profitable Sunrise may have pushed the program without even knowing for whom they were working, the SEC said.

    On April 1, the PP Blog observed an online pitch for an entity that appeared to be using the name and address of a U.S. government agency while promising “to recover” funds lost through Profitable Sunrise. The fake agency claimed it could recover losses for a sum of less than $50 and encouraged Profitable Sunrise members to send money to purported accounts at the Liberty Reserve and Solid Trust Pay payment processors.

    Profitable Sunrise members also have been targeted by boat-sharks hoping to glean commissions for other HYIP “programs” and purported MLM “opportunities.”

    On March 31 — Easter Sunday — the PP Blog reported that a Facebook pitch aimed at Profitable Sunrise members sought to recruit them into a “program” known as TelexFree.

    A video for TelexFree claimed members could purchase an income by sending the “program” specific sums of money.

    The TelexFree pitch was similar to pitches for the infamous World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid schemes, which were exposed in 2005 and operated by James Bunchan and Seng Tan. Those scams resulted in federal prison sentences for both Bunchan and Tan and also sparked follow-up probes by the government because a federal prosecutor and witnesses were subjected to death threats by Bunchan.

    Like Profitable Sunrise, the WMDS and 1UOL scams traded on references to religion. And like TelexFree and Profitable Sunrise, WMDS and 1UOL prospects were told they could purchase an income.

    WMDS and 1UOL members — like Profitable Sunrise members — also may not have been sure of who they were working for. Here is a snippet from an appeals-court ruling upholding the 20-year-prison sentence of Tan (italics added):

    “A high-school graduate, [Christian] Rochon became president (in name only, though) for one reason, and one reason only: Bunchan wanted an ‘American face’ for his companies, and his neighbor Rochon (a Caucasian of Canadian decent) apparently fit the bill,” the footnote reads. “And after renting Rochon a suit jacket and taking him to a professional photographer, Bunchan had Rochon’s photo plastered all over the companies’ promotional pamphlets.”

    Tan told WMDS and 1UOL members that she’d been sent by the “Gods” to make them millionaires.

    Also see April 16 PP Blog story: Idaho Says Profitable Sunrise Pitchmen May Have Exposure ‘For Soliciting Other Investors’

     

  • BULLETIN: No Profitable Sunrise For Florida Ponzi Pitchman; Gary D. Martin Sentenced In North Carolina To 10 Years In Federal Prison For ‘Queen Shoals’ Money-Laundering Conspiracy And Ordered To Pay More Than $31 Million In Restitution

    breakingnews72In a development that could give pause to promoters of the purportedly “private” Profitable Sunrise scheme now on the radar of regulators in North America and Europe, a Florida man has been sentenced to 10 years in federal prison for his role in pitching a purported “opportunity” known as Queen Shoals.

    The announcement of the prison sentence of Gary D. Martin, 61, was made by U.S. Attorney Anne M. Tompkins of the Western District of North Carolina. She was joined by Roger A. Coe, acting special agent in charge of the FBI office in Charlotte, and North Carolina Secretary of State Elaine F. Marshall.

    Marshall’s office issued a cease-and-desist order late last month to Profitable Sunrise, a purportedly “private” program. Tompkins’ office, meanwhile, is involved in the probe of the alleged Zeek Rewards Ponzi scheme, which described itself as a “private” program, according to court files.  In August 2012, the SEC said Zeek was selling unregistered securities as investment contracts and had gathered at least $600 million.

    While Profitable Sunrise is alleged by regulators to be offering returns in excess of 300 percent a year, Queen Shoals promised a much lower annualized percentage of between 8 percent and 24 percent.

    The $32.5 million Queen Shoals Ponzi scheme was operated by Sidney Hanson. Martin formed an LLC with a similar name and pitched Queen Shoals from Florida. Federal prosecutors effectively accused him of passing along lies told by Hanson to fleece investors, including senior citizens.

    Chief U.S. District Judge Robert J. Conrad Jr., who ruled in August 2011 that promises of “guaranteed” annual earnings were used by Martin to lure customers into the fraud, described the effect as devastating

    “People in their 60’s, 70’s, 80’s and even 90’s lost everything because Hanson and Martin defrauded them,” prosecutors quoted Conrad as saying.

    And, prosecutors said, Conrad also noted that Martin “went into homes, got people to rely on him and told them things that weren’t true, and based on false representations, many lost their life savings . . . He is seriously culpable.”

    Conrad ordered Martin to pay more than $31.7 million in restitution and to serve two years’ probation upon completion of the prison sentence.

    The Martin case speaks to the issue of how a lack of due diligence on the part of promoters can cause problems if a scheme later turns out to be a scam, perhaps especially if promoters add their own lies to a pitch and recruit other pitchmen.

    From a statement by prosecutors (italics/bolding added):

    Court records show that although Hanson never directly told Martin that Queen Shoals was a Ponzi scheme, Martin induced victims to invest in the Queen Shoals Ponzi scheme through a series of false and fraudulent representations. Specifically, Martin falsely claimed that QSC had over 20 years’ experience in financial services and international finance and that he had a vast background in financial services, including the silver, gold and foreign currency trading markets. In fact, Martin had no such experience, held no professional licenses related to finance or investments and had never engaged in any silver, gold or foreign currency trading.

    According to court documents, Martin, through the QSC web site and other means, also made false claims about QSC’s financial expertise in “Self-Directed IRA Strategies and Fixed Rate Accounts.” Martin held QSC out as “leaders in Professional Private Placement Retirement Planning” and falsely claimed that QSC had a “proven method of diversification [that] spreads the risk nicely for a balanced portfolio,” when, in fact, QSC offered no such diversification and funneled victim funds solely into the Queen Shoals Ponzi scheme. Court records show that Martin routinely vouched for the success and reliability of Queen Shoals by claiming to have personally invested a significant amount of his own money into Queen Shoals when, in fact, Martin personally invested only $4,000.

    According to filed documents and today’s sentencing hearing, Martin engaged in money laundering transactions by utilizing the referral fees he received from Hanson to pay commissions to himself and the so-called QSC consultants. From in or about 2007 to in or about 2009, Martin received over $1.9 million in referral fees from Hanson and paid the consultants over $1.5 million during the relevant time period in return for inducing victims to invest in the Queen Shoals Ponzi scheme. These payments caused QSC consultants to induce additional victims to invest in the Queen Shoals Ponzi scheme, thereby perpetuating the scheme.

    In March 2011, Hanson, then 63, was sentenced to 22 years in federal prison.

  • North Carolina Secretary Of State: Profitable Sunrise ‘A Real Danger To The Investing Public’

    recommendedreading1EDITOR’S NOTE: Reproduced below is the full news release by the office of North Carolina Secretary of State Elaine F. Marshall on the cease-and-desist order issued last week to “Profitable Sunrise.”

    Even as the state has raised serious concerns about the “program,” Profitable Sunrise “defenders” have been seeking to minimize the issues. Some people even are hurling insults at North Carolina regulators while blanketing Ponzi-scheme forums such as TalkGold and MoneyMakerGroup with “I got paid” posts.

    That a program “pays” is not evidence that no fraud scheme is occurring. (Bernard Madoff “paid” — right up until the day he didn’t.)  Along those lines, collapsed “programs” such as Zeek Rewards, AdSurfDaily, Legisi, Pathway To Prosperity and Imperia Invest IBC — all of which advertised outsize returns  — all had a presence on the Ponzi boards.

    Some “defenders” of Profitable Sunrise appear to be scurrying to describe the alleged investment “program” as the recipient of “loans” from customers. The “loan” claims may raise altogether different issues — such as whether Profitable Sunrise is engaging in unlawful banking while commingling assets and operating as an unlawful investment pool. And despite “defenders’” claims that Profitable Sunrise is  not the issuer of “securities” as investment contracts, Profitable Sunrise has advertised five investment schemes on its own website, including a bizarrely named plan known as the “Long Haul” that purported to pay 2.7 percent a day. The Legisi HYIP scheme  sought to escape scrutiny in the United States by calling itself a “loan” program. Federal prosecutors described Legisi operator Gregory McKnight’s  wordplay as “semantic obfuscation.” The SEC earlier described U.S.-based Legisi pitchman Matthew John Gagnon as a threat to the investing public.

    Here, below, the statement by Marshall’s office . . .

    ** ______________________________________________ **

    Raleigh – North Carolina Secretary of State Securities officials have issued a Temporary Order to Cease and Desist to Roman Novak, Radoslav Novak and Inter Reef LTD d/b/a Profitable Sunrise to bar them from offering and selling or attempting to sell securities in the form of investment contracts to North Carolina’s investing public.

    Secretary of State investigators say the respondents promoted five different “investment plans” through a website that offered rates of return ranging from 1.6-percent per business day to 2.7-percent per business day. Investors were told their money would be used to fund short-term loans to businesses. Investors were also told their investments were “risk-free,” “with a certain rate of return and no chance of default,” and that “all funds deposited with us are insured against loss.”

    Secretary of State investigators have also discovered that victims were making wire transfers of money to financial institutions in Eastern European countries.

    However, the respondents were never registered with the North Carolina Secretary of State’s Securities Division to sell securities and the investment itself was not registered as a security in accordance with the North Carolina Securities Act.

    “We have issued this Cease and Desist Order because we believe this solicitation poses a real danger to the investing public,” Secretary of State Elaine F. Marshall said Friday. “Proper registration of securities and the individuals selling securities is fundamental to protecting the public from con artists and investment fraud. That is why it is so important to call our Securities Division before investing your hard-earned money to make sure that the investment you are considering is registered. This case also demonstrates the perils of web-based investment marketing.”

    Marshall urged anyone in North Carolina who has invested with Profitable Sunrise to contact the Secretary of State’s Securities Division at 1-800-688-4507.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Read earlier story.

    Read the consent order.

  • North Carolina Man Adds To List Of Alleged Schemers Who Bought Jet Skis With Fraud Proceeds; J.V. Huffman Jr. Also Faces Trial On Weapons Charge

    J.V. Huffman Jr. Source: Catawba Country Sheriff's Office

    It’s not as though alleged fraudster J.V. Huffman Jr. did not have the expensive cars and real estate often associated with Ponzi schemes or financial frauds.

    Huffman, jailed awaiting trial in North Carolina on Ponzi and weapons charges, had plenty of those, according to William Walt Pettit, the court-appointed receiver. He had an Aston Martin ($100,000+), three Mercedes (nearly $180,000 combined), and a Prevost motor home (insured against loss for $825,000) , for example. And Huffman had at least 14 parcels or properties, including a $765,000 property in North Carolina and multiple interests in time-shares at Walt Disney World in Orlando.

    But Huffman also had jet skis, which oddly seem to have become a signature purchase among operators of alleged Ponzi schemes or financial frauds. Disbarred Florida attorney Scott Rothstein, implicated in an alleged $1.2 billion Ponzi scheme, had jet skis.

    Affiliate Strategies Inc., a Kansas company under whose umbrella the shuttered Noobing autosurf fell, had a jet ski. ASI is among a number of companies sued by the Federal Trade Commission and the attorneys general of four states for operating a grant-writing scheme.

    Florida-based AdSurfDaily, whose president is implicated by the U.S. Secret Service in a $100 million Ponzi scheme, also had jet skis — two of them. Andy Bowdoin told his members that the jet skis (and a lakefront home) were for their benefit, but the statement was met with anger, the jet skis and Bowdoin’s other marine equipment dismissed derisively as “water toys.”

    Huffman’s next court appearance in North Carolina has been delayed until Jan. 25. He also faces a civil prosecution by the SEC, which said his Ponzi scheme began in 1991 and operated for 17 years before collapsing.

    The weapons charge was added when guards found a razor blade hidden in Huffman’s Bible in his jail cell. Prosecutors said the alleged financial scheme largely was targeted at Lutherans.

    SEC investigators said Huffman and his company — Biltmore Financial Group — gathered as much as $25 million from 500 investors. At first, Huffman told investors he operated a mutual fund.

    After the 9/11 terrorist attacks and the ensuing volatility in financial markets, Huffman changed his story, telling investors that he pooled funds to purchase and sell safe mortgages that had strong equity positions and were insured, the SEC said.

    “Contrary to his representations, Huffman and Biltmore did not invest the funds as represented,” the SEC said. “Instead, Huffman spent investor funds to subsidize his lavish lifestyle. Returns to investors were paid from money invested by new investors. The purported insurance protecting the investments did not exist and much of the principal has been dissipated or used to purchase real estate for Huffman and/or his wife, expensive automobiles or other luxuries.”

    In another claim reminiscent of the AdSurfDaily case, the SEC said Huffman dropped famous acronyms such as “FDIC” to get people to invest with him.

    North Carolina Secretary of State Elaine F. Marshall is spearheading the criminal prosecution.

    “People who are knowledgeable in the investment industry came to us saying that the
    promises being made sounded ‘too good to be true,’” she said, after agents arrested Huffman in November 2008. “In most cases, when an investment sounds too good to be true, it usually is.”