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BULLETIN: In New ‘Advertising’ Ponzi-Scheme Takedown, SEC Points To YouTube Video Allegedly Used By Scammers To Drive Sales — And Feds File Criminal Charges

Screen shot from YouTube video playing today on the SEC’s website. Among other things, the video shows two men admiring a Cadillac, two women admiring a swimming pool situated at a tony home with a lake view, two other men admiring an exotic vehicle, testimonials from apparent investors — and a smiling pitchman throughout. The video helped drive business to a Florida-based Ponzi scheme that gathered tens of millions of dollars, the SEC and federal prosecutors said.

Updated 2:45 P.M. EDT (April 16, 2014) The SEC has sued the operators of an alleged Ponzi scheme in Florida — and federal prosecutors have filed criminal charges.

In its announcement of the prosecution against Joseph Signore of West Palm Beach and Paul L. Schumack II of Pompano Beach, the SEC provided a link to a YouTube video used by the alleged scammers. Separately, the office of U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida said the scheme gathered about $70 million from investors nationwide.

Schumack, according to the SEC’s civil complaint, solicited investors by touting his military credentials and a passage from 1 Corinthians 10:31: “Whatever you do, do it all for the glory of God.”

Financial records, however, showed that Schumack’s business entity “transferred approximately $4 million from its investor account to an unrelated account from which Schumack and others executed more than 100 cash withdrawals totaling around $4.8 million, which was 91 percent of the account balance,” the SEC said.

Signore, Schumack’s colleague and sales agent, is a convicted thief, the SEC said.

Signore, 49, and Schumack, 56, were arrested for their alleged actions in the Florida Ponzi scheme. They are charged with “conspiracy to commit mail and wire fraud, five counts of mail fraud each, and six counts of wire fraud,” Ferrer’s office said.

The men were at the helm of companies known as JCS Enterprises Inc. (Signore) and T.B.T.I. Inc. (Schumack) that touted “virtual concierge machines” or VCMs, the SEC said. The agency long has warned that YouTube and other social-media sites have been used to push investment-fraud schemes.

Perhaps to further drive home its point, the SEC today posted the YouTube video to its own website. In one scene, a man is seen polishing a Cadillac. Another man says, “What an amazing car! How can you afford this?”

The first man replies, “My Virtual Concierge.”

A similar scene in the video played out at at home that featured a swimming pool.

“Your new pool is spectacular. How are you able to afford it?” a woman asks. Another woman replies, “My Virtual Concierge.”

A smiling narrator then intones, “Do you want to make more money? Then it’s time you learn about owning a Virtual Concierge.”

“Signore and Schumack touted VCMs as a revolutionary enterprise and fail-safe investment based on a stream of advertising revenue that would generate the guaranteed returns paid to investors,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “However, the advertising revenue was virtually non-existent and investors aren’t enjoying the riches touted on YouTube.”

From the SEC’s statement (italics added):

The SEC alleges that Joseph Signore of West Palm Beach, Paul L. Schumack II of Pompano Beach, and their respective companies JCS Enterprises Inc. and T.B.T.I. Inc. falsely promised hundreds of investors nationwide that their funds would be used to purchase ATM-like machines that businesses could use to advertise products and services via touch screen and printable tickets or coupons. Investors supposedly needed to do nothing to earn returns on their investment in a VCM, which would purportedly be placed at such locations as hotels, airports, and stadiums where they would derive revenue from the businesses paying to advertise through them. However, instead of advertising revenue serving as the driving force behind the returns paid to investors, the two men and their companies paid returns to earlier investors using money from newer investors. Signore and Schumack also diverted millions of dollars in investor funds for their personal use and other unrelated expenses.

The “majority” of investors stopped receiving payouts in January 2014, but “Signore and Schumack continued to solicit new investors while fabricating excuses to placate irate investors no longer receiving their returns,” the SEC said.

In the run-up to the collapse and feeling heat from investors, the SEC alleged, Signore’s JCS claimed it was “investigating” Schumack’s T.B.T.I.

“JCS issued a press release, which it posted on its website, indicating it was investigating the matter,” the SEC alleged. “In denying any wrongdoing, JCS placed the blame squarely on T.B.T.I., and claimed it had only an arms-length relationship with T.B.T.I. This was patently false.”

Records showed that “Signore personally used investor funds, including diverting approximately $2,000,000 to himself, his wife and son,” the SEC alleged. “Signore also diverted approximately $90,000 to a business jointly operated by himself and his wife, and approximately $44,000 to Schumack personally.”

A website known as ATMHospitality.com was among the sites used in the scheme, according to the SEC’s complaint. The site, which appears to be registered in the name of Schumack’s wife, now resolves to a page that displays a photo of a Bible, a cross and an infant.

In December ~~2013~~ 2003 [edited April 16, 2014] Signore, the “chairman and president” of JCS, filed for bankruptcy, the SEC said.

Signore also has a criminal history, the SEC said.

“On February 10, 2006, Signore was adjudicated guilty per a plea agreement to theft charges emanating from two separate indictments brought by the State of New Jersey,” the agency said. “Signore first pled guilty to charges he failed to share the proceeds from the sale of an automobile with a charity to which he was legally obligated. Signore had to pay $11,475 in restitution to the National Multiple Sclerosis Society, as well as nominal amounts to other organizations, and fees. Signore also pled guilty to unlawfully obtaining vehicles owned by Sears Roebuck & Company, selling the vehicles, and retaining the proceeds for himself and his co-defendant. He was sentenced to four years’ probation, restitution of $47,850, and other nominal fines and fees.”

In 2011, the SEC said, JCS was registered as a Delaware corporation.

“JCS and its investment offerings are not registered with the Commission in any capacity,” the SEC said.

T.B.T.I. was incorporated in Florida in 2001, the SEC said.

Like JCS, “T.B.T.I. and its investment offerings are not registered with the Commission in any capacity,” the agency said.

Investors in the VCM program could “could choose between an aggressive or passive option,” the SEC alleged.

“The aggressive option burdened investors with responsibility, but allowed for greater returns,” the SEC continued. “The passive option left the investor with no responsibility, required no effort, and guaranteed them $300 monthly returns per VCM. The Defendants continuously and clearly stressed the passive option as the best choice for the investors.”

Apr 8, 2014
BULLETIN: Florida Woman Sued Civilly, Charged Criminally In Alleged Ponzi- And Affinity-Fraud Scheme Targeted At Colombian-Americans

BULLETIN: The SEC has sued a Florida woman, amid allegations she swindled Colombian-Americans and other Colombians in a $4 million Ponzi scheme that duped investors into believing her purported “immigration bail bonds” program was backed by the FDIC and an “investment broker” later blamed for payout delays.

The woman — Jenny E. Coplan of Tamarac — also has been charged criminally by federal prosecutors in the Southern District of Florida, the SEC said.

Coplan’s age is listed as 54.

“Coplan deliberately misled investors into believing their investments were safe and secure when in reality she was lining her own pockets,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Her predatory scheme exploited the trust and friendship of members of her own community by using empty promises to convince them to trust her with their hard-earned savings.”

All in all, the SEC said, Coplan “raised approximately $4 million from more than 90 investors in Florida, California, Georgia, Texas, Canada, and Colombia.”

Records cited by the SEC show that Coplan controlled at least four Florida LLCs, all of which used the word “Immigration” in their names. All of the entities have been dissolved.

Elements of the case are similar to elements of the $119 million AdSurfDaily Ponzi scheme case brought by the U.S. Secret Service in 2008. Like Coplan, ASD operator Andy Bowdoin was associated with various dissolved business entities in Florida. And as is the case in the allegations against Coplan, some ASD promoters claimed ASD was backed by the FDIC, suggesting money sent to the enterprise by insured.

Some promoters of TelexFree — a current HYIP scheme operating in Brazil and the United States — also have claimed that money sent to their “program” was insured, purportedly making it impossible for participants to lose money. TelexFree may be an affinity-fraud scheme initially targeted at Brazilian-Americans and Brazilians in general. The scheme now has entered many countries.

From the SEC’s complaint against Coplan (italics added):

16. Coplan, who is herself a member of the Colombian-American community, developed relationships with other Colombian-Americans and Colombian immigrants through a business she operated providing immigration services. Coplan then offered individuals the opportunity to invest in Immigration Services and the bail bond program.

17. In about June 2009, Coplan told at least one investor that this was an investment opportunity she offered to her friends and family initially, and then later opened it to everyone. Coplan also told prospective investors she wanted to help them achieve financial stability. To cultivate potential investors, Coplan sometimes mingled with investors’ friends and family members at their social gatherings. A large number of at least one investor’s friends and family members invested.

“Coplan never placed investor funds with any investment broker, and their money was never FDIC insured,” the SEC alleged. “Instead, she paid supposed profits to earlier investors using funds from newer investors in classic Ponzi fashion, and she stole approximately $878,000 of investor money for her own personal use.”

From a statement by the SEC (italics added):

The SEC alleges that Coplan created fictitious investor statements that she disseminated to hide her misuse of the money and lead investors to believe their investments were growing. Furthermore, Coplan e-mailed one investor two purported FDIC statements reflecting insured balances of $107,000 and $250,000, lulling the investor to think the investment was particularly safe. When her scheme began to unravel in 2011, Coplan blamed the purported investment broker for the delay in interest payments to investors, telling them the broker held the investors’ funds to cover deficiencies because Coplan had failed to meet certain monthly investment quotas. Even though Immigration General Services had virtually no funds in its bank accounts and was unable to honor investors’ increasing redemption requests, Coplan tried in late 2011 to create a false appearance that the company was back to business as usual. She issued non-sufficient fund checks to investors purporting to be their monthly profits. Through her continued misstatements, Coplan was able to raise another $578,000 from new investors before the scheme collapsed entirely.

Coplan’s investors were told they’d fetch returns of between “60 to 108 percent annually,” the SEC charged.

Sep 30, 2013
BULLETIN: Another Major Scam Rocks Florida: Claudio Eleazar Osorio Arrested By Feds, Sued By SEC; Miami Entrepreneur And Friend To Politicians Accused Of Stealing Millions From Investors

BULLETIN: Florida has served up another doozy — one that is an embarrassment to major figures in both major U.S. political parties.

Claudio Eleazar Osorio, also known as Claudio Osorio Rodriguez, 54, was arrested by federal agents today, amid charges he scammed the U.S. government out of $10 million in the aftermath of the devastating earthquake in Haiti in January 2010.

If promising to provide post-earthquake housing in Haiti and not delivering were not enough, Osorio also concocted a ruse by which investors came to believe their money was guaranteed by “a Middle Eastern sovereign wealth fund,” according to court filings today.

“This claim was patently false,” the SEC charged. “The Middle Eastern sovereign wealth fund investment was a ruse to solicit additional funds from investors.”

The Aventura resident was charged with conspiracy to commit wire fraud, wire fraud, major fraud against the United States, conspiracy to commit money laundering and making false statements to a U.S. government agency.

Also charged criminally was accountant Craig Stanley Toll, 64, of Pembroke Pines.

In a parallel civil action, Osorio and Toll were sued by the SEC, which alleged a massive fraud at Osorio’s InnoVida Holdings LLC.

Osorio, the SEC said, raised at least $16.8 million from investors and “stole nearly half” of it to “pay the mortgage on his multi-million dollar mansion and other lavish highlife expenses.”

“From his lap of luxury, Osorio concocted a compelling story about InnoVida by recruiting an impressive board of directors and boasting a bogus financial condition to lure investors into funding his scheme of lies,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

Former Florida Gov. Jeb Bush, a Republican and the son of former President George H.W. Bush and the brother of former President George W. Bush, once sat on InnoVida’s board. So did Ret. Gen. Wesley Clark, a onetime Democratic candidate for President. Osorio also is listed in a Federal Election Commission database as an individual contributor to the Presidential campaigns of Barack Obama and Hillary Clinton, and the Congressional campaign of Debbie Wasserman Schultz, among others.

From a statement by the office of U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida (italics added):

The indictment further alleges that between January 2010 and March 2011, Osorio, Toll and others applied for and obtained a $10,000,000 loan from the Overseas Private Investment Corporation (“OPIC”), a U.S. government agency that promotes U.S. government investments abroad to foster the development and growth of free markets. The purported purpose of the loan was to build a manufacturing facility and 500 homes in Haiti (“the Haiti project”) for displaced families in the aftermath of the January 2010 earthquake. The indictment alleges that Osorio, Toll and others made materially false representations and omissions concerning, among other things, the profitability of Innovida, the purported use of the loan proceeds, an equity contribution to be made by Innovida, and contracts that Innovida purportedly had obtained with third-party vendors. Osorio used the OPIC loan proceeds to repay investors and for his and his co-conspirators’ personal benefit and to further the fraud scheme.

The SEC, meanwhile, described Osorio as a “former Ernst & Young Entrepreneur of the Year award winner.”

From a statement by the SEC (italics added):

To induce funds from investors, Osorio and Toll allegedly produced false pro forma financial statements. A pro forma financial statement for March 31, 2009, stated that InnoVida had more than $35 million in cash and cash equivalents and more than $100 million of equity. A pro forma financial statement for Dec. 31, 2009, listed more than $39 million in cash and cash equivalents and $122 million of equity. In reality, the company’s bank accounts held less than $185,000 on March 31, 2009, and less than $2 million on Dec. 31, 2009. Toll failed to review all of InnoVida’s bank account statements when he drafted financial statements. Instead, he accepted Osorio’s misrepresentations that InnoVida had these assets in an account to which Toll did not have access.

The SEC alleges that Osorio offered bogus share prices to prospective investors based on false valuations. He told one investor that InnoVida was valued at $250 million, and then a week later told a different investor that the company was worth $50 million. The latter investor purchased $100,000 of Osorio’s stake in the company for five cents per share.

Read a March 2011 story in the Sun Sentinel.

Read the SEC complaint.

Read the indictment.

Dec 7, 2012
BULLETIN: Sunshine State Serves Up Another Bizarre One: Florida Securities Swindler Changed His Name — And Began Scamming Anew, SEC Says

BULLETIN: (UPDATED 1:31 P.M. JULY 25, 2013, TO CORRECT NAME.) The SEC has gone to federal court in the Southern District of Florida, alleging that a Boca Raton swindler formerly known as Joseph Yurkin changed his name to Joseph Hilton and began scamming anew.

“By changing his name, Hilton thought he could evade further SEC scrutiny and keep the investing public from finding the truth in his background,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “The SEC is committed to pursuing repeat offenders and ensuring the open and transparent sale of securities to investors.”

The new scam involved “investments in oil drilling projects,” the SEC said.

The bizarre caper began to unfold last year, after the SEC obtained a final judgment in a 2007 case when Hilton was known as Yurkin and was associated with a company known as Homeland Communications Corp., the agency said.

After that judgment, Yurkin changed his name and rolled out at at two more frauds, the SEC charged.

Form the SEC’s complaint against the man now known as Hilton (italics added):

From no later than March 2011 until January 2012, Hilton sold securities in the fomm of limited partnership units in at least three oil drilling projects in Tennessee sponsored by United States Energy Corporation (“U.S. Energy”). To lure investors, Hilton misrepresented his identity, the risks associated with the investment, the anticipated dividends due to investors, and the amount of oil US Energy’s wells produced.

Not only did Hilton make false representations to potential investors, he also managed a boiler room and sales agents to assist him in soliciting contributions. Hilton caused companies he controls, Pacific Northwestern Energy LLC (“Pacific”) and New Horizon Publishing Inc., to pay these sales agents commissions in exchange for finding investors and selling US Energy securities.

A federal judge has issued an emergency asset freeze and appointed a receiver, the SEC said.

Read the complaint.

Oct 3, 2012
URGENT >> BULLETIN >> MOVING: Florida Attorney Charged Civilly, Criminally In Alleged ‘Commodities Online’ Caper; 2 Principals (With Felony Convictions) Also Charged

URGENT >> BULLETIN >> MOVING: Florida attorney Michael R. Casey has been charged both civilly and criminally in the alleged Commodities Online fraud scheme, the SEC said.

Also charged criminally and civilly were former Commodities Online executives James C. Howard III and Louis N. Gallo III.

“This trio teamed up to employ all the hallmarks of an investment scheme,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Howard met with prospective investors at a luxury hotel to emanate a false sense of wealth and security, Gallo oversaw an in-house boiler room that drummed up investor interest, and Casey was the company’s purported legal counsel who acted anything but lawyerly.”

Both Howard and Gallo were convicted felons prior to emerging as executives at Commodities Online, the SEC said. The fraud caper allegedly gathered $27.5 million.

From the SEC complaint (italics added):

In reality, COL performed only a limited percentage of the commodities transactions it promised investors. Instead, the Company, Howard, and Gallo dissipated millions of dollars of investor funds to largely sham companies, including Relief Defendants Sutton Capital, LLC, J & W Trading, LLC, American Financial Solutions, LLC, and Minjo Corporation. Through these companies, Howard and Gallo misappropriated investor funds for their own use. So-called profits they distributed to investors they took largely from other investors’ funds.

Casey personally made misrepresentations to investors about the profitability, structure, and existence of the purported commodities contracts. He also knew about Howard’s misappropriation of investor funds, but failed to disclose this fact when he communicated with investors.

Howard, 53, resides in of Lauderhill, Fla.

“In 1997, Howard was convicted of federal narcotics and firearms felonies and sentenced to 57 months in prison,” the SEC said.

Gallo, 43, resides in Parkland, Fla.

“In 2005, Gallo pleaded guilty in the United States District Court for the District of New Jersey to bank fraud and narcotics charges and was ultimately sentenced,” the SEC said. “In 2007, in the same court, he pleaded guilty to transmitting a threat to injure and was later sentenced to one day in prison and a three-year term of supervised release.”

Casey, 65, resides in Oakland Park, Fla.

“He is an attorney licensed to practice in Florida,” the SEC said. “In early 2010, Casey acted as COL’s outside legal counsel. In May 2010, he replaced Howard as president of COL.”

From the SEC complaint:

In May 2010, COL issued a press release announcing Howard was stepping down from his COL management position but would “remain in a consulting relationship with [COL] and will continue to provide the company with the benefit of his many years of experience in the commodities business.” While the press release announced that Casey would replace Howard as president, it did not disclose Howard’s arrest [in a separate alleged fraud scheme]. Gallo and Casey were aware of the press release, which at least one of COL’s sales agents circulated.

The SEC initially moved against Commodities Online last year. Today’s complaint names individual defendants and companies that allegedly received ill-gotten gains.

James Clark Howard III

Howard was arrested by the Boca Raton Police Department in a separate scheme targeting Haitian Americans on March 5, 2010. About six months later — in September 2010 — he was sued by a Nevada company that listed former AdSurfDaily member and Surf’s Up moderator Terralynn Hoy as a director.

The Nevada company — SSH2 Acquisitions Inc. — alleged that Howard was part of a Ponzi scheme that also involved Patricia Saa, Sutton Capital LLC and Rapallo Investment Group LLC.

Howard and the defendants, according to the lawsuit, told SSH2 it was trading in commodities and “would produce profits of 40% per month or more, while not risking any of the invested funds.”

In its lawsuit, SSH2 alleged that its dealings with Howard and the others began in “early 2009? and continued through March 2010.

Read the SEC complaint against Casey, Howard and Gallo.

Sep 5, 2012
SEC Takes Down Another Ponzi, Agency Says; Ricardo Bonilla Rojas Faces Civil And Criminal Charges After Allegedly Aiming Puerto Rico-Based Scheme At Evangelical Christians And Factory Workers

The SEC has gone to federal court in Puerto Rico, alleging that Ricardo Bonilla Rojas was operating a $7 million Ponzi scheme targeted at evangelical Christians and factory workers.

Victims in the case hail from Puerto Rico, Florida, New York, and North Carolina, the agency said.

Rojas, 53, is a resident of Arecibo, Puerto Rico. He presided over a company known as Shadai Yire and duped investors by making them believe he was purchasing commodities, the SEC said.

But “Rojas never actually invested any money in commodities and instead used new contributions to repay earlier investors in classic Ponzi scheme fashion,” the SEC charged. “He stole $700,000 for himself.”

About 200 investors were affected by the scheme, which began “at least” in August 2005 and continued until February 2009, the SEC said.

Rojas also has been charged in a parallel criminal action by the U.S. Attorney’s Office for the District of Puerto Rico, the SEC said.

“Rojas targeted novice investors who were often evangelical Christians, and he touted a long history of successful trading in commodities,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “In reality, he was fleecing the flock.”

Elements of the SEC’s Rojas case are reminiscent of the alleged Commodities Online caper in Florida. The SEC sued to halt that scheme last year.

“Rojas hired some sales agents to help him solicit investors, and paid commissions based on a percentage of the investor funds they raised,” the SEC said. “Rojas and his sales agents pitched the investment opportunity to individuals as a risk-free way to earn high returns in a short period of time. Rojas also created phony account statements that were sent to investors to hide his misuse of investor money and lead them to believe their investments were growing.”

Aug 21, 2012
UNBELIEVABLE: Now, An ‘Astrology-Based Ponzi Scheme,’ SEC Says; ‘Trading Strategies Were Based On Lunar Cycles And . . . Gravitational Pull Between Earth And The Moon’

“Persaud preyed on people who trusted him by promising high and steady returns while hiding his unconventional trading strategy. When Persaud blatantly lied to investors and hid their losses through a Ponzi scheme, he should have known that an SEC enforcement action was in the stars.” — Eric I. Bustillo, director of the SEC’s Miami Regional Office, June 21, 2012

BULLETIN: The SEC has gone to federal court in Orlando, Fla., alleging that Gurudeo “Buddy” Persaud was operating a Ponzi scheme and making trading decisions “premised on the idea that gravitational forces affect mass human behavior, and in turn, the stock market.

“For example,” the SEC charged, “Persaud believed that when the moon exerts greater gravitational pull on the Earth, people feel dejected and are more inclined to sell securities.”

One of the victims was a widow “who worked two jobs to make ends meet,” the SEC said.

The woman “invested $175,000 from life insurance proceeds from her husband’s sudden death,” the SEC said.

Persaud, 47, of Orlando, has been charged with fraud after allegedly telling investors their money would be safe and would generate annual returns of between 6 percent and 18 percent. He was associated with an entity known as White Elephant Trading Company LLC, the SEC said.

The scheme affected at least 14 investors and gathered more than $1 million, operating between July 2007 and January 2010, the SEC charged.

“[I]n making trading decisions, Persaud chiefly relied on an Internet service that provided directional market forecasts based on lunar cycles and gravitational pull,” the SEC alleged.

“Persaud touted his experience in the financial services industry as a certified financial planner and gave investors his personal guarantee their principal contributions were secure,” the SEC charged. “He made numerous misrepresentations and omissions to investors, foremost among them failing to disclose his trading strategies were based on lunar cycles and the gravitational pull between Earth and the moon.”

Moreover, the SEC said, Persaud “pooled the [investor] contributions and traded or misappropriated them as he saw fit. Thus, even if Persaud wanted to provide account balances, he could not have. Instead, he invented them.”

In November 2010, the SEC said, Persaud emailed a purported account letter to an investor who’d plowed $75,000 into the scheme. The letter falsely showed the investor had an account balance of $108,361.

In reality, the SEC charged, “White Elephant’s bank and brokerage account statements showed less than $20,000 remaining in all the accounts combined, and trading losses of approximately $399,000.”

By Jan. 5, 2011, the SEC charged, Persaud told another investor that her account balance was $175,313.23 at the end of December 2010.

By that time, however, “White Elephant’s bank and brokerage account statements showed approximately $5,300 remaining in all the accounts combined.”

“By February 2011, there were no funds remaining in the White Elephant bank accounts because Persaud misappropriated investor contributions, fraudulently paid investor contributions as purported investment returns to conceal investor losses, and lost the remainder of investors’ money in trading based on his lunar cycle trading strategy,” the SEC charged.

Jun 21, 2012
BULLETIN: SEC Says St. Louis Man Went On ‘Spending Spree’ With Investors’ Money, Fleecing Them Of More Than $9 Million; Burton Douglas Morriss Charged With Fraud

BULLETIN: The SEC has gone to federal court in Missouri and obtained an emergency asset freeze in a case that alleges a St. Louis man who operated private investment funds misappropriated more than $9 million from investors.

Charged in the civil case is Burton Douglas Morriss, 49, and four companies: MIC VII LLC, Acartha Technology Partners LP, Acartha Group LLC and Gryphon Investments III LLC.

Some of the money was steered to Morriss Holdings LLC, which is named a relief defendant for receiving ill-gotten gains, the SEC said.

“It is fraud, pure and simple,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

Investors’ money was used by Morriss to make alimony payments, pay interest on personal loans and take “costly vacations, including an African safari,” the SEC charged.

“Morriss attempted to hide his illegal transfers of investor funds by calling them ‘loans’ when in reality he had no intention of paying back the money and instead went on a spending spree,” Bustillo said.

Read the SEC’s emergency complaint.

Jan 18, 2012
BULLETIN: SEC Says Stiefel Laboratories Inc. Lowballed Employees And Other Shareholders, Ripping Them Off In Alleged $110 Million Stock-Buyback Scheme

BULLETIN: The SEC has gone to federal court in the Southern District of Florida, alleging that Stiefel Laboratories Inc. was buying back stock from its employees and shareholders at “severely undervalued prices” and caused losses to its own people over a period of years to the tune of $110 million.

The firm and former CEO Charles W. Stiefel have been charged civilly in the alleged fraud, the SEC said.

“Stiefel Labs and Charles W. Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan.”

Once a family owned dermatology-products business, Stiefel Labs was acquired by GlaxoSmithKline in 2009. Severe lowballing by Stiefel Labs aimed at acquiring more than 1,900 employee and shareholders’ shares of the firm dated back to 2006, the SEC said.

The fraud culminated with the sale of the company after it had engaged with multiple suitors and private -equity firms and knew the money it offered employees for their shares paled in comparison to the sums offered by companies privately, according to the SEC.

When the firm changed hands, the value amounted to more than $68,000 a share, the SEC said.

Among other claims, the SEC alleged that, between Dec. 3, 2008 and April 1, 2009, “Stiefel Labs purchased more than 800 shares of its stock from shareholders at $16,469 a share even though Charles Stiefel knew that equity valuation was low and misleading, in part because he was negotiating the sale of the company.”

In January 2009, according to the SEC, GlaxoSmithKline expressed interest in a Stiefel Labs acquisition and signed a confidentiality agreement.

“As late as March 16, 2009, Charles Stiefel ordered that the ongoing negotiations not be disclosed to employees, and he misled shareholders to believe the company would remain family-owned,” the SEC charged. “On April 20, 2009, Stiefel Labs announced that GlaxoSmithKline would acquire the company for a value that amounted to more than $68,000 per share. This price was more than 300 percent higher than the per share price that Stiefel Labs had been paying to buy back shares from its shareholders.”

Read SEC news release. Read the complaint.

Dec 12, 2011
URGENT >> BULLETIN >> MOVING: Paranoia-Maker: FBI Undercover Sting In Florida Leads To Criminal, Civil Charges Against 5 In Alleged Penny-Stock Capers; Agents Established ‘Phony’ Consulting Company

URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.

The sting featured a phony “consulting” company created by the FBI, authorities said. News about the make-believe consultancy followed on the heels of news last month that U.S. investigators had created a “payment processor” as part of a different probe into illegal gambling.

Charged criminally in today’s undercover cases were Brian Gibson, 63, of Coconut Creek, Fla; Donald W. Klein, 40, of Frisco, Texas; Douglas Newton, 66, of Rancho Mirage, Calif; Charles Fuentes, 66, of Dana Point, Calif; and Thomas Schroepfer, 54, of Las Vegas. Schroepfer also is known as Thomas Schroepfer Baetsen.

The men and several companies also were charged civilly by the SEC in what the agency described as a coordinated law-enforcement assault against microcap hucksters.

“Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement.

The Miami region’s top federal prosecutor, meanwhile, said the cases evolved from the Southern District of Florida’s ongoing Securities and Investment Fraud Initiative, a task force aimed at criminals and fraudsters operating in the region.

“The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” said Wifredo A. Ferrer.

Undercover FBI agents posed as scammers and set up a phony “consulting” business as part of the probe, the SEC said.

“The defendants charged today were intent on making profits for themselves while defrauding others,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

Newton, the SEC said, was chief executive officer of Real American Brands Inc., now known as Real American Capital Corp. He was accused of paying kickbacks to a “purported employee pension fund trustee” to buy more than 6.2 million shares of restricted Real American Brands stock.

He further was accused of trying to conceal the kickbacks through a “consulting” firm.

However, the trustee Newton believed to be corrupt actually was “a fictitious person,” the SEC said. Meanwhile, “the trustee’s business associate who helped arrange the deal was an undercover FBI agent,” and the consulting company was a “phony” one created by the FBI, the SEC added.

Klein was the president and chief executive officer of KCM Holdings Corp. He is accused of engaging in two restricted stock transactions and one market transaction involving KCM Holdings’ stock.

“Klein and the company paid kickbacks to an undercover FBI agent who portrayed himself as a business associate of a corrupt trustee of an employee pension fund, in exchange for the fund’s purchase of 2.5 million shares of restricted KCM Holdings stock,” the SEC said. “Klein attempted to conceal the kickbacks through a consulting agreement with a phony company that would receive the kickbacks. In another scheme, Klein bribed a purported corrupt stockbroker (actually an undercover FBI agent) to purchase KCM Holdings stock in the open market for brokerage clients with discretionary accounts.”

Thomas Schroepfer was president and president of of SmokeFree Innotec Inc. He, too, got caught in the sting, the SEC said.

For his part, Fuentes was a promoter of SmokeFree’s stock, and “paid kickbacks to an undercover FBI agent, posing as the business associate of a corrupt employee pension fund trustee, in exchange for the fund’s purchase of 400,000 shares of restricted SmokeFree stock,” the SEC said.

Schroepfer, the SEC said, “attempted to conceal the kickbacks through a consulting agreement with a phony company created to receive the kickbacks.

“In addition, SmokeFree issued shares of its stock to a cooperating witness for acting as a middleman in the scheme,” the SEC said.

Gibson “created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International Inc., as part of a planned pump-and-dump scheme,” the SEC charged.

He is accused of touting Xtreme Motorsports “by blasting a series of e-mails to potential investors” and posting “false testimonials on the site from purported investors raving about their success in following the website’s stock picks,” the SEC said.

In a separate case in Maryland last month, prosecutors announced that federal agents had created a “payment processor” to infiltrate illegal gambling operations.

The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:

“Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.”

In response to a white-collar fraud epidemic involving huge sums of money and fraudsters and criminals operating both domestically and internationally, U.S. agencies, including the Secret Service, ICE and others, have been employing techniques once largely reserved for organized-crime probes.

Jun 30, 2011
INCREDIBLE: Florida — Again: SEC Files Complaint Against Purported ‘Gold’ Mining Operation In Miami Known As Quri Resources And Its CEO, Jaime Santiago Gomez
BULLETIN: The SEC has gone to federal court in Florida to accuse Quri Resources Inc. and its Chief Executive Officer Jaime Santiago Gomez of operating a pump-and-dump scheme to drive up the price of Quri’s unregistered stock.

It was the second major action in Florida today against companies and individuals who allegedly were running stock-fraud schemes. Named defendants in a separate SEC case were Atlantis Technology Group and CEO Christopher Dubeau of Weston, Fla.

“Investors were duped into believing that Quri Resources was a successful mining company and that Atlantis Technology Group was selling cutting-edge technology services,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

“Both companies misled investors with exaggerated claims while their respective senior executives illegally dumped shares into the market,” Bustillo said. “We will continue to crack down on companies that promote misleading information.”

The SEC said that Quri purported to be a “mining company headquartered in Miami, Florida, and operating in Ecuador.”

As was the case with Atlantis and Dubeau, Quri and Gomez were accused of issuing “a series of false press releases and other misleading public statements” as part of the scheme, the SEC charged.

From February to July 2009, Quri claimed in several press releases that, among other things:
- It was ready to begin drilling on a mining project in Ecuador with a probable gold reserve worth over $1 billion.
- It had signed letters of intent to acquire two valuable mining projects in Arizona.
- It had acquired a second mining project in Ecuador and anticipated producing gold within three months.
- It had signed a letter of intent to acquire a third valuable mining project in Ecuador.
“[A]t the same time, Quri’s website and other public statements described Quri as having ongoing operations, employees worldwide, and an impressive management team,” the SEC charged. “The complaint alleges that these claims were grossly misleading because, among other things:
- The exact value of the gold reserves in Ecuador could not be known without further detailed exploration.
- Quri never acquired any mining projects in Arizona, and it acquired, at most, only one project in Ecuador.
- Quri never developed any of its purported mining projects and was never in a financial position to do so.
- Quri had no money, was never able to raise any funds, had no reasonable expectation of any funding, and was heavily indebted.
The SEC said the scheme also involved the misuse of a website and a social-networking site.

“Gomez also authored Quri’s internet website and approved its profile on the social network website LinkedIn,” the agency alleged. “These falsely described Quri as having ongoing operations, 28 employees worldwide, a geologist with a PhD on staff, and an impressive management team led by Gomez, a college graduate. None of these claims were true.”

Gomez simply fleeced investors, the SEC charged.

“[T]aking advantage of Quri’s artificially inflated stock price, Gomez, through an entity he controlled, dumped over half a million shares of Quri stock on the unsuspecting public, selling Quri stock in unregistered transactions, earning at least $17,500 from the sale of the stock,” the SEC charged.

See earlier story about Atlantis.

Read the SEC complaint against Quri.
Sep 30, 2010