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Tag: Forex Ponzi schemes

  • BULLETIN: Idaho Man Allegedly Ran Forex Ponzi Scheme And Duped Investors With Fake Asset Freeze And Forged Documents Purporting To Be From CFTC Official And Judge; Brad Lee Demuzio Sued Civilly, Charged Criminally

    BULLETIN: (UPDATED 4:14 P.M. EDT U.S.A. APRIL 14) The CFTC has gone to federal court in Idaho, alleging that Brad Lee Demuzio of Chubbuck was running a Forex Ponzi scheme that tanked.

    Unable to make payouts, Demuzio “fabricated a letter purporting to be from the CFTC and bearing the fraudulently copied signature of a CFTC officer, which falsely represented that the company’s funds had been frozen in connection with a purported CFTC investigation,” the CFTC charged.

    But Demuzio didn’t stop there, the agency charged.

    “The complaint also alleges that Demuzio subsequently fabricated a second letter fraudulently providing an update as to the status of the purported investigation as well as a third document purporting to be a dismissal of the investigation and bearing the fraudulently copied signature of an Administrative Law Judge,” the agency charged.

    Meanwhile, the CFTC alleged, the official seal of the Commission was used in the bid to cover up the fraud and Demuzio “attempted to pass these documents off to investors as official Commission documents.”

    Chubbuck now has been indicted on five counts of wire fraud, the CFTC said, noting that the FBI was involved in the probe.

    “On or about January 13, 2012, Demuzio confessed to an agent of the Federal Bureau of Investigation that he had knowingly made false statements to investors and fabricated Commission documents,” the CFTC said.

    The scheme, which operated through an entity known as Demuzio Capital Management (DCM) and netted $1.8 million, began to unravel during the summer of 2011, when certain investors told Demuzio they wanted their capital outlays and purported profits back, the CFTC said.

    Checks were issued to investors in August 2011, but the checks bounced, the CFTC said.

    By Aug. 5, Demuzio said he could not pay because “the Commission had frozen DCM’s funds in the course of an investigation,” the agency said.

    As part of the scheme, Demuzio manufactured a document addressed to himself, with a CFTC official as the purported sender.

    This document falsely stated in part that “the CFTC has opened an investigation into your activities. This investigation requires the temporary freezing of your current assets. The investigation along with the freezing of your assets is intended to be temporary.”

    By October, the CFTC alleged, Demuzio had manufactured another letter to himself that purportedly had originated at the agency, thanked him for his cooperation and suggested that a decision would be forthcoming.

    Among other things, the bogus October letter asserted that “This letter is being sent to express our appreciation to you for your cooperation during the investigation . . . We are also writing to confirm to you that a letter of resolution will be sent to you no later than Friday October 14, 2011.”

    By Oct. 11, a third bogus document surfaced. This one was styled “Order of Dismissal” and purported “to have been signed by a Commission Administrative Law Judge,” the agency said.

    This document, the CFTC alleged, included this false statement:

    “At the parties’ request, the complaint is DISMISSED with prejudice and this proceeding is TERMINATED in its entirety. IT IS SO ORDERED.”

    Demuzio confessed to the FBI in a signed statement, the CFTC said.

    “The first and most important mistake that I have made has been to lie to each of these individuals, all of whom are close friends and family,” the confession read in part, according to the CFTC. “I have lied to them about the money we made and how we made it.”

    And Demuzio further confessed in his statement that he had “engaged in a series of lies that culminated in my making letter [sic] from the cftc showing that I could not return their money because of an investigation,” the CFTC said.

  • 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.

  • UPDATE: Jeffery Groendyke, Figure In CFTC Ponzi Case Filed Civilly In May, Pleads Guilty To Criminal Charge Of Wire Fraud After FBI Probe

    UPDATE: Jeffery (also cited as “Jeffrey”) L. Groendyke, the Michigan man ordered by a federal judge earlier this month to pay nearly $1.4 million in restitution and penalties in a Forex Ponzi case brought civilly by the CFTC, now has pleaded guilty to a criminal charge of wire fraud, federal prosecutors in the Western District of Michigan said yesterday.

    Groendyke, 41, admitted he fraudulently obtained about $1 million from investors in his JG Forex Fund and misappropriated money, the office of U.S. Attorney Donald A. Davis said.

    The guilty plea followed an investigation by the FBI, prosecutors said.

    Groendyke was charged civilly in May.  In November, court filings by the CFTC alleged that funds from Groendyke’s fraud scheme made their way to Nicholas Trimble, who was running a fraud scheme through Capstone FX Quantitative Analysis Inc. that involved a purported “automated forex robot trading system” known as the “Gladiator system.”

    As part of Trimble’s fraud, Trimble fabricated a Utah office and told an investor that miracle programmers worked at the Utah office. When the investor wanted to see the office, Trimble arranged a “webinar” instead, the CFTC charged.

    Trimble, 29, of Denver, was spending investors’ money at Las Vegas casinos, making large cash withdrawals and giving money to his wife and a lawyer, the CFTC charged.

    A federal judge in Colorado froze Trimble’s assets.

    Claims about miraculous trading platforms and software frequently accompany Forex fraud schemes, which often are targeted at people of faith and sometimes include webinars.

    Groendyke is free on bond. Sentencing is anticipated in March.

     

  • UPDATE: Jeffery L. Groendyke, Michigan Man Accused In Forex Ponzi Scheme, Ordered To Pay Nearly $1.4 Million In Restitution And Penalties

    Jeffery L. Groendyke, the Michigan man accused by the CFTC in May of targeting people of faith and others in a Forex Ponzi scheme, has been ordered to pay $963,141 in restitution and a $420,000 civil penalty.

    U.S. District Judge Robert J. Jonker issued the order against Groendyke by consent, finding that he fraudulently solicited $1,009,844 from 42 individuals, lost some of it trading and making Ponzi payments and sent $501,510 to an entity known as Capstone FX.

    The CFTC last month charged Captone and its operator Nicholas Trimble with fraud, amid allegations Trimble spent investors’ money in Las Vegas casinos, fabricated an office in Utah (and a miraculous trading platform) — and told other lies to separate people from their money.

    Groendyke’s scheme caused an apparent Groendyke supporter to visit the PP Blog in the spring and claim “I can’t wait to laugh at the CFTC.”

    The same poster demanded, “Do some homework bitch.”

    For the breakdown on how investor funds were dissipated in the Groendyke scheme and how investors were hoodwinked by false statements, read the judicial order against Groendyke.

     

  • UPDATE: International Forex Ponzi Swindler David A. Smith Sentenced To 30 Years In U.S. Jail

    David A. Smith. Source: Orange County Jail

    David A. Smith, the Ponzi schemer who swindled investors in the Caribbean and Florida in a caper that gathered more than $200 million, has been sentenced to 30 years in a U.S. prison.

    Smith, a Jamaican citizen who was brought to Florida last year to face the U.S. charges, first must serve a sentence of six and one-half years in the Turks and Caicos Islands. His time there will count toward his U.S. sentence, and U.S. federal prosecutors said he’d finish the balance of his U.S. term in the United States.

    His firm was known as OLINT, which stands for Overseas Locket International Corp.

  • BULLETIN: Church Pastor Accused Of Running Forex Ponzi And Fraud Scheme Ordered To Pay More Than $2 Million; Jeremiah C. Yancy Promised Monthly Returns Of 40 Percent And Told Customers His Firm Managed Funds For ‘Orphanages,’ Judge Says

    BULLETIN: A federal judge in Texas has ordered the former pastor of an Idaho church and his firm to pay more than $2 million in restitution and penalties in a Forex Ponzi scheme that affected 64 customers, including church members allegedly targeted in the preacher’s scam.

    The order, which was entered by consent, applies to Jeremiah C. Yancy, who now resides in Atoka, Okla. Yancy also is known as Jeremiah C. Glaub. He ran a Texas-based firm known as Longbranch Group International LLC. The order also applies to the firm.

    U.S. District Judge Vanessa Gilmore of the Southern District of Texas issued the order.

    Yancy and Longbranch told Forex customers they managed money for churches and orphanages. Customers were told they could expect monthly returns of between 20 percent and 40 percent, and were shown bogus trading results and account statements, the CFTC said.

    The agency charged Yancy and the firm in August 2010. Yancy and Longbranch neither admitted nor denied the allegations.

  • 9News.com (KUSA/Denver) Reports That Marlyn Hinders, Fugitive In $80 Million Genesis Fund Ponzi Scheme, Has Been Arrested

    Marlyn D. “Milt” Hinders, a Colorado fugitive charged six years ago in the $80 million Genesis Fund Forex Ponzi scheme, has been arrested in Houston, 9News.com (KUSA) is reporting.

    Hinders is 72. He was indicted in May 2005. A federal grand jury that had been impaneled in the Central District of California in 2003 accused him of being “one of the leading promoters and a manager of the Genesis Fund.”

    The Genesis Fund scheme traces its roots at least to 1994 and presaged highly complex international Forex, HYIP and autosurf fraud investigations to come. The Genesis Fund fraud caper started in the United States, but then whisked itself offshore to Costa Rica and other countries when U.S. law enforcement began to close in, first by issuing subpoenas and later by convening a grand jury when evidence disappeared.

    One of the figures in the case was a “co-conspirator lawyer from Costa Rica,” according to the indictment. Another was California attorney Victor Preston, who pleaded guilty in 2009 to defrauding the United States.

    INTERPOL and authorities in Costa Rica assisted in rounding up at least three Genesis Fund defendants who’d ducked out of the United States. Five others were arrested in the United States, prosecutors said.

    Hinders, who allegedly moved to Mexico in 2004 after subpoenas were issued and the grand jury was impaneled, was caught in Houston after a “tip” last month, KUSA reported. It is believed Hinders is the last of the nine defendants in the case to be rounded up.

    Like the now-defunct AdViewGlobal autosurf, the now-defunct Genesis Fund purported to be an offshore “association” outside the reach of U.S. law enforcement, according to records.

    Investigators followed the Genesis Fund paper trail “from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations,” according to a statement last year.

    When the Genesis Fund Ponzi scheme collapsed, its operators “and their co-conspirators lulled the investors into believing that their investments would be recovered through a new investment plan,” the grand jury charged in an 83-count indictment.

    It is common for investment fraud schemes to suspend payouts and then claim a new program will emerge to replace a failed one.

    “Upon learning of the grand jury investigation, the defendants and their co-conspirators conspired to and did endeavor to obstruct the investigation by restructuring the Genesis Fund as a group of nominee offshore corporations,” the grand jury charged.

    “This signals the new era of solving global financial fraud — the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence,” Victor S O. Song, chief of the IRS Criminal Investigation Unit, said last year.

    Read earlier story on the Genesis Fund.

    Read the Genesis Fund indictment.

  • BULLETIN: FLORIDA — AGAIN: CFTC Says Man With 3 Aliases Ripped Off Church Members And Prayer-Group Attendees In Forex Ponzi Scheme And Then Moved To Canada

    BULLETIN: The CFTC has gone to federal court in the Southern District of Florida, alleging that a former Miami man who conducted prayer services in his home ripped off church members, friends, neighbors and others in a Forex Ponzi scheme.

    Some investors bought into the scheme with cash payments that totaled in the hundreds of thousands of dollars, the CFTC alleged.

    Charged in the alleged caper were Juvenal Eduardo Machado and his Miami-based company, Invers Forex LLC. Invers was in the interior-remodeling business prior to morphing into a Forex firm, and Machado used at least three aliases, according to the CFTC.

    The aliases included Juvenal Eduardo Machado Bogadi, Edward Kaufman and Eduardo Machado, the CFTC said. Machado moved to Canada after the scheme collapsed and customers demanded their money, and is believed to be living in Ontario.

    Machado and his firm gathered at least $786,000 from customers, but did not open individual trading accounts for customers and deposit their money into individual accounts as promised, the CFTC said.

    Rather, Machado and the firm opened a “single” trading account in Machado’s name. Although customers had forked over at least $786,000, Machado deposited only about $135,000 of that sum — and lost almost 90 percent in trading.

    When the scheme apparently was collapsing in March 2010, Machado made excuses about why customers weren’t receiving their promised payouts, the CFTC said. In at least one instance, a customer who’d originally been told she could withdraw her money with 30 days’ notice was told she could not have her money for six months.

    When the six months expired, the customer was told she needed to wait another 30 days to get her money, the CFTC said.

    Authorities believe Machado moved from Miami to Canada during the summer of 2010. Despite demands from customers to return their money, the money has not been returned, the CFTC said.

    Neither Invers nor the interior-remodeling firm — Interior Remodeling USA Inc. — was registered with the CFTC  “in any capacity,” the agency said, alleging that the scheme began in December 2008 and operated “at least” through March 2010.

    Machado, who allegedly solicited Forex funds from church members and people who attended prayer meetings in his home, told prospects that a “God had put him on the earth to help people financially,”  the CFTC said.

    Among Machado’s other claims was that he was “one of the best [F]orex traders in Miami”  and that people paid him to share his techniques, the CFTC said, alleging that Machado offered “guaranteed” profits of 5 percent a month.

    At least 28 customers invested with Machado — and three customers alone turned over $344,000 in cash to him, the CFTC said.

    Investigators believe some customers received disbursements in cash from Machado, the CFTC said.

    Meanwhile, Machado and his firm used an accountant that also was a Forex customer and “caused” the accountant to send “false IRS forms” with earnings information to customers, the CFTC alleged.

  • Second Man With Trevor Cook Tie Charged Criminally In Massive Minnesota Ponzi Scheme; Christopher Pettengill Faces Securities-Fraud, Conspiracy And Money-Laundering Accusations

    A Minnesota man has become the second person with ties to convicted Ponzi schemer Trevor Cook’s Forex scam to be charged criminally.

    Christopher Pettengill, 54, of Plymouth, “knowingly concealed information from investors concerning the foreign currency program sold by Pettengill, Cook, and others,” federal prosecutors said.

    He has been charged with securities fraud, money-laundering and conspiracy to commit wire fraud, the office of U.S. Attorney B. Todd Jones of the District of Minnesota said.

    Cook pleaded guilty in the $194 million caper last year and was sentenced to 25 years in federal prison.

    Jon Jason Greco, 40, of Minneapolis, was charged in March with making false statements to federal agents. Greco was accused of hiding loot from the scheme.

    Pettengill was accused of lending credibility to the scam and encouraging people to invest money.

    “Pettengill allegedly conducted numerous wire transfers during the course of the conspiracy, and on September 3, 2008, he allegedly made a credit card payment of $11,369.19, which was derived from the proceeds of the securities fraud,” prosecutors said.

    He faces up to 20 years in prison, if convicted on all counts.

    The SEC and CFTC sued Cook and former radio personality Pat Kiley in November 2009. Earlier this year, the SEC filed suit against Jason Bo-Alan Beckman, another alleged promoter of the scam.

  • BULLETIN: Feds Make Criminal Bust In Alleged Forex Fraud; Nicholas Cox Of Integra Capital Management LLC Arrested In North Carolina; Allegations In Companion Civil Case Destroy Myth That Companies That Issue 1099s Could Not Possibly Be Operating Scams

    A North Carolina man sued by the CFTC last year in an alleged $3 million Forex and commodities Ponzi scheme now has been arrested by federal agents on criminal charges.

    The allegations in the case destroy a myth advanced by financial hucksters and shills that a company that issues 1099 tax forms could not possibly be operating a scam.

    Nicholas Cox, 34, was indicted by a federal grand jury on Tuesday. He is charged with seven counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering, federal prosecutors said.

    The announcement of the arrest was made in Washington by Assistant Attorney General Lanny A. Breuer and U.S. Attorney Anne M. Tompkins of the Western District of North Carolina.

    Breuer is the head of the Justice Department’s Criminal Division, and the case was brought by elements of the interagency Financial Fraud Enforcement Task Force created by President Obama in 2009, officials said.

    Cox, who was arrested in Denton, N.C., was one of the principals of Integra Capital Management LLC. An alleged Integra co-conspirator, Rodney Whitney, also was charged criminally, and already has pleaded guilty to conspiracy to commit mail fraud, wire fraud and money-laundering, prosecutors said.

    Whitney also is a defendant in the CFTC action.

    Integra’s scheme operated between September 2006 and January 2009, luring investors with tales about handsome “dividends,” prosecutors charged.

    Cox and Whitney “provided false and fraudulent information, including prospectuses, contracts, tax forms, account statements and other documents, to current and prospective investors to obtain and misappropriate more than $3.29 million in investor funds,” prosecutors said.

    They also lied about their experience and credentials, prosecutors said.

    In September 2010, the CFTC said Whitney “distributed false account statements and false 1099 tax forms to Integra Capital’s customers, showing that their investments were profitable.

    “Instead,’ the CFTC charged, “the defendants’ trading accounts consistently lost money.”

    It is common for Forex fraudsters to claim that a company that issues 1099s could not possibly be operating a fraud. Similar claims are made in the universes of HYIP and autosurf fraudsters.

    If the allegations in the Integra case are true, it means that, not only did a corrupt company issue 1099s, it also issued fraudulent 1099s that reflected gains that did not exist, thus potentially causing participants to pay taxes on phantom profits.

    “At least” four of Integra’s customers received bogus 1099s, the CFTC said last year.

    One of the 1099s showed a bogus gain of more than $226,000, the CFTC said. Another showed a bogus gain of $81,500. Still others showed bogus gains of more than $48,000 and more than $5,000.

  • BULLETIN: Arthur Ferdig, Operator Of Collapsed Tradex Ponzi Scheme, Sentenced To Federal Prison For Tax Evasion; IRS Says Money Diverted To Offshore Accounts And Shell Companies

    Arthur A. Ferdig

    BULLETIN: Arthur Allen Ferdig, a California man who owned a collapsed Forex Ponzi scheme known as Tradex and claimed to have conversed with angels and the “Christ Energy,” has been sentenced to 18 months in federal prison for tax evasion.

    Ferdig, 71, admitted he practiced “sophisticated concealment” and stashed Tradex cash in offshore accounts and various ventures, including a Las Vegas firm known as Industrial Metals and Mining, according to court documents.

    And Ferdig also admitted he hid $529,000 in income for the 2002 tax year and did not file a tax return. A plea agreement requires him to pay taxes on the money, and Ferdig will be placed on probation for three years after his prison release.

    “Individuals who intentionally use foreign bank accounts and shell companies to conceal income and assets offshore from the IRS risk criminal prosecution,” said Leslie P. DeMarco, IRS Criminal Investigation special agent in charge of the Los Angeles Field Office.

    The prosecution of Ferdig destroyed a common myth in the  HYIP and autosurf worlds that “offshore” venues insulate the ventures and participants from prosecution. Tradex operated from the Caribbean island of Dominica, and Ferdig, a U.S. citizen, lived in Jamaica and the Bahamas.

    Ferdig claimed to have met his first angel, Metatron, on Sept. 22, 2002, while Ferdig was peering over rocky sea cliffs in Negril, Jamaica. He later met Gabriel, Michael, Uriel, Ezrael, Ariel, Raphael, Muriel, Bethany “and other wonderful and loving angels and spirits of light,” according to his website.

    People who followed Ferdig were called “Truth-Seekers,” according to records.

    His non-Forex product lineup included “Angel Tears,” defined as “an all-natural, bio-trace mineral tincture developed to enhance human health and vitality.”

    Although Tradex purported to have millions of dollars under management, missives to investors were signed “The TRADEX Management and Staff” or “The Tradex Management.”