UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”
U.S. District Judge Donovan W. Frank issued a temporary restraining order against Brown and her company, Investors Income Fund X LLC. The order was issued April 8.
Brown, 46, of Golden Valley, was accused of operating a “sham” fund into which investors plowed more than $1.1 million between July 2009 and March 2010.
“Brown told her investors that Fund X is a ‘bond fund’ with fixed annual returns of 8% or 9%,” the SEC said. “[S]he distributed fictitious ‘returns’ to investors, furthering the fiction that Fund X was a legitimate and successful investment opportunity.”
But Brown “misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself and build . . . office space for her new business,” the SEC said.
Investors Income Fund X LLC was registered as a corporation in South Dakota, the SEC said.
“Unbeknownst to her victims, Fund X is a sham — Brown’s alter ego,” the SEC said.
The case features allegations of siphoning, forgery, cherry-picking clients of Brown’s former employer and issuing fraudulent “returns” in Bernard Madoff-like fashion. It also occurred against the backdrop of March 17 Congressional testimony by FBI Director Robert Mueller III that U.S. companies increasingly were relying on shell corporations to commit fraud.
Minnesota Fraud Cases
In recent months, investigators and prosecutors in Minnesota have opened up a number of major fraud probes. The combined cases are alleged to have drained hundreds of millions of dollars from investors. In some instances, prosecutors and regulators have asserted that companies used multiple names to commit fraud.
Petters was convicted last week of presiding over that was described as the largest financial-fraud case in Minnesota history: a $3.65 billion Ponzi scheme.
Petters displayed “stunning criminality,” prosecutors said. One of the victims wrote, “Our society, unfortunately, is becoming plagued with too many people like this, and like Bernard Madoff. Tom Petters needs to learn that there are severe consequences for his incomprehensible behavior.”
Meanwhile, the SEC, the CFTC, the FBI, prosecutors and a court-appointed receiver are poring over records to reverse-engineer the alleged Trevor Cook/Pat Kiley Ponzi scheme. Court records suggest multiple company names were involved and that the scheme involved at least $190 million and caused investor losses of at least $139 million.
Money was moved “all over the world,” according to court filings.
Cook and Kiley were sued by the SEC and the CFTC in November. Cook was charged criminally last month. Prosecutors said he was “aided and abetted by others.†In this document, the National Futures Association, which also filed an action that references Cook, asserted that $75 million from a purported Swiss fund may have been directed at a mysterious investor known only as “Fased.”
The purported payment occurred while Cook, a Minnesota resident, allegedly was managing money for a Canadian company known as KINGZ Capital Management Corp. KINGZ name also has been linked to an autosurf known as AdViewGlobal (AVG), which had close ties to an autosurf known as AdSurfDaily (ASD).
On May 4, 2009 — on the same day the Obama administration announced a crackdown on international financial fraud — AVG announced that KINGZ had become its facilitator for international wire transfers. KINGZ denied the assertion, saying it believed it had been targeted in a scam. The company painted the picture that AVG was attempting to route money to itself through a U.S. shell company.
AVG purportedly operated from Uruguay.
Florida-based ASD, which members said was popular in Minnesota, was implicated in August 2008 by the Secret Service in a Ponzi scheme. A federal judge has issued orders of forfeiture totaling more than $80 million in the ASD case. ASD used at least three names, according to records: AdSurfDaily, AdSalesDaily, and ASD Cash Generator.
Prosecutors also linked ASD to at least two other autosurfs: LaFuenteDinero (the “fountain of money”) and Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.
In February, the U.S. Secret Service alleged that Minnesota resident Steve Renner was operating a Ponzi scheme through a company known as INetGlobal and companies related to the firm. The scheme, the Secret Service said, largely targeted Chinese members who may have little or no facility in English.
Renner denies the allegations. Prosecutors described the case as a “major fraud and money laundering investigation,” saying INetGlobal came to life during a period in which federal agents were seizing tens of millions of dollars in the ASD case amid Ponzi, wire-fraud and money-laundering assertions.
An ASD member introduced an undercover Secret Service agent to INetGlobal, the agency said in court filings.
Other recent fraud cases in Minnesota include the Gerard Cellette Jr. Ponzi case ($53 million); the Charles “Chuck†E. Hays case ($20 million); and the Kalin Thanh Dao case (up to $10 million).
