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Tag: Leslie P. DeMarco

  • 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.”

  • California Man, 72, Sentenced To 110 Months For HYIP Rip-Off; Richard M. Hersch Also Ordered To Pay ‘At Least’ $9.2 Million In Restitution

    First, Richard M. Hersch, 72, told investors they’d earn up to 6 percent a week by plowing money into his company, All States ATM Inc.

    He then explained the company had “contracts” with major horse-racing tracks in California and elsewhere to operate Automated Teller Machines (ATMs) on the “back side” of the tracks.

    Ordinary horse-racing fans could not use the ATMs, according to Hersch, because the “backside” was off-limits to the general public and situated for the convenience of racetrack employees, horse owners, horse trainers and others — his own, highly profitable niche.

    Hersch then made the investments appear to be even more lucrative by explaining “the racetracks allowed him to operate a check-cashing or loan service on the back side of the track for the exclusive use of those with access to that area,” prosecutors said.

    To further disarm skeptical prospects, “Hersch claimed that he had 160 employees and hundreds of ATMs and that his company was in its eighth year of business,” prosecutors said.

    But the tracks Hersch said used his ATM and check-cashing business “reported having no contracts with him or All States ATM to provide financial services of any sort,” prosecutors said.

    Hersch was charged with mail fraud and structuring, and was arrested last year by the FBI and IRS. Investigators determined he had coaxed more than 150 people to invest about $25 million in his company.

    He pleaded guilty in November and was sentenced yesterday, acknowledging he operated an HYIP fraud and conspired with others to structure 15 transactions totaling $141,500 to evade currency-reporting requirements. Prosecutors said he and co-conspirators withdrew cash from a bank account in amounts between $9,000 and $9,500 because they knew that withdrawals of cash over $10,000 triggered the reporting requirements.

    U.S. District Judge John A. Houston sentenced Hersch to 110 months in federal prison and to pay “at least” $9.2 million in restitution.

    “[Hersch’s] sentencing should remind the public of the financial perils associated with high yield investment fraud scams,” said Keith Slotter, FBI special agent in charge.

    HYIP schemers will get caught, a veteran IRS investigators warned.

    “Currency-report information filed by banks and financial institutions provides a paper trail, or roadmap, for investigations of financial crimes and illegal activities, including tax evasion, embezzlement, and money laundering,” said Leslie P. DeMarco, special agent in charge of the IRS Criminal Investigation unit in the agency’s Los Angeles Field Office.

    “Individuals who deliberately break down cash withdrawals into amounts less that $10,000, so as not to trigger a bank’s reporting requirement, are committing a financial crime,” said DeMarco. “In this investigation, IRS special agents used their financial expertise to uncover Mr. Hersch’s intentionally structured cash withdrawals, designed to hide his investment fraud scheme.”

    U.S. Attorney Laura E. Duffy of the Southern District of California said Hersch’s sentence sent a message to financial fraudsters who are duping investors.

    “[The] sentence demonstrates our commitment to investigating and prosecuting those individuals who prey upon innocent victims in our community through fraudulent investment schemes,” Duffy said.

    Hersch now joins the ranks of Bernard Madoff, 71, (New York/Florida); Richard Piccoli, 83, (New York); Andy Bowdoin, 75, (Florida); Julia Ann Schmidt, 68, (Texas); Judith Zabalaoui, 71, (Louisiana); Arthur Nadel, 77, (Florida/NewYork); Ronald Keith Owens, 73, (Texas); James Blackman Roberts, 71, (Arkansas); Larry Atkins, 65, (North Dakota), Richard Taft Johnson, 67, (Michigan), Maxwell B. Smith, 69, (New Jersey) and others as senior citizens implicated in large financial frauds.