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Tag: QSC

  • 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.

  • 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.