PatrickPretty.com

Tag: SEC Division of Enforcement

  • URGENT >> BULLETIN >> MOVING: SEC Calls Zeek ‘$600 Million Online Pyramid And Ponzi Scheme’

    URGENT >> BULLETIN >> MOVING: (UPDATED 6:25 P.M. EDT (U.S.A.) The SEC has filed an emergency action in federal court in Charlotte, N.C., that alleges Zeek Rewards is a $600 million Ponzi and pyramid scheme.

    “The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an associate director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”

    In its emergency filing, the SEC described Zeek as a classic Ponzi scheme. The agency charged that “approximately 98% of ZeekRewards’ total revenues, and correspondingly the purported share of ‘net profits’ paid to current investors, are comprised of funds received from new investors.”

    Records show that the AdSurfDaily Ponzi scheme which, like Zeek, suggested that investors would receive a return on the order of 1 percent a day, also received only about 2 percent of its revenue from sources other than members. Zeek had members in common with ASD.

    Zeek, the SEC alleged, “is teetering on collapse.”

    Zeek CEO Paul R. Burks has been charged with selling unregistered securities as investment contracts, the SEC said. Burks presided over Rex Venture Group LLC, Zeek’s purported parent company. Rex Venture also has been charged. The SEC said it was aided in the probe by the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

    Burks’ program holds “approximately $225 million in investor funds in approximately 15 foreign and domestic financial institutions, and those funds are at risk of imminent dissipation and depletion,” the SEC charged, noting that the Ponzi potentially could affect more than 1 million people globally.

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

    “Through the ZeekRewards program, Defendants offer affiliates several ways to earn money, two of which involve the offer and sale of securities in the form of investment contracts: the ““Retail Profit Pool” and the “Matrix,” the SEC charged.

    And, the agency said, the “compounding” effect has created a condition under which 3 billion Zeek “Profit Points” are outstanding.

    “Based on the ZeekRewards current outstanding Profit Point balance, the company would be obligated to pay out approximately $45 million per day if all Qualified Affiliates elected to receive their daily award in cash,” the agency charged.

    Amid Zeek claims that it paid out 50 percent of its daily net and that its business model was “proprietary,” investigators discovered that Zeek delivered an unusually consistent return of about 1.5 percent a day.

    “In fact, the dividend bears no relation to the company’s net profits,” the SEC charged. “Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.

    Similar allegations were made in 2008 against ASD operator Andy Bowdoin.

    Zeek’s fabled Zeekler “bids” were described by the SEC as smoke-and-mirrors. From the complaint (italics added):

    Despite encouraging affiliates to purchase and give away VIP Bids to promote and drive traffic to the Zeekler penny auction website, Defendants fail to disclose that almost none of the VIP Bids given away by Qualified investors are actually used on the Zeekler penny auction website. Of approximately 10 billion VIP Bids purchased by or awarded to investors, less than one-quarter of one percent have been actually used in auctions on the Zeekler penny auction website. Thus, the VIP Bids do little or nothing to actually promote the retail business.

    Zeek operator Burks, meanwhile, “has withdrawn approximately $11 million while operating Rex Venture and ZeekRewards, of which approximately $4 million remains in his possession, custody or control.

    Burks “distributed approximately $1 million of the funds garnered from ZeekRewards to family members,” the SEC said.

    Amid high drama and confusing website reports from Zeek yesterday, including the virtual abandonment of its office in Lexington, N.C., and petition drives by Zeek affiliates to demand the return of Zeek, it turns out that “Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver,” the SEC said.

    The U.S. Secret Service also is investigating Zeek, as is the office of North Carolina Attorney General Roy Cooper.

    Read the SEC complaint.

  • URGENT >> BULLETIN >> MOVING: Peter Madoff Charged Criminally, Civilly; Bernard Madoff’s Brother ‘Enabled The Largest Fraud In Human History’ And Gained Millions Of Dollars, U.S. Attorney Preet Bharara Says

    URGENT >> BULLETIN >> MOVING: Peter Madoff, the brother of Ponzi schemer Bernard Madoff, has pleaded guilty in New York to a two-count superseding information charging him with conspiracy to commit securities fraud, tax fraud, mail fraud, ERISA fraud and falsifying records of an investment adviser.

    The government is seeking a staggering forfeiture order of $143.1 billion, “including all of [Peter Madoff’s] real and personal property.”

    Peter Madoff began conspiring with his brother in 1996, and the sought-after forfeiture amount “represents all of the investor funds paid” into Bernard L. Madoff Investment Securities LLC from 1996 to the Ponzi collapse in December 2008, prosecutors said.

    Peter Madoff has agreed to the forfeiture amount, prosecutors said.

    Peter Madoff, 66, also was charged by the SEC today. He was the chief compliance officer and senior managing director of Bernard L. Madoff Investment Securities.

    “Peter Madoff enabled the largest fraud in human history,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “He will now be jailed well into old age, and he will forfeit virtually every penny he has.  We are not yet finished calling to account everyone responsible for the epic fraud of Bernard Madoff and the epic pain of his many victims.”

    “Peter Madoff helped Bernie Madoff create the image of a functioning compliance program purportedly overseen by sophisticated financial professionals,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Tragically, the image was merely an illusion supported by Peter’s sham paperwork and false filings for which he was rewarded with tens of millions of dollars in stolen investor funds.”

    Read the SEC’s statement.

     

  • BULLETIN: SEC Suspends Trading In 379 Penny Stocks; Initiative Dubbed ‘Operation Shell-Expel’ Leads To Unprecedented Number Of Shutdowns

    BULLETIN: In an unprecedented move, the SEC today announced that it had suspended trading in 379 penny stocks, saying the companies were delinquent in filings and ripe for hijacking and scams involving reverse mergers and pump-and-dump schemes.

    “The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures,” the agency said.

    The previous one-day record for trading suspensions was 35. That mark was set in 2005, but the SEC now says “enhanced intelligence technology” has enabled it to spot dormant companies more effectively and head off trouble at the pass.

    “Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors.”

    Regulators such as the SEC and FTC and agencies such as the FBI long have fretted about the use of shell companies to pull off fraud schemes, dupe investors, customers and vendors and conceal crimes and civil offenses.

    “It’s critical to assess risks to investors in the capital markets and, through strategic planning, develop ways to neutralize them,” said Thomas Sporkin, director of the SEC’s Office of Market Intelligence. “We were able to conduct a detailed review of the microcap issuers quoted in the over-the-counter market and cull out these high-risk shell companies.”

    As part of an initiative dubbed “Operation Shell-Expel” undertaken by the SEC’s Microcap Fraud Working Group, the trading suspensions announced today affect “clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud,” the agency said.

    “The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors,” the SEC said. “But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.”

    Here is the list of the 379 companies.

  • INCREDIBLE! SEC Says Recidivist Huckster And Felon Allen E. Weintraub Is Scamming Again — This Time With Purported Facebook Shares; Court Grants Asset Freeze And Agency Publishes Phone Number To Take Complaints

    Allen E. Weintraub

    BULLETIN: The SEC is tackling another bizarre securities-fraud case in which the alleged elements read like fiction. In May 2011, the agency charged Allen E. Weintraub of Aventura, Fla., in a bogus “tender offer” caper in which he fraudulently claimed to have backers to purchase (for purported billions of dollars) Eastman Kodak Co. and AMR Corp., the parent company of American Airlines.

    Weintraub, who declared bankruptcy in 2007, submitted the bogus tender offers while he was on probation for two felony counts of organized fraud and one felony count of money-laundering, the agency charged.

    If that weren’t enough, the offers were submitted through a dissolved shell company known as Sterling Global Holdings while Weintraub was coming off a 2008 mortgage foreclosure. His criminal record dates back at least to 1992, according to records.

    Weintraub and Sterling Global were ordered in January 2012 to pay civil fines totaling $400,000 for the bizarre Kodak/AMR takeover fraud — and Weintraub once again was enjoined from violating federal securities laws. The January order followed a 2002 order in which Weintraub was banned from being an officer or director of a public company as a result of a previous scam, according to records.

    Alleged New Weintraub Fraud Emerges

    Now — incredibly — the SEC says Weintraub is presiding over yet-another fraud, this one involving the use of the alias “William Lewis” and three companies: Private Stock Transfer Inc., PST Investments III Inc. and World Financial Solutions.

    The latest scam involve the selling of “worthless shares” in an enterprise known as “PST Investments,” with Weintraub claiming he could arrange for customers to get pre-IPO shares of Facebook. The IPO scam operated at least in part through a website styled PrivateStockTransfer.com, the SEC alleged.

    As part of an emergency order and asset freeze, a federal judge has ordered the site taken offline. It was serving a blank page this morning, but Google cache suggests the site was active at least through April 10. The April 10 cache entry shows the logos of Twitter and Facebook, which potentially means that Weintraub was using two social media-platforms, including Facebook, to commit fraud against Facebook and possibly Twitter.

    Various government agencies have warned about social-networking fraud.

    Here is how the Google cache for the landing page of PrivateStockTransfer.com read (in part) on April 10 (italics added):

    Welcome to the leading company in PRIVATE STOCK buying and selling of the hottest PRIVATE COMPANIES. In the past only celebrities and big funds were invited to purchase shares in the hottest PRE-IPO companies. Today any accredited investor can have that opportunity as well. Today you can own stock in FACEBOOK, TWITTER, and other explosive pre-ipo companies.

    If you currently own stock in these companies and want to sell, Private Stock Transfer, can match you up to waiting buyers. No need to wait for the IPO to cash out. Today there is a Market for your Private Stock, and buyers waiting to buy.

    Another page on the site read (in part) on April 2 as follows, according to Google cache (italics added):

    FACEBOOK STOCK

    Currently available: April 1-30, 2012 or until sold

    100,000 Shares of common stock, PRICED at $38.00 a share and a minimum investment of 3,000 shares

    The April 2 page, according to the Google cache, asserted the offer was a “private placement” and, despite the offer of a specific number of shares and a “minimum investment” of 3,000 shares, asserted that “None of the information displayed represents a public offer to buy or sell any securities.”

    Regulators long have warned that scammers engage in wordplay and publish disclaimers to disguise the fraudulent sale of securities.

    Registration data for the domain shows it was registered to “bill lewis” of Tampa. The street address used in the domain registration appears to be the address of an office complex in Tampa that has a video-conferencing center among its amenities. The website was registered on Oct. 3, 2011, about five months after the SEC brought the “tender-offer” fraud case against Weintraub.

    As part of its latest Weintraub probe, the SEC has published the phone number and name of a specific senior attorney — and is asking the public for help.

    “The Division of Enforcement urges anyone who believes that Allen Weintraub may have recently defrauded them to contact John Rossetti, Senior Counsel, at 202-551-4819,” the agency announced — in bold type.

  • BULLETIN: First, Notre Dame’s ‘Rudy’ — Now, Willie Gault Of The ‘Super Bowl Shuffle’ Chicago Bears; SEC Charges Former NFL Wide Receiver In Alleged Stock Caper; Feds Arrest Lawyer

    BULLETIN: The SEC has gone to federal court in the Central District of California to charge former U.S. Olympian and NFL wide receiver Willie Gault in an alleged stock scheme involving Heart Tronics Inc.

    Gault, 51, was a member of the 1980 U.S. Olympic Team that boycotted the summer games in Moscow. He later played in the NFL for 11 seasons for the Chicago Bears and the then-Los Angeles Raiders. With Gault playing wide receiver, the 1985 Bears team won the Super Bowl over the New England Patriots. The Bears’ team also was famous for the “Super Bowl Shuffle” video and recording.

    Just last week, the SEC charged former Notre Dame walk-on Daniel “Rudy” Ruettiger  and 12 others in an alleged penny-stock caper. Ruettiger, 63, was the inspiration behind the 1993 movie “Rudy.” The agency said today that the separate scheme involving Gault also involved others, including J. Rowland Perkins, a founder of the Creative Artists Agency talent agency, and Mitchell J. Stein, an attorney in Hidden Valley, Calif., and Boca Raton, Fla.

    Perkins and Gault were charged civilly. Stein, 53, was charged both civilly and criminally.

    Stein was arrested Sunday at Los Angeles International Airport, the Justice Department said this afternoon. He is charged with one count of conspiracy to commit mail fraud and wire fraud, three counts of mail fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering and one count of conspiracy to obstruct justice.

    “Stein took advantage of Gault’s celebrity to further prop up the image of Heart Tronics as a successful enterprise,” said Stephen L. Cohen, associate director in the SEC’s Division of Enforcement. “Stein secretly sold millions of dollars in stock while peddling false claims of Heart Tronics’s lucrative sales orders, and has been living the high life off his illicit proceeds with multiple homes, exotic cars, and private jets.”

    Also charged civilly was Martin B. Carter of Boca Raton. The SEC described him as Stein’s “chauffer and handyman.” Other civil defendants include Ryan A. Rauch of San Clemente, Calif., and Mark C. Nevdahl of Spokane, Wash.

    “Stein and Gault together defrauded one investor into making a substantial investment in Heart Tronics based on false representations that his money would fund the company’s operations,” the SEC alleged. “Instead, Stein and Gault diverted the investor’s proceeds for personal use, including the purchase of Heart Tronics stock in Gault’s personal brokerage account ‘Catch 83’ to create the false appearance of volume and investor demand for the stock.”

    Gault wore No. 83 for the Bears and the Raiders. The SEC said Heart Tronics installed him “as a figurehead co-CEO along with . . .  Perkins in order to generate publicity for the company and foster investor confidence.”

    “Stein orchestrated the repeated announcement of fictitious sales orders for Heart Tronics’ products in public filings with the Commission, press releases, and other public broadcasts, all designed to make it appear that Heart Tronics was more successful than it actually was,” the SEC charged.

    As part of the fraud, the SEC charged, Carter flew to Japan to mail back a letter to the United States in a bid to advance the scheme.

    Carter, the chauffer, also posed as a person named “Tony Nony,” the SEC charged.

    Read the SEC complaint.

  • BULLETIN: NOTRE DAME HEARTBREAKER: Legendary Fighting Irish Football Walk-On Daniel ‘Rudy’ Ruettiger Charged With 12 Others In Alleged $11 Million ‘Pump And Dump’ Penny-Stock Swindle

    BULLETIN: The SEC has charged Daniel “Rudy” Ruettiger and 12 others — including a disbarred attorney — in an alleged penny-stock swindle that gathered $11 million.

    The civil case is filed in U.S. District Court in Nevada.

    Ruettiger, 63, of Las Vegas, was the inspiration behind the movie “Rudy,” which depicted his drive to make the Notre Dame football team as a walk-on despite being undersized.

    A motivational speaker who became famous after the movie, Ruettiger founded a company known as Rudy Nutrition, positioning its sports drink against Gatorade, the SEC said. The stock traded under the symbol RUNU, and stock promoter Stephen DeCesare of Las Vegas “put the RUNU scheme together,” the agency charged.

    “Investors were lured into the scheme by Mr. Ruettiger’s well-known, feel-good story but found themselves in a situation that did not have a happy ending,” said Scott W. Friestad, associate director of the SEC’s Division of Enforcement. “The tall tales in this elaborate scheme included phony taste tests and other false information that was used to convince investors they were investing in something special.”

    The SEC identified the disbarred attorney as Kevin J. Quinn of Santa Monica, Calif.

    As part of the scheme, the SEC said, potential investors received a promotional mailer that “falsely claimed that in ‘a major southwest test, Rudy outsold Gatorade 2 to 1!”

    A promotional e-mail, the SEC said, “falsely boasted that in ‘several blind taste tests, Rudy outperformed Gatorade and Powerade by 2:1.’”

    At the same time, “the scheme’s promoters engaged in manipulative trading to artificially inflate the price of Rudy Nutrition stock while selling unregistered shares to investors,” the SEC said.

    Ruettiger has agreed to pay $382,866 to settle the charges without admitting or denying the allegations, the SEC said. Ten other defendants also entered settlement agreements without admitting or denying wrongdoing, and all of the agreements must meet with court approval.

    In bringing the complaint, the SEC described a “classic pump-and-dump” swindle that featured a reverse merger, fraudulent touting, bogus press releases, videos, ceaseless hype and Internet postings.

    See full list of defendants here.

    Read the SEC complaint here.

  • URGENT >> BULLETIN >> MOVING: SEC Says D.C. Attorney Brynee K. Baylor Was Running Prime-Bank Swindle With Frank L. Pavlico III, A Felon On Probation In Case Involving ‘Drug Trafficking’ Proceeds

    UPDATED 10:04 A.M. ET (DEC. 8, U.S.A.)  Frank L. Pavlico III — convicted in 2007 of felony conspiracy to conduct financial transactions involving the proceeds of drug trafficking and released in 2008 after serving his 10-month prison term — has been arrested for wire fraud by the FBI in an alleged prime-bank swindle that occurred while Pavlico was on probation, the SEC said.

    Charged civilly with securities fraud is Brynee K. Baylor, an attorney in the District of Columbia, Maryland and New Jersey. The SEC said Baylor helped Pavlico pull off the swindle, which allegedly gathered about $2.1 million and affected at least 13 investors.

    U.S. District Judge Rosemary Collyer of the District of Columbia approved an emergency asset freeze, the SEC said.

    “Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This case is particularly egregious because attorneys hold a special position of trust, and Baylor and her law firm cloaked the Milan investment in the guise of licensed legal services to deceive investors and steal their money.”

    Baylor, 37, of Silver Spring, Md., is co-founder and managing partner of Baylor & Jackson PLLC in the District of Columbia, according to the SEC. The agency said she and the law firm “acted as ‘counsel’ for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.”

    The Milan Group, which also was known as The Milan Trading Group Inc., operated from Pavlico’s home in Clarks Summit, Pa., the SEC said. Pavlico is 41, the SEC said.

    The scheme operated in a shroud of mystery, with inexperienced investors being told about a purported “private trading platform” and that  “confidentiality and secrecy requirements prevented the defendants from providing details of the investments,” the SEC charged.

    Baylor “deceive[ed] investors into believing that the Milan investment was legitimate and that investors’ funds would be safe,” the SEC charged, adding that she provided notarized “Attorney Attestation” letters to some investors.

    Moreover, the SEC charged, Baylor “told investors that she had personally witnessed millions of dollars paid to investors through B&J’s trust account, consistent with Pavlico’s representations.”

    Pavlico “deceived investors by using the name ‘Frank Lorenzo’ and by failing to disclose that he pled guilty to a felony, served 10 months in prison, and was on supervised release at the time he was soliciting their investments,” the SEC charged.

    Investors were duped by high-sounding terms such as “standby letters of credit” and “bank guarantees,” the SEC said. Meanwhile, “Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns including, among other things, feigned illnesses, false representations that the European bankers supposedly involved in the transaction were on extended vacation, or that there were unspecified problems with processing the transactions through ‘Euroclear,’ a supposed necessary step in the transaction,” the SEC charged.

    The scheme began in August 2010 or earlier, the SEC charged. Prison records show Pavlico was released in November 2008. His probation ran through Nov. 5, 2011, according to records.

    “Pavlico offered returns of up to twenty times the original investment within forty-five days,” the SEC charged. “Investors were told that the investment involved no risk and that their principal would be returned if a successful bank instrument transaction was not completed.”

    Fake “screen shots” also were used to dupe investors, the SEC charged.

    Collyer also is presiding over the AdSurfDaily Ponzi case in the District of Columbia. The FBI alleged last month that Collyer was targeted with false liens by Kenneth Wayne Leaming, 55, of Spanaway, Wash.

    Read the SEC complaint against Pavlico and Baylor.

  • 3 PONZI/FRAUD CAPSULES: (1) Washington State Woman Jailed In Alleged $126 Million Ponzi Scheme; (2) Charity, Church, Investors In Metro Washington, D.C., Allegedly Scammed In $27M Ponzi; (3) South Florida Man Sentenced To More Than 12 Years In $29.5M ‘Gold’ Scam

    Screen shot: PDF from section of Page 1 of the indictment of Doris E. Nelson in an alleged $126 million Ponzi operating internationally through multiple companies.

    EDITOR’S NOTE: This information is presented in the form of briefs, with links to external sources.

    1.) Doris E. Nelson, arrested/jailed in Spokane, Wash., region, last week after federal raid in April 2010. SEC filed civil charges in September 2011.

    The allegations against Nelson and multiple companies in Nevada, Utah and Canada are alarming, but also somewhat standard fare if you’ve been observing how schemes form and then explain away problems when trouble develops.

    Among the core allegations are these:

    • Nelson, of Colbert, Wash.,  ran a payday-loan business called “The Little Loan Shoppe” in the area of Spokane. The firm was linked to multiple LLCs in the United States and multiple LTDs in Canada. The business started out in the Canadian province of British Columbia in roughly 1997, and moved to the United States “in or about 2001.” Investors were told they could earn enormous profits from the spread between the loan shop’s expenses and what it charged customers for a short-term loan.
    • The Ponzi scheme took in “at least” $126 million and caused losses of more than $40 million — losses that affected “at least” 800 investors.
    • Federal prosecutors say they have identified “victim investors” in multiple Canadian provinces and multiple U.S. states. The indictment also lists a victim from Spain.
    • The payday loan business was not profitable. Investors were getting paid through a complex shell game that lasted for years and involved the formation of new companies, including marketing and “leads” arms.
    • Nelson and some of the defendants engaged in wire fraud, mail fraud and money-laundering.
    • Nelson lied to the Manitoba Securities Commission and advised certain parties to lie to the British Columbia Securities Commission (BCSC).
    • Nelson used investor funds to purchase a motor home valued at nearly $127,000, a Chevrolet Corvette valued at more than $61,000, a Mercedes Benz valued at nearly $112,000. She purchased more than $220,000 in clothing at the St. Johns Knits store and $217,000 at other stores, including Nordstrom.
    • Nelson lost $400,000 of investors’ funds gambling at various Las Vegas casinos.
    • Nelson spent investors’ money on luxury sea cruises, including nearly $29,000 on a Royal Caribbean cruise in which she also spent $23,500 in investor funds to gamble.
    • The promissory-notes scheme showed classic signs of collapse in October 2008. (More details below.) Nelson slashed payouts to investors — from an anticipated rate of between 40 percent and 60 percent to 10 percent. The 10 percent payouts collapsed by March 2009.
    • Nelson claimed Little Loan Shoppe bought the building it used in Spokane, but that was a lie. In truth, the company was paying rent to a company owned by Nelson’s husband.
    • In February 2008, leading up to the beginning of the end in October 2008, Nelson forecast “an explosion of profit.” In May, she announced that “our industry is thriving.” She then opened a new window for investments, telling marks that she was “excepting” new money, as opposed to “accepting” it.  “[T]his window of opportunity will probably not be open again due to the expected surplus of income . . .” she wrote.
    • Between late June and late July of 2008, Nelson announced a “massive marketing campaign” that would turn the operation into “one of the largest loan companies.”
    • Millions of dollars flowed to the teetering scheme after Nelson’s various hype fests.
    • In October 2008, Nelson lied to BCSC about how she was making interest payments to investors, denying that the money came from “newer” investors and claiming the cash came from loan profits.
    • BCSC ordered Nelson to stop issuing promissory notes. Nelson then told investors that changes to U.S. lending laws had “dramatically reduced our profits . . .”
    • In February 2009, Nelson advised investors to quit contacting her about their investments because the inquiries were distracting her. She then announced a purported account review. In March 2009, Nelson told investors that the account review was behind schedule and perhaps would not be completed until the middle of April.
    • In March 2009, Nelson traveled to Florida to try to get more money from existing investors.
    • The scam then collapsed in its entirety and investors experienced ruin.

    Read/view coverage of alleged Nelson scam at KXLY.com.

    The Alleged Garfield M. Taylor Ponzi Scheme In Metro Washington, D.C.

    2.) Garfield M. Taylor, others sued by SEC last week amid spectacular allegations of Ponzi fraud targeted at charities and people of faith, among others.

    Outlined below are some of the core allegations in the alleged Garfield M. Taylor Ponzi scheme, which includes multiple defendants and multiple companies. The SEC brought the case last week, alleging a $27 million Ponzi scheme.

    First, a quote from Stephen L. Cohen, the SEC’s associate director in the Division of Enforcement.

    “Garfield Taylor and his partners in the scheme touted themselves as seasoned and trustworthy financial professionals offering a conservative but lucrative investment opportunity. In reality, they were gambling away investor assets in extremely risky trades and operating a classic Ponzi scheme.”

    Key allegations:

    • Garfield Taylor, of North Bethesda, Md., formerly worked for Fannie Mae and “frequently” used its name in his fraud pitch. His companies, Garfield Taylor Inc. and Gibraltar Asset Management Group LLC, were charged by the SEC, as were five alleged “collaborators”: Maurice G. Taylor of Bowie, Md., who is the brother of Garfield Taylor; Randolph M. Taylor of Washington, D.C., who is the nephew of Garfield Taylor; Benjamin C. Dalley of Washington, D.C., who is the childhood friend and business partner of Randolph Taylor; Jeffrey A. King of Upper Marlboro, Md., whose sister is married to Maurice Taylor; William B. Mitchell of Middle River, Md.
    • The scheme operated “at least” between 2005 and 2010, targeting “middle class” investors and charities.
    • The FDIC’s name was used to sanitize the scam.
    • Unregistered brokers were used to recruit investors.
    • The firms themselves were not registered.
    • Misleading PowerPoint presentations were used.
    • A Baptist church in Maryland, a children’s charity in Washington and an investment club in Philadelphia were shown the PowerPoint presentations.
    • Fancy language such as “proprietary strategy,” “covered call investment strategy” and “unparalleled downside protection” was used.
    • The Baptist church also was shown a “fake ‘letter of recommendation’ from Charles Schwab.”
    • “This letter was not prepared by anyone at Charles Schwab. Rather, it is a fabrication.”
    • A retiree from Lanham, Md.,  plowed more than $780,000 into the scam, an amount that represented “nearly his entire retirement savings.”
    • At least one investor in 2009 was worried about his/her nest egg in the post-Bernard Madoff environment, but Dalley reassured the investor that the opportunity had “taken the internal measures to strictly regulate our traders and accounting to ensure that our investor’s investments are safe.”
    • When Dalley provided the assurance, he already knew that the opportunity “had not followed a covered call trading strategy and had instead engaged in highly speculative naked options trading.”
    • Garfield Taylor actually was operating a “joint Ponzi scheme” through his companies.
    • Garfield Taylor “convinced at least three individuals to give him the username and password to their online brokerage accounts in order for Garfield Taylor to place trades in those accounts on a discretionary basis in exchange for a share of any profits generated.” A Maryland woman duped in this fashion lost “nearly her entire account” originally worth $450,000 “in a matter of two months.”
    • Garfield Taylor used investors’ money to send his children to private school at a cost of $73,000.
    • At one point, one of the Garfield Taylor firms had “less than” $1,000 in its account, but an investor “wired approximately $590,000.” Garfield Taylor used the incoming money to make Ponzi payments.

    Read the SEC complaint.

    Gold Scammer Gets More Than 12 Years In Slammer

    3.) Jamie Campany, 48, of Palm Beach County, Fla., sentenced to federal prison in $29.5 million fraud.

    Key allegations:

    • More than 1,400 investors defrauded.
    • Multiple companies operating in South Florida and elsewhere involved, including Global Bullion Exchange LLC of Lake Worth. Scam also used name of “Barclay.”
    • Fraud fueled by telemarketing.
    • FBI, U.S. Postal Inspection Service and Florida Office of Financial Regulation handled probe.

    Read Feds’ statement announcing the Campany sentencing.

    Watch Campany tell ABC News how he scammed the masses.

     

  • URGENT >> BULLETIN >> MOVING: Former NASDAQ Managing Director Charged Criminally, Sued Civilly In Insider-Trading Case; Donald L. Johnson Pleads Guilty To Criminal Securities Fraud Amid Allegations He Cherry-Picked Information While Serving As Stock-Exchange Gatekeeper

    URGENT >> BULLETIN >> MOVING: A former managing director of the NASDAQ stock exchange has been charged by both the SEC and federal prosecutors in an insider-trading case.

    Donald L. Johnson, 56, of Ashburn, Va., already has pleaded guilty on the criminal side of things, the Justice Department said.

    For its part, the SEC said Johnson abused his position, made trades from his work computer and racked up $755,000 dollars in illegal profits over three years.

    Johnson, the SEC said, cherry-picked information on corporate leadership changes, earnings reports, earnings forecasts and regulatory approvals of new pharmaceutical products.

    “This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

    Federal prosecutors also used the fox-and-henhouse analogy.

    “Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished,” said Assistant Attorney General Lanny Breuer, head of the Justice Department’s Criminal Division.

    Meanwhile, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia said Johnson padded his retirement by cheating.

    “He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year,” MacBride said.  “But he learned what every other trader on Wall Street must now realize: We’re watching.”

    Prosecutors gave the U.S. Postal Inspection Service credit for the criminal bust.

    Johnson was a managing director on NASDAQ’s market intelligence desk in New York between 2006 and September 2009, prosecutors said.

    “Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.

    Criminal securities fraud carries a maximum penalty of 20 years in federal prison and a maximum fine of $5 million.

  • BULLETIN: SEC Goes To Federal Court In Dallas To Halt Alleged Ponzi Scheme Involving DOZENS Of Companies; China Voice Holding Corp. Implicated In Alleged Domestic And International Fraud

    BULLETIN: UPDATED 3:07 P.M. EDT (U.S.A.) The SEC has gone to federal court in Dallas to halt the operations of what it described as a highly complex fraud and Ponzi scheme involving a purported VOIP/telecommunications firm and more than 40 individuals and companies.

    A federal judge has frozen the assets of China Voice Holding Corp., and the SEC described the case as a “complicated web” of deceit engineered by David Ronald Allen and others associated with the firm, which is headquartered in Boca Raton, Fla.

    Allen, 60, resides in Dallas. Also named defendants were former China Voice executive William F. Burbank IV, 52, of Delray Beach, Fla.; Alex Dowlatshahi, 36, of Dallas; Ilya Drapkin, 64, of Dallas; Christopher Mills, 34, of McKinney, Texas; Gerald Patera, 69, of Pinehurst, N.C.; and Robert Wilson, 42, of Dallas.

    Dowlatshahi was described by the SEC as a recidivist securities offender who was part of a 2006 offering fraud in California.

    Dozens of companies were part of the China Voice fraud, the SEC alleged.

    Investors were told they’d earn returns of “at least” 25 percent, but an $8.6 million Ponzi scheme was under way, the SEC charged.

    “These promoters falsely touted what they claimed to be a prudent investment with reliable returns through loans made to carefully selected businesses,” said Stephen L. Cohen, associate director of the SEC’s Division of Enforcement. “This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that’s a tell-tale sign that something likely is amiss.”

    China Voice, Allen and Burbank were accused of issuing a “series of fraudulent company statements about its financial condition and business prospects,” the SEC said.

    Patera and Drapkin helped China Voice “finance stock promotion campaigns to pump up the company’s stock price,” the SEC charged,

    Meanwhile, Wilson orchestrated a “a blast fax campaign,” the SEC charged.

    “The spam faxes were sent to thousands of people at once and contained false and misleading statements about China Voice and who was paying for the faxes,” the SEC alleged. “At the same time they were spending more than a million dollars on stock promotion, Patera and Drapkin dumped millions of shares of the company into the market.”

    So many individuals and companies were involved in the alleged fraud that the recitation of the names of the defendants and relief defendants in the 50-page complaint took up all or parts of seven pages.

    The facts as outlined by the SEC did not begin until the tenth page of the complaint. Regulators at virtually all levels have been encountering increasingly complex financial capers that involve dozens of corporations and shell companies.

    A case filed in Nevada by the FTC in December alleged that 10 corporations and 52 shell companies were part of a colossal fraud that had gathered hundreds of millions of dollars.

    Read the SEC complaint.

  • FDA Chemist Cheng Yi Liang’s Very Bad Day: Busted By The Feds, Sued By The SEC For Trading On Information Lifted From Confidential Government Database

    A chemist who works for the U.S. Food and Drug Administration has been charged criminally by federal prosecutors, arrested by federal agents in Maryland, sued by the SEC — and will go to bed tonight knowing his son has been arrested in the same case.

    Cheng Yi Liang, 56, of Gaithersburg, was accused of abusing his position of trust at the FDA by mining the agency’s database for information on drug approvals or denials — and then trading on the information he gleaned to “generate more than $3.6 million in illicit profits and avoided losses,” the SEC said.

    Liang’s son, Andrew Liang, 25, also of Gaithersburg, was arrested, too.

    And high-ranking public officials minced no words when announcing the charges against the men, which included a stunning allegation that the senior Liang sought to conceal the scheme in part by trading in the account of his elderly mother in China.

    “Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens,” said Assistant U.S. Attorney General Lanny Breuer. “According to the [criminal] complaint, he and his son repeatedly violated that trust to line their own pockets.”

    Breuer is the head of the Justice Department’s Criminal Division.

    “Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami.

    Khuzami is director of the SEC’s Division of Enforcement.

    Another high-ranking official summarized today’s events by saying Liang’s actions made government workers look bad.

    “Profiting based on sensitive, insider information — as Liang is charged with today — is not only illegal, but taints the image of thousands of hard-working government employees,” sighed Elton Malone, special agent in charge of the office of special investigations for the U.S. Department of Health and Human Services, Office of the Inspector General.

    Liang, an FDA employee since 1996, began snatching information as early as July 2006, the SEC charged.

    He “illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies,” the agency charged.

    In a bid to cover his tracks, Liang “traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China,” the SEC charged.

    “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives,” said Daniel M. Hawke, chief of the SEC’s Market Abuse Unit.

    Father and son were charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud. Federal prosecutors said investigators caught Liang after special software was installed on the work computer he was using.

    See this SEC exhibit that outlines the trades.