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Tag: securities fraud

  • BULLETIN: California Man Sentenced To 90 Years In Prison For Fleecing Elderly Investors In Ponzi Scheme

    BULLETIN: Convicted Ponzi swindler Jeffrey Gordon Butler has been sentenced to 90 years and eight months in a California state prison.

    Butler, 51, of San Juan Capistrano, Calif., was convicted in June 2009 of 693 felony counts, including making untrue statements of material fact in the offer and sale of securities, the offer and sale of unqualified securities, theft from elderly persons, using a scheme to defraud in the sale of a security and filing false tax returns.

    Butler’s wife, Peggy Warmath Butler, 49, was convicted of four felony counts of filing false tax returns. She was sentenced today to one year in jail, followed by seven years’ formal probation.

    Orange County prosecutors objected to her sentence, saying it was too light.

    So many Ponzi victims testified in the sentencing phase of the trial that the process took four days to complete and was interrupted by the holidays. Because so many victims were nearing the end of their life spans, prosecutors recorded their statements on videotape prior to the trial and played them at the sentencing.

    At least six victims died during the course of the trial, and 52 victims died prior to the case being brought before the jury.

    “Many of Jeffrey Butler’s victims had trouble believing that he was capable of stealing their life’s savings,” said Tony Rackauckas, Orange County District Attorney. “He stole more than money from the people who trusted him. Jeffrey Butler also stole his victims’ dignity, independence, and dreams

    “By sentencing him to 90 years in prison it means that Jeffrey Butler will spend the rest of his life in prison unable to victimize another person,” Rackauckas said.

    See Dec. 16 story.

  • BREAKING NEWS: FBI Tells Senate Judiciary Committee It Is Probing 314 HYIP Schemes Only Months After ASD Members Asked Panel To Probe Prosecutors

    Kevin L. Perkins of the FBI tells the Senate Judiciary Committee that the agency is investigating 1,500 cases of securities fraud and that 314 of them involve HYIP fraud in various forms.
    Kevin L. Perkins of the FBI tells the Senate Judiciary Committee that the agency is investigating 1,500 cases of securities fraud and that 314 of them involve HYIP fraud in various forms.

    And to think that only months ago — in February 2009 — various members of AdSurfDaily wrote to the Senate Judiciary Committee trying to elicit support for Ponzi schemes. The letter-writing campaign was spearheaded by “Professor” Patrick Moriarty and pushed by the Pro-AdSurfDaily Surf’s Up forum.

    But now the FBI has told the committee, led by Sen. Patrick Leahy, D.-Vermont, that it has registered a 105 percent increase in HYIP fraud and opened 314 investigations in 2009, up from 154 in 2008.

    “[M]any [had] losses exceeding $100 million,” said Kevin L. Perkins, assistant director of the FBI’s Criminal Investigations Division.

    Perkins said the probes cover the gamut — from the massive Ponzi scheme fraud of Bernard Madoff to smaller variations of the Ponzi scheme.

    “These schemes use money collected from new victims, rather than profits from an underlying business venture, to pay the high rates of return promised to earlier investors,” Perkins told the Committee.  “This arrangement gives investors the impression there is a legitimate, money-making enterprise behind the fraudster’s story; but in reality, unwitting investors are the only source of funding.”

    During his testimony, Perkins also referenced “prime-bank schemes” in which victims are told that “certain financial instruments such as notes, letters of credit, debentures, or guarantees have been issued by well-known institutions such as the World Bank, and offer a risk-free opportunity with high rates of return.”

    In August 2008, in a forfeiture complaint against the assets of AdSurfDaily and Golden Panda Ad Builder, federal prosecutors revealed that Golden Panda President Clarence Busby had been sued civilly by the SEC in the 1990s after he was implicated in three prime-bank schemes. At the same time, prosecutors revealed ASD President Andy Bowdoin had been arrested for felony securities fraud in Alabama during the same decade.

    Despite the Ponzi allegations against ASD and the histories of Bowdoin and Busby, Surf’s Up urged the Judiciary Committee to investigate the prosecutors who brought the forfeiture cases against ASD and Golden Panda in August 2008.

    “We each need to explain [to Leahy] how thousands of innocent Americans have suffered and continue to suffer because of these incredible and despicable acts” by prosecutors, Surf’s Up urged members.

    Law enforcement is investigating a stunning number of securities-fraud cases, the FBI revealed.

    “The FBI continues to aggressively investigate this criminal threat, and currently has more than 1,500 related securities fraud investigations,” Perkins said.

    Read about the Moriarty/Surf’s Up letter-writing campaign to the Senate Judiciary Committee.

  • Ponzi Suspect to Judge, ‘Jail Me’; Judge To Ponzi Suspect, ‘OK’; Minnesota’s Gerard Frank Cellette Jr. Booked Into Hennepin County Jail On 36 Felony Counts

    Reporters prepare for news conference in Gerard Cellette Ponzi case.
    Reporters prepare for news conference last month in the Gerard Cellette Ponzi case.

    Gerard Frank Cellette Jr. was implicated by prosecutors in an alleged $53 million Ponzi scheme in Minnesota last month.

    Cellette, 44, of Andover, Minn., asked a judge to jail him yesterday — and the judge granted his wish. Cellette now is Inmate No. 2009034708 in the Hennepin County Sheriff’s Jail. He was charged Nov. 5 with 36 felony counts of fraud in the offer and sale of securities.

    The charges were brought by Hennepin County  Attorney Mike Freeman. Cellette technically is jailed awaiting trial, but a trial may not occur because he is helping prosecutors unravel his own scheme.

    Ponzi schemes are plaguing Minnesota. AdSurfDaily, an alleged $100 million Ponzi scheme operating from Florida, was popular in the state in 2008. Three weeks ago the SEC and the CFTC accused two Minnesota residents — Christian radio host Pat Kiley and money manager Trevor Cook — of operating a $190 million Ponzi scheme involving foreign currency trading.

    Cook was said to have bought a private island in Canada with some of his loot — along with a submarine to access the island. Cook took the 5th Amendment at a proceeding last week.

    Meanwhile, a jury in Minnesota returned a guilty verdict last week against Minnesota businessman Tom Petters in a $3.65 billion Ponzi scheme.

    The early speculation in Minnesota is that Cellette knows he is going to serve time for his Ponzi scheme — so he might as well start serving it early and spare taxpayers the bill for a trial.

    Ten of the 36 felony securities counts against Gerard Frank Cellette Jr. in Minnesota.
    Ten of the 36 felony securities counts against Gerard Frank Cellette Jr. in Minnesota.

  • Racketeering Alleged In 14-Year-Old Denver Ponzi Scheme; Mark J. Jackson Indicted Under State Law By Local Prosecutor

    ponziblotterThink the Feds are the only thing to worry about if you’re in the Ponzi scheme business? Think again.

    In yet another prosecution that demonstrates Ponzi schemers have more to fear than federal agencies such as the SEC, the CFTC, the FBI, the Secret Service, the IRS and the Postal Inspection Service, a Colorado man has been indicted by a local prosecutor under state racketeering, securities, theft and forgery laws.

    Mark J. Jackson was sued civilly in April by Colorado Securities Commissioner Fred J. Joseph and Colorado Attorney General John W. Suthers. An order prohibiting the destruction of records was entered, and a receiver was appointed. The receiver now is suing Jackson’s father, Ted Jackson, amid allegations that the elder Jackson was a partner in the scheme and was unjustly enriched.

    Denver District Attorney Mitchell Morrissey, a local prosecutor, opened a criminal probe, with the assistance of the Colorado Division of Securities. That local and state investigation resulted in the criminal indictment against Mark Jackson.

    Mark Jackson, 55, was charged with 59 felony counts, including a single count of violating the Colorado Organized Crime Control Act and, as part of the racketeering scheme, 11 counts of securities fraud, 17 counts of theft and 30 counts of forgery.

    “[B]eginning in 1995 Jackson portrayed himself as a successful day trader and took money from investors with promises of returns from 12 to 36 percent,” prosecutors said. “[I]nstead of investing the money, Jackson used it to pay other investors and also used investor money for his personal benefit.”

    At the same time, prosecutors said, “Jackson prepared phony profit and loss statements and other documents with false statements.”

    Victims sustained losses “estimated to be in the millions of dollars,” prosecutors said. Court documents suggest the alleged scheme involves more than $41 million.

    Jackson is expected to surrender this week. Morrissey’s Economic Crime Unit is spearheading the probe.

    Individual investors also are suing Jackson.

  • Joseph Forte Charged With $50 Million Ponzi Fraud

    First the SEC sued fund manager Joseph Forte, accusing him of running a Ponzi scheme that fleeced investors out of tens of millions of dollars.

    Now Forte has been charged criminally with mail fraud. Authorities said his victims included a church, a charity and a private school.

    The SEC sued Forte, 53, of Broomall, Pa., on Jan. 7, accusing him of running a $50 million Ponzi scheme over a period of 12 years. The U.S. Postal Inspection Service entered the case, filing an affidavit for an arrest warrant after learning Forte used the mails to defraud dozens of investors.

    Authorities said the scheme collapsed when Forte no longer could make redemptions because he wasn’t getting enough money from new investors to pay off earlier investors.

    “Between 1996 and 2008, Forte raised tens of millions of dollars in investment capital from roughly 80 investors, including at least one charitable foundation, one church, and one private school,” said George Clark, a postal inspector, in an affidavit.

    “Several investors have advised government agents that they had been directed to the fund through ‘word of mouth’ and were attracted to the fund’s reported gains which ranged from at least 18% to 37%,” Clark said.  “At no time did the fund report a loss to investors, even though Forte consistently lost money on his actual investments.”

    Forte provided fraudulent information to an accountant to advance the scheme, Clark said. The accountant prepared clients’ statements based on the bogus information, using the mails to send the statements. The accountant has not been charged.

    Feds: ‘False’ In Its Entirety

    Forte’s Ponzi scheme was just an exercise in creative writing, authorities said. While he told clients the fund had more than $154 million, it actually had $150,000.

    “The last statement received by investors for the third quarter of 2008 indicates that the fund had a return of 18.88% for the quarter and that the Joseph Forte LP fund’s total value as of September 30, 2008 was $154,700,189,” Clark said.

    In truth, Clark said, the value of Forte’s trading account was only $150,000. The account was closed in October, but Forte continued to collect  money from clients until Dec. 19, Clark said.

    “According to Forte, all reported returns were false in their entirety and were simply numbers that [he] fabricated,” Clark said. “Forte admitted that in every quarter from 1996 through the end of 2008, the reported returns were false.

    “Forte told investigators that he believed that he would realize gains at some point and that he would be able to return to investors their principal plus their reported returns,” Clark continued. “Between 1996 and 2008, however, Forte never earned the returns that he had reported. In fact, an examination of records between 1998 and 2008, indicates that over that time period, Forte’s trading account suffered aggregate trading losses of $3.3 million.”

    Despite the losses, Clark said, new investors continued to give Forte money because he shielded the losses and reported high rates of return. Forte did not even execute trades for sustained periods of time, simply gathering money and depositing it in a bank.

    “[F]rom December 2004 to December 2008, there were 26 months in which Forte made less than three trades, including 16 months in which Forte made no trades whatsoever,” Clark said.

    Forte told Clark that he  halted his actual trading for long periods of time to practice using his “trading models.”

  • Regulator Cites Uptick In Ponzi Fraud

    “We are seeing an uptick in Ponzi scheme cases because, in this economic climate, new investors cannot be found to perpetuate the scheme. As these schemes collapse, the CFTC will move swiftly to prosecute those who harm innocent investors.” — Stephen J. Obie, CFTC

    “Run the other way” if someone promises you exorbitant investment returns, warned the acting director of enforcement for the the U.S. Commodity Futures Trading Commission (CFTC).

    In a statement, Stephen J. Obie also said regulators were seeing an uptick in Ponzi fraud because of the poor economy.

    Last week, CFTC charged James Ossie of Dawsonville, Ga., and his company, CRE Capital Corp. (CRE) of Alpharetta, Ga., with operating a Ponzi scheme that defrauded investors of about $25 million in a forex scam.

    CFTC said “Ossie and CRE promised pool participants that they would earn a 10 percent return on their money within 30 days by trading United States and Japanese currency pairs. The complaint further alleges that since June 18, 2008, rather than making money for pool participants, Ossie and CRE lost approximately $4.4 million trading forex.

    “Finally,” the agency said, “the complaint alleges that Ossie and CRE operated a Ponzi scheme, in which forex trading ‘profits’ were actually paid from the principal of subsequent pool participants.”

    Obie didn’t mince words.

    “Investors must run the other way when approached by anyone claiming to guarantee exorbitant monthly returns, like those promised by CRE and Ossie,” he said.  “Such representations should raise an immediate red flag that such investment is too good to be true.

    “We are seeing an uptick in Ponzi scheme cases because, in this economic climate, new investors cannot be found to perpetuate the scheme,” Obie continued.  “As these schemes collapse, the CFTC will move swiftly to prosecute those who harm innocent investors.”

    CFTC said the case against Ossie and CRE was the first brought by its Forex Enforcement Task Force. Congress granted the agency new powers last summer under the Food, Conservation, and Energy Act of 2008.

    Under its new mandate, CFTC is resposible for “investigating and litigating fraud in the  off-exchange retail foreign currency (forex) market.”

    CFTC’s task force will focus on fraud in the retail forex market and will work cooperatively with other federal and state regulatory and criminal authorities.

    “The formation of the CFTC’s new Forex Enforcement Task Force reaffirms our agency’s commitment to stopping unscrupulous individuals working in this space,” said Michael Dunn, head of CFTC’s  Forex Education and Outreach Task Force.

    “This announcement sends a clear signal that the CFTC is on the beat, and that our continued and increased cooperation with law enforcement authorities will help put these forex dealers where they belong – in jail.”

    Obie said forex fraud affects investors of all stripes.

    “With the creation of the retail forex task force, the CFTC has committed the resources necessary to expand its efforts to identify and prosecute those who commit fraud in the retail forex market.”

    The SEC also charged Ossie and CRE.

  • Marcus Schrenker Captured Near Quincy, Fla.

    schrenkerartBLOG UPDATE 12:44 P.M. EST (USA): The U.S. Marshals Service has issued an updated statement on the capture of Marcus Schrenker. It is reproduced at the bottom of this post.

    Here, directly below, is our initial post . . .

    Authorities said they believed Indiana investment adviser Marcus Schrenker staged the crash of his Piper PA46 and faked his own death, parachuting from the plane to avoid prosecution for securities fraud.

    The crash occurred Sunday in Florida. A manhunt ensued.

    Schrenker, who walked away from a brief post-crash encounter with law-enforcement before authorities knew the circumstances of the case, was captured last night at a campground near Quincy, Fla.

    Police said he had slashed one of his wrists, but the injuries did not appear to be life-threatening.

    Schrenker was under investigation by Indiana authorities for securities fraud and for providing investment advice without a license. He’d also been the target of a successful lawsuit in which a judge ordered him to return $433,000 in commissions earned fraudulently from a Maryland company.

    View the Schrenker arrest warrant at FindLaw.

    The U.S. Marshal’s Service issued a statement in plainspeak to announce the capture, which occurred about 10 p.m.

    “This evening, members of a Florida-based U.S. Marshals Service task force found fugitive Marcus Schrenker at a campground near Quincy, Fla., in Gadsden County.

    “Acting on information received, a group of about 20 task force members, along with state and local authorities, approached a tent with Schrenker inside. Upon entering the tent, it became apparent that the subject had lost a great deal of blood from a deep cut to one of his wrists.  Schrenker was treated at the scene and flown to Tallahassee Memorial Hospital via Life Flight. At this time, his injuries are not believed to be life threatening.”

    Quincy, a small town that has seen better financial times, is a short drive from Tallahassee in northern Florida.

    It is the headquarters of AdSurfDaily Inc., a company federal prosecutors accused last summer of selling unregistered securities and operating a $100 million Ponzi scheme.

    UPDATE: U.S. Marshals Service Statement:

    “Fugitive Marcus Schrenker remains in the Tallahassee Memorial Hospital this morning receiving treatment for what appears to have been self-inflicted wounds to the wrist and forearm of his left arm. He is still under the custody of U.S. Marshals at this time. Schrenker was discovered approximately 10:00 p.m. last evening in a tent at the KOA campground near Quincy, Fla., in Gadsden County.

    “Schrenker was administered first aid by the law enforcement personnel on scene. A Life Flight helicopter was directed into the campground for transportation of Schrenker to the hospital.

    “Schrenker’s apprehension came just several hours after the U.S. Marshals in the Southern District of Indiana were handed a pair of warrants for his arrest. A coordinated effort by U.S. Marshals in Indiana, Alabama and Florida led task force, plus state and local authorities to the campground.

    “I want to thank and congratulate all of the law enforcement personnel who worked so diligently to find Marcus Schrenker. His apprehension brings to an end one of the more inventive escape attempts I have ever seen,” said Director John F. Clark of the U.S. Marshals Service. “Just as important is the fact that once our people found Schrenker, and realized what bad shape he was in, they were every bit as determined to save his life as they were to track him down.”