Sign of the apocalypse? The headquarters of the “3 Hebrew Boys” Ponzi scheme in Columbia, S.C., was gutted in a fire Monday and Tuesday. Firefighters spent 19 hours over two days battling the blaze, but the “building and all contents . . . were completely destroyed,” according to Beattie B. Ashmore.
Ashmore is the court-appointed receiver in the case. Proof-of-claim forms for victims of the $80 million Ponzi swindle became available April 15, only 11 days before the fire broke out. The cause of the fire is under investigation, and the building was an asset of the receivership estate.
“All computers and documents have been stored off-site since the Receiver took possession of the building in October 2007,” Ashmore said. “The building was being managed by a reputable property management company, fully insured and continuously monitored by a security company. The Receiver will make a claim immediately with the Hartford Insurance Company for the full value of the building with the insurance proceeds going to the benefit of the victims.”
The 3 Hebrew Boys case is one of the strangest in the United States, drawing comparisons to the alleged AdSurfDaily Ponzi scheme owing to elements of affinity fraud and antigovernment rhetoric.
Joseph Brunson, Tim McQueen and Tony Pough were convicted in November of swindling tens of millions of dollars in a bogus debt-relief “ministry.” The purported aim of the program was to free people from government “bondage,†and the investigation was referred to as “Satan’s handiwork.â€
In the earliest days of the 3 Hebrew Boys case, more than 100 people protested on behalf of the scheme at a rally in Columbia, saying the government did not understand the program, had overreached in its prosecutorial efforts, refused to deny it was wrong and had chosen to move forward with the case in a bid to save face.
In an approach similar to one used by the AdViewGlobal (AVG) autosurf, members were forced to agree to a confidentially clause that purportedly prohibited them from discussing the company outside the confines of meeting places. Participants were threatened with a $1 million penalty for sharing information.
AVG, which has close ties to ASD, morphed into a “private association†in February 2009. Members were scolded for sharing information and calling the autosurf an “investment†program. As the company appeared to be collapsing in May and June, members were threatened with copyright-infringement lawsuits for sharing information published by the firm.
Brunson, McQueen and Pough are jailed awaiting sentencing. After they were found guilty of 174 counts mail fraud, money-laundering and transporting stolen goods, the men filed documents accusing former U.S. Attorney Walt Wilkins of treason and committing acts of war by prosecuting them.
The men became known as “3 Hebrew Boys†after operating a website with the same name, which is based on a biblical story of believers who escaped a furnace by relying on their faith. The Ponzi scheme operated under the name Capital Consortium Group LLC.
Minnesota Ponzi Sentencing
A Ponzi scheme operator in Rosemount, Minn., has been sentenced to 117 months in prison and ordered to pay $21.8 million in restitution to victims.
Charles “Chuck†E. Hays, 56, has been detained since his arrest in February 2009. He pleaded guilty last year to one count of mail fraud, one count of wire fraud and one count of structuring transactions to avoid financial reporting requirements.
Among the items seized in the case was a $3 million yacht acquired with investors’ money. Hays operated a firm known as Crossfire Trading LLC and bilked investors out of more than $20 million by operating a Ponzi scheme.
“Hays told potential investors he was a day trader in stock index futures and other futures contracts,” federal prosecutors said.
Investors plowed money into the scheme based on lies told by Hays, and he “admitted he diverted and converted those funds for his personal use and other unauthorized purposes,” prosecutors said.
The sentencing judge in the case was U.S. District Judge Donovan Frank.
California Ponzi Sentencing
Milton Retana, 46, of Huntington Park, was sentenced to 25 years in prison for a $62 million Ponzi scheme that bilked mostly Spanish-speaking investors out of at least $33 million.
The case became known as the “Best Diamond case.” Retana operated a purported real-estate investment company known as Best Diamond Funding. It was yet another instance another in which the name of a precious metal or mineral was used in a Ponzi scheme.
Evidence of the fraud was hidden in the back of a religious bookstore operated by Retana’s wife, prosecutors said. When investigators searched the bookstore, they found millions of dollars in cash. Best Diamond was located next door to the bookstore.
The scheme — like many other Ponzi schemes — featured an appeal to religion, prosecutors said.
“Best Diamond Funding solicited money through advertisements in Spanish-language magazines, on the Internet, and during weekly investment seminars at locations across Los Angeles. The raucous investment seminars often had as many as 300 potential investors and incorporated religious messages,” prosecutors said.
“Retana guaranteed returns as high as 84 percent each year, claiming that he would purchase properties in bulk at below-market prices and immediately sell them for a profit,” prosecutors said. “However, records obtained by federal investigators showed that Retana used only a tiny fraction of the victims’ money to purchase real estate and that his company was actually losing money.”
The sentencing judge in the case was U.S. District Judge R. Gary Klausner.
Monty Ervin, the self-styled “sovereign citizen” who declared himself “governor” of Alabama in its “original jurisdiction” and a “Most Christian Prince,” has been sentenced to 10 years in federal prison for his role in scheme that masked the ownership of real estate by placing it in the names of bogus trusts and relied on structured transactions to evade currency-reporting requirements.