PatrickPretty.com

Tag: U.S. District Judge R. Gary Klausner

  • BULLETIN: SEC Calls U.S. Fine Investment Arts Inc. (USFIA) A ‘Worldwide Pyramid Scheme’ Tied To ‘Gemcoins’

    breakingnews725BULLETIN: (7th update 3:26 p.m. EDT U.S.A.) An SEC complaint against USFIA Inc. first reported on Tuesday by the Sierra Madre Tattler and BehindMLM.com now has become public, with the SEC calling the venture a “worldwide pyramid scheme” that gathered on the order of $32 million while claiming it was backed by amber mines and duping MLM participants into believing they’d score big through a purported cryptocurrency known as Gemcoins.

    Among the deceptions, according to the SEC, was that “the United States government has purchased 70% of the Gemcoins in circulation.”

    The SEC complaint follows by less than two months a complaint by the FTC that called Vemma, another MLM program, a pyramid scheme.

    “We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.”

    Here’s how the SEC described the action, which has led to asset freezes ordered by U.S. District Judge R. Gary Klausner of the Central District of California (italics added):

    This is an action brought to halt an ongoing securities offering fraud perpetrated by defendant Steve Chen, and various purported business entities that he operates and controls including defendants US Fine Investment Arts, Inc. (“USFIA”), Alliance Financial Group, Inc. (“AFG”), Amauction, Inc., Aborell Mgmt I, LLC, Aborell Advisors I, LLC, Aborell REIT II, LLC, Ahome Real Estate, LLC, Alliance NGN, Inc., Apollo REIT I, Inc. Apollo REIT II, LLC, Amkey, Inc., US China Consultation Association (“USCCA”), and Quail Ranch Golf Course, LLC. All of these entities are co-located in an office building owned by one of Chen’s business entities, Apollo REIT II, LLC, located in Arcadia, California.

    “In the face of growing investor unrest, and negative publicity in the press, Chen was interviewed by the Arcadia Police Department on September 15, 2015, regarding his operation of USFIA,” the SEC alleged. “Immediately after that interview, Chen attempted to wire $7.5 million out of USFIA’s bank account at Bank of America to a bank in the Peoples Republic of China. The wire was broken down into two parts, and $3.5 million was sent abroad, while the remainder is still held by the bank.”

    What about the amber? Some investors received some, and discovered it was “practically worthless,” the SEC alleged.

    USFIA sold unregistered securities in tiers and tied them to a recruitment scheme, the agency charged.

    “USFIA also represented that it had an extensive bonus and award system to encourage investors to recruit additional investors,” the SEC charged. “As set forth in its written investor ‘Compensation Program,’ investors could choose from five different ‘packages’ ranging in amounts of$1,000, $2,000, $5,000,$10,000 and $30,000. Depending on the type of package purchased by a downstream investor, the recommending investor would receive a 10% ‘Recommendation Award,’ and an additional ‘binary”‘reward based on sales of an investor’s downline investors. Investors would also receive a ‘Recurring Bonus’ generated by different ‘generations’ of downstream investors, ranging from 5% to 20%.”

    As was the alleged circumstance with Vemma, USFIA allegedly used showy automobiles to lure prospects. At USFIA, prospects also allegedly were lured with the prospect of owning a dream home on a golf course.

    Though USFIA initially claimed investors would score through an IPO, the IPO never materialized. Investors then were told they’d receive gemcoins, “some type of digital currency,” the SEC alleged. The gemcoins purportedly were backed by amber holdings in the Dominican Republic and Argentina.

    Chen and USFIA issued “outlandish statements” to dupe the masses, the SEC charged.

    Read the SEC complaint.

    See the Tattler’s coverage (Tuesday into Wednesday). See BehindMLM’s coverage.

  • Judges Across United States Hammer Forex Ponzi-Schemers And Commodities Fraudsters; Nearly $100 Million In Penalties Announced Last Week Alone

    Federal judges in California, New York, Tennessee and Arizona last week ordered spectacular financial penalties against Forex and commodities fraudsters.

    Dennis R. Bolze was assessed a penalty of more than $36.6 million and ordered to pay restitution of more than $13 million to investors he scammed. The orders were entered by Chief U.S. District Judge Curtis L. Collier of the Eastern District of Tennessee.

    Bolze was sentenced last year to more than 27 years in federal prison by U.S. District Judge Thomas A. Varlan, also of the Eastern District of Tennessee.

    Meanwhile, Robert D. Bame was assessed restitution and a financial penalty totaling $46.9 million by U.S. District Judge R. Gary Klausner of the Central District of California.

    In May 2009, Bame was sentenced to 97 months in federal prison for wire fraud and engaging in monetary transactions with property derived from specified unlawful activity.

    The cases against Bame and Bolze alone resulted in monetary sanctions of more than $96.6 million.

    Separately, a restitution order and penalty totaling more than $1.1 million was entered against Helmut H. Weber by U.S. District Judge David G. Campbell of the District of Arizona. Weber was indicted in October 2008 by state authorities for fraud and the misappropriation of customer funds.

    In New York, meanwhile, Jeffrey Shalhoub was ordered to pay more than $700,000 in restitution and penalties. Those orders were entered by U.S. District Judge Joanna Seybert of the Eastern District of New York.

    The CFTC, which brought the civil cases against each of the defendants referenced in this story, said Shalhoub ran a Ponzi scheme, using customers’ money to “pay for computer and golfing equipment, clothing, car payments on a Land Rover and a $3,500 tab at a Manhattan restaurant.”

    Bolze, one of the earliest of the so-called “mini-Madoffs,” also ran a Ponzi scheme. Bolze bolted from Tennessee in December 2008, the same month the Madoff Ponzi was exposed.

    After his arrest in Pennsylvania, Bolze asked for an opportunity to recoup the money he had fleeced from victims. All he needed, he argued to a federal judge, was the Internet, a computerized program — and a little time.

    Bame, the CFTC said, “diverted about $19 million of investors’ money either to pay off other investors or for his personal use, such as purchasing automobiles or traveling in private jets.”

    In the case of Weber, the CFTC said, “the majority of the funds were misappropriated to pay for [his] lavish lifestyle.”