March 1, 2016 Comments (0) Blog

Examples of Ponzi Schemes and the SEC’s investigation of those schemes

Ponzi Schemes
(Last Updated On: April 7, 2017)

What Is A Ponzi Scheme?

Names after Charles Ponzi, a Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi schemes organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of money from new investors to continue. Ponzi schemes inevitably collapse, most often when it becomes difficult to recruit new investors or when a large number of investors ask for their funds to be returned.

There have been a number of Ponzi schemes over the last few years.  Here are just a few that the SEC has investigated.

According to the SEC website, the following are examples of SEC enforcement actions against Ponzi schemes:

2014 ·         Neal V. Goyal – SEC charged a Chicago-based investment fund manager with operating a Ponzi scheme that used new investor funds to pay redemptions to existing investors and fund his own lavish lifestyle.

·         Gaeton “Guy” Della Penna – SEC charged a Sarasota, Fla.-based private fund manager with defrauding investors in a Ponzi scheme that ensued after he squandered their money on bad investments and personal expenses.

·         Joseph Signore and Paul L. Schumack II – SEC charged the operators of a South Florida-based Ponzi scheme targeting investors through YouTube videos and selling them investments in a product called virtual concierge machines (VCMs) that would purportedly generate guaranteed returns of 300 to 500 percent in four years.

2013 ·         Christopher A.T. Pedras – SEC charged the conductor of a Ponzi scheme involving U.S. and New Zealand-based companies peddling sham investment opportunities ranging from a bank trading program to kidney dialysis clinics.

·         Jenny E. Coplan – SEC charged a woman living in South Florida with defrauding investors in a Ponzi scheme and affinity fraud that targeted the local Colombian-American community and involved purported investments in immigration bail bonds.

·         John K. Marcum – SEC charged an Indiana resident who falsely touted himself as a successful trader and asset manager to raise more than $6 million from investors. He squandered the money on personal luxuries and other ventures such as a reality TV show, and continued soliciting money from new investors to pay earlier investors’ redemption requests.

·         Trendon T. Shavers – SEC charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin.

·         Alvin R. Brown and First Choice Investment – SEC shut down a $3 million Ponzi scheme that targeted seniors, including an elderly investor suffering from a stroke and dementia, by falsely promising high profits from commercial and residential rental properties in California and other Western states.

2012 ·         Ricardo Bonilla Rojas and Shadai Yire – SEC charged a Puerto Rico resident and his company with conducting a $7 million Ponzi scheme that targeted evangelical Christians and factory workers in Puerto Rico.

·         Jim Donnan and Gregory Crabtree – SEC announced fraud charges against a former college football coach who teamed with an Ohio man to conduct an $80 million Ponzi scheme that included other college coaches and former players among its victims.

·         Bridge Premium Finance – SEC announced fraud charges and an emergency asset freeze against a Denver-based company and Colorado residents Michael Turnock and William Sullivan II for carrying out a $15.7 million Ponzi scheme harming more than 120 investors nationwide.

·         Gurudeo “Buddy” Persaud – SEC charged a former broker from Orlando, Fla., who defrauded investors in an astrology-based Ponzi scheme in which his trading strategy was based on his belief that markets are affected by gravitational forces.

·         John Geringer – SEC charges a Northern California-based fund manager with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

·         David Connolly – SEC charged a New Jersey man with operating a Ponzi-like scheme involving a series of investment vehicles formed for the purported purpose of purchasing and managing rental apartment buildings in New Jersey and Pennsylvania.

2011 ·         Wendell Jacobson and Allen Jacobson – SEC charged a father and son in Utah with selling purported investments in their real estate business that turned out to be nothing more than a wide-scale $220 million Ponzi scheme.

·         Garfield M. Taylor – SEC charged a Bethesda, Md. man and several family members and friends with conducting a multi-million dollar Ponzi scheme targeting investors in the Washington, D.C. metropolitan area.

·         Eric Aronson – SEC halted a Ponzi scheme that bilked investors of approximately $26 million based on promises of rich returns on water-filtering natural stone pavers. The U.S. Attorney’s Office for the Eastern District of New York brought a parallel criminal action against Aronson and others.

·         Doris E. Nelson – SEC charged the owner of a Spokane, Wash.-based payday loan business with conducting a massive Ponzi scheme that raised approximately $135 million from hundreds of investors. The U.S. Attorney’s Office for the Eastern District of Washington brought a parallel criminal action against Nelson and others.

·         James Davis Risher and Daniel Joseph Sebastian – SEC charged two Florida men with operating a Ponzi scheme disguised as a purported private equity fund that fraudulently raised approximately $22 million from investors, several of whom were Florida teachers or retirees. The U.S. Attorney’s Office for the Middle District of Florida brought a parallel criminal action against Risher.

·         David Ronald Allen – SEC halted a Ponzi scheme perpetrated by the co-founder of China Voice Holding Corp. and two associates that raised at least $8.6 million from investors who were promised returns of at least 25 percent.

·         James Clements and Zeina Smidi – SEC charged two South Florida residents for conducting a $30 million Ponzi scheme in which investors were promised guaranteed monthly returns as high as 11 percent from the trading of foreign currencies.

·         John Scott Clark – SEC halted a Ponzi scheme orchestrated by a Utah resident that raised more than $47 million from at least 120 investors for purported funding of payday loans.

·         Jason Bo-Alan Beckman – SEC obtained an emergency asset freeze against a Minnesota resident and his investment advisory firm in a Ponzi scheme that raised at least $194 million from nearly 1,000 investors in fraudulent offerings related to foreign currency trading. The U.S. Attorney’s Office for the District of Minnesota brought a parallel criminal action against Beckman and others.

·         Francisco Illarramendi – SEC charged a Connecticut-based investment adviser and its principal for misappropriating investor assets and misusing two hedge funds for Ponzi-like activity. The U.S. Attorney’s Office for the District of Connecticut brought a parallel criminal action against Illarramendi.

The White Law Group often handles claims involving a Ponzi scheme, generally going after the financial advisors or brokerage firms that recommended the Ponzi scheme or in some cases even operated it.  Brokerage firms have an obligation to their clients to perform adequate due diligence on all investments they recommend.  As such, if a firm fails to discover an obvious Ponzi scheme and then sells that “investment” to its clients, the firm can be held responsible for the resulting losses.

Recovery of Investment Losses

If you believe that you have been the victim of a Ponzi scheme, please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.  The firm represents investors throughout the country in claims against their brokerage firm or financial advisor.

For more information on the firm and its representation of investors, visit http://www.whitesecuritieslaw.com.