Actions Against Prime Bank Scam Investment Fraud Scheme Examples Offering High-Yield Instruments
On October 30, 2000, Steven C. Roberts pleaded guilty to seven counts of mail fraud and was sentenced to seven concurrent terms of 27 months imprisonment with a 3 year special parole term at the end and ordered to make restitution of $3,373,000.
Roberts and his co-conspirators, including Robert Cord, alias Robert F. Schoonover, Jr. (who earlier was sentenced to 60 months imprisonment and a $25,000 fine), promised investors returns of up to 30% per month purportedly guaranteed either by a major European bank or by a Caribbean-based insurer.
Because there was no real investment, some investors received partial, "Ponzi" payments, and others received nothing. Much of the $15 million taken in by Roberts, Cord and the others were used to purchase or improve houses, acquire automobiles and watercraft and support lavish life styles.
On November 13, 1998, the SEC obtained a temporary restraining order against their activities and obtained an asset freeze and a receiver.
In default judgments which were entered 05/01 against Robert Cord, WinterHawk West Indies, Ltd., Funders Marketing Company, Inc., FMCI Trust, Earl McKinney, Fortune Investments, Ltd., and TREDS Financial Trust, the Court ordered Cord and WinterHawk, jointly and severally, to pay disgorgement of $6,290,980 with interest; Funders and FMCI, $8,174,332; McKinney and Fortune $3,432,621; and TREDS $966,183.
On November 6, 2000, a default judgment against Funding Resource Group ordered it to pay disgorgement of $9,993,929 with interest.
B. David Gilliland, an individual who assisted the scheme, has entered a guilty plea to securities fraud in Florida, and others who participated in the scheme were convicted by a jury there. All are awaiting sentencing. Still others are the subjects of federal and state criminal investigations.
(SEC v. Funding Resource Group, Case No. 4:98-CA-2689)
High Yield Prime Bank Ponzi Scheme
11/00 - The SEC announced a Permanent Injunction and other Equitable Relief (Order) against Roy E. Matlock and Alan Root who consented without admitting or denying the allegations.
It was alleged in 11/99 that, from November 1992 through May 1993, Matlock and Root, through their companies Legacy Trust and Legacy Management Group, Inc., raised $3.5 million from 8 investors, including $3.2 million from the Chicago Housing Authority pension plan.
Investors were told that their funds would be pooled with other investors' funds to buy and sell prime bank instruments, specifically, letters of credit, standby letters of credit, and notes issued by the top 100 world banks, all of which do not exist.
The Complaint further alleged that Matlock and Root told investors to expect a high rate of return on their investment, and their principal investment was guaranteed even though they suffered losses of over $2.6 million dollars.
Instead of investing the money as represented, they allegedly used the funds to pay personal and business expenses and to operate a Ponzi scheme by paying interest and principal to prior investors.
On November 20, 2000, the SEC got an Order Freezing Assets, Requiring an Accounting, Requiring Preservation of Documents and Authorizing Expedited Discovery, and appointed a receiver for all defendants and relief defendants.
Jerry Eaton, Kevin J. Kyes, John A. Di Pietro and Craig D. Hawkins are accused of misappropriating approximately $5 million of Perennial Fund I LP investors' monies which was raised from investors through false and misleading claims that investor proceeds would be invested in safe instruments, such as U.S. government securities.
Further, they claimed that based upon these investments, Perennial Fund would enter into secondary trading efforts that purportedly were designed so that investor monies would never be at risk.
In reality, Kyes, Di Pietro and Hawkins misappropriated approximately $500,000 of investor monies to, among other things, make "Ponzi" payments to investors, and transferred the remaining $4.5 million to Eaton.
In turn, Eaton, a former truck driver who resides in Las Vegas, Nevada d/b/a Island Park Business Trust and claimed to be a federally approved "trader" of prime bank instruments, misappropriated these monies, in part to purchase two luxury homes.
In addition, Kyes, Di Pietro and Hawkins falsely claimed to investors that the Perennial Fund had been purchased at an enormous profit and sent investors a false statement setting forth fictitious profits. They then lulled investors with various false explanations for the delay in distributing these profits.
At the same time that they touted Perennial's purported success, Kyes, Di Pietro and Hawkins began to offer Sentinel Fund I LP, a new, but very similar, investment.
The Commission's complaint charged Kyes, Di Pietro, Hawkins, Eaton, Perennial Fund, Perennial Investments, Sentinel Fund and Sentinel Investments with violating the antifraud provisions found in the Securities Act.
The Commission also charged, as relief defendants, Harold L. Killgore, Alex Volodarsky, Carl T. Johnson, James A. Person, Snappy Enterprises, Inc. and Malachi Financial Corporation, who collectively received at least $2.9 million of investor monies.
12/00 - The SEC filed an action seeking injunctions, penalties and relief against Phillip Ezell, of Indiana, for offering unregistered and fictitious "prime bank" instruments over the Internet from March 1998 to August 2000.
The Commission alleges that Ezell, doing business as 21st Century Funding, offered investment programs involving supposedly risk-free trading in "bank debenture notes" issued by the "top banks" of the world. This was said to generate enormous returns of up to 80 percent per week, that profits were guaranteed, and that these programs were regulated by the United States Federal Reserve or the International Chamber of Commerce.
01/01 - The SEC has entered final judgments against H.D. Inc. and St. Barth LTD., two entities involved in promoting a "prime bank" scheme.
H.D. Inc., formerly a New Jersey corporation, and St. Barth, formerly registered in the Commonwealth of the Bahamas, both consented to the judgments, without admitting or denying the allegations of the Commission's complaint.
Although they were enjoined from further violating the Securities Act and also agreed to pay disgorgement of $803,470 plus prejudgment interest of $651,507, the court waived the payments and did not impose civil penalties based on their demonstrated inability to pay.
The complaint alleged that they, along with others, fraudulently obtained more than $1.7 million from at least three individuals by offering and selling securities in the form of participations in investment programs purportedly to trade prime bank instruments.
The trading was to result in spectacular profits for investors--returns of ten to fifty times their initial investments in two months to two years--at no risk. Instead of using the money as promised, which was impossible, given the bogus nature of the investment, they misappropriated the investors' funds for their own benefit, ultimately transferring most of the money to offshore accounts.
Previous judgments were entered against other defendants in this case. See, Lit. Rel. Nos. 15752, 15819, and 16207. Litigation continues as to the remaining defendants and relief defendants.
02/01 - The SEC issued an order permanently enjoining Wellington Bank and Trust, Ltd, John E. Brinker, Jr., Gary J. Bentz, and entities they control or with which they are associated such as Wellington Capital Nevada, Wellington Capital Bahamas, from engaging in fraud, unregistered sales of securities, and acting as unregistered brokers, in violation of federal securities laws.
The order also freezes the assets of the defendants and relief defendants, appoints an examiner to determine the amount of ill-gotten gains they must disgorge and the amount of civil penalties.
From the Cincinnati, Ohio offices of Castlerock Consulting, LLC, Brinker, 54, and Bentz, 44, sold unregistered securities in an investment program offered by Wellington Bank, which is based in the nation of Grenada.
From at least June 1998 through through February 27, 2001, Brinker, Bentz, and others violated federal securities laws by engaging in a Ponzi scheme that raised at least $7.1 million from over 200 investors. They represented that the program would generate annual returns of 50% or more through trading in non-existent "prime bank" instruments.
Wellington Capital corresponded with investors and provided them forms to process their investments. The Wellington companies were incorporated in Nevada and the Bahamas with Brinker and Bentz as the officers. Wellington Capital Nevada received investor funds in its bank account, which they controlled.
Of the $7.1 million in investor funds raised and deposited in the Wellington Capital Nevada account, Brinker and Bentz transferred at least $5.4 million to themselves, Castlerock, investors, and other individuals and entities with no apparent involvement in any trading program.
The defendants also include several U.S., Grenadan, and Bahamian corporate entities that helped facilitate the scheme along with relief defendants associated with Brinker and Bentz, Alpha Advantage II, Inc., Eleven Eighty-Five, LP and Steadfast Ministries, Inc., that received investor money. They all consented to the court's order without admitting or denying the allegations and the two are barred from association with any broker or dealer.
In a related motion, the Commission alleges that shortly before the asset freeze, Bentz obtained approximately $72,000 through mortgage loans, and after the freeze, he spent those funds in violation of the freeze. Accordingly, they asked the court to hold Bentz in civil contempt and order him to replace the spent funds.
S.E.C. v. John E. Brinker, Jr., et. al., (Case No. IP01 0259 C-H/G)
09/01 - The SEC filed a complaint charging that Gilbert Merrell Wynne and Richard V. Dear engaged in a fraudulent scheme to defraud public investors through the offer and sale of securities issued by three entities controlled by Wynne, namely Kingdom Growth Fund, Ltd., Kingdom Financial Services and Orthodox Church of Jesus Christ, Inc. The complaint seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties against each defendant.
From at least November 1998 through November 1999, Wynne and Dear, directly and through their salespersons, fraudulently induced investors to purchase the securities by making numerous material misrepresentations and omissions including, among other things, guaranteeing investors returns ranging from 15-20% per month.
They claimed that the investments were risk free and that the guaranteed returns would be generated through investing in so-called "prime bank" instruments.
In actuality the instruments touted by the defendants did not exist and there was no reasonable basis for guaranteeing the exorbitant returns.
Ultimately, the defendants raised at least $2.2 million from more than 200 investors located in Pennsylvania and other states. According to the complaint, none of the investor funds was invested as promised. Instead, Wynne used those funds for personal and business expenses, to pay existing investors, and to pay commissions to Dear and other salespeople.
The Commission also charges Stephen W. Beik, an attorney practicing in Florida, with aiding and abetting the fraudulent scheme by drafting certain offering documents used in the scheme, acting as escrow agent for funds raised in the scheme, attempting to generate fees by identifying prime bank investments ostensibly suitable for investor funds and by transferring investor funds to offshore accounts after he was aware that the Commission was investigating the matter.
03/01 - The SEC filed a civil fraud action against Earl A. Abbott, a Florida businessman and three of his sales agents, Richard L. Stalvey, an accountant, Glenn Purdue and Robert E. Gerwin who sold $3.55 million of non-existent prime bank securities which were purportedly supplied by defendant Kenneth C. Nunn, a resident of England.
The Commission's complaint alleges that between May and October 1998 they engaged in the fraudulent offer and sale of unregistered securities in the form of interests in a non-existent "trading program" which would use investor funds to buy and sell "medium term debentures" issued by some of the world's "top 25 banks," with the trading to be conducted by an unidentified "trading group" in a secret location somewhere in Europe.
According to the complaint, they promised the twelve investors in five states extraordinarily high returns (between 80% and 160%) with no risk.
Approximately $3.3 million was wired to an off-shore account on Guernsey in the Channel Islands controlled by Nunn who transferred approximately $1 million to Thomas J. O'Keeffe, of Ireland who, Nunn claimed, would conduct the "trading."
Stalvey agreed, without admitting or denying the allegations, to settle the action by agreeing to the entry of an injunction against him and a disgorgement order requiring him to disgorge $50,000 of ill-gotten gains. Based on his demonstrated inability to pay disgorgement, the settlement agreement waives disgorgement and does not assess a civil monetary penalty.
In an earlier related action, a complaint was filed against Richard J. Briden, a Massachusetts business consultant, in connection with his offer and sale of fraudulent prime bank securities. That complaint alleged that Briden convinced seven investors to invest $295,000 in the Abbott/Nunn program he found through Gerwin.
04/01 - The SEC entered a temporary restraining order against Steven E. Thorn, of Ohio, Karen A. Estrada, of California, and their related entities for raising approximately $64.5 million in a fraudulent prime bank scheme. The judge also ordered that their assets be frozen and that they account for the funds raised.
Since February 1998, Thorn and Estrada raised at least $10.5 million by selling investments in purported European bank trading programs through three entities they controlled, Global Investors Group, LLC, Fund Global, LLC and Global Equity Group, LLC.
Then, since November 1999, Thorn, Estrada, Craig A. Morgan and others raised at least $54 million through three different entities, First Financial Ventures, LLC, Second Financial Ventures, LLC, and Third Financial Ventures, LLC.
In both programs, Thorn and Estrada allegedly made false claims that the money they raised would be used as collateral for the purchase of prime bank instruments issued by European financial institutions.
They also misrepresented to investors that their principal was never at risk and promised rates of return ranging from 7% to 100% per month. Of the total amount raised, at most only $3.8 million could have been used for any legitimate investment purposes, and $1.5 million was used to pay for Thorn's personal expenses.
The Financial Ventures Programs differed from the early schemes only in that they told investors that their funds would remain on deposit in a U.S. bank, that investors would retain control of their funds, which would not be pledged as security or collateral to fund the trading. They also told investors that their principal was never at risk and promised returns of 50% to100% per month.
09/01 - Donald C. Wallace surrendered to federal authorities and was then incarcerated as a result of a Writ of Body Attachment issued in SEC v. Kenton Capital, Ltd., et al. He shall remain in custody until such time as the Court discharges him.
His incarceration resulted from his failure to comply with an order either to pay disgorgement in the amount of $265,245.10 (plus prejudgment interest in the amount of $86,665.83 and post judgment interest) and a civil penalty in the amount of $1.2 million, or enter into an alternate payment plan that was acceptable to the Commission and the Court.
The securities fraud judgment in the underlying case stemmed from a prime bank fraud perpetrated through Kenton Capital, Ltd., an entity incorporated in the Cayman Islands and of which Wallace was President.
09/01 - On December 29, 1999, the Commission obtained final judgments against defendants Scott L. Simpson, Zappa International Corporation, and Westminster Trading Trust, all formerly located in Texas, and Eagle Vision Holdings Inc. and Wayne L. Nattrass, both formerly located in the Seattle, Washington area.
From 09/96-11/98 they allegedly raised approximately $15 million from at least 100 investors through the fraudulent sale of investments in trading programs that supposedly purchased prime bank instruments, by falsely offering guaranteed returns exceeding 200 percent per month, falsely claiming the programs were sponsored by the Federal Reserve Bank and the International Monetary Fund, and falsely representing that investors funds were guaranteed against risk of loss by the top twenty-five world banks.
Simpson, Zappa and Westminster were ordered to pay disgorgement of $5,802,657 plus prejudgment interest of $630,267, and Nattrass and Eagle Vision were to pay disgorgement of $2,405,789 plus prejudgment interest of $209,012.
They consented to entry of the final judgments without admitting or denying the allegations.
On December 28, 1999, Scott Simpson and Wayne Nattrass each pled guilty to one count of conspiracy to commit securities fraud and wire fraud, and Scott Walker pled guilty to one count of wire fraud. Case No. 99-CR-009B (D. Wyo.).
03/00 - A final judgment was also entered against Scott B. Walker and Equity Management Services of Wyoming, based on the sales of interests in a fictitious trading program of prime bank instruments.
The Court found that Walker had no basis for his statements about the prime bank program because he did not obtain a bank guarantee of investors' funds; he did not know the persons trading the funds; had he inquired, he would have learned that the International Monetary Fund does not license traders and neither the International Chamber of Commerce nor the Federal reserve participates in nor approves prime bank instrument trading programs; he had no basis to claim returns of 50 to 100 percent per trade; and he did not disclose that he received a commission of 10 to 20 percent and used investors' funds to pay his personal expenses.
His actions and knowledge were attributed to Equity Management, because he acted as its trustee and agent. The Court ordered them to pay disgorgement of $220,000, plus prejudgment interest of $27,049.
09/01 - An order for summary judgment and judgment of permanent injunction and other relief was signed against Alamin, Inc., and George Louis Vaughn, Jr. who were ordered to pay $500 in civil penalties. Defendants Curt Arvidson and Financial Resources were permanently enjoined by consent on July 31, 2001, and ordered to, and have paid, $10,000 in civil penalties.
The Court found that they solicited at least 23 municipalities located primarily in the western United States, offering to sell over $649 million in interests in a prime bank trading program.
Ultimately, none of the municipalities invested in the scheme in which they claimed they would use the assets as collateral in a prime bank trading program which was endorsed by the International Monetary Fund and guaranteed returns of 130% a month with no risk of loss.
08/01 - The SEC found Washington D.C. attorney Lewis Allen Rivlin liable for securities fraud and ordered him to pay over $6.5 million in disgorgement and prejudgment interest. Based primarily on evidence adduced at a five day bench trial in October 2000, the Court found that Rivlin violated the federal securities laws in 1997-98 when he offered securities involving a non-existent high-yield bank debenture "trading program" to investors and sold $6.239 million of the worthless securities to four investor groups, including $873,000 from the Fundacion Perez Pallarez, an Ecuadorian charity for underprivileged girls.
According to Rivlin, the "trading program" was based on the ability of certain individuals, known as "commitment holders," to buy medium term notes or debentures from the top 25 European banks at a deep discount -- 70% of face value -- and then resell the instruments to major investment firms like Merrill Lynch at only a small discount, perhaps 96% of face value, on some kind of secret trading market.
Rivlin instructed the charity to wire its money to Chrysanthos, a high-ranking bishop from Cyprus who has since resigned amid allegations of ethics violations. Chrysanthos supposedly had links to the lucrative trading programs but was waylaid by a businessman named Dr. Zioudas who assumed control of the cash.
The Court found, however, that Rivlin's "trading program" was "a complete scam," and that none of the investor funds Rivlin obtained was ever used in any "trading program."
The Court further found that "`trading programs' do not exist," that "it is simply ludicrous to think that any sophisticated financial institution would sell something worth $100 for $70," that "there is no secret secondary market," and that "trading programs" are "a variation of the `prime bank' schemes.
The Court noted that according to a credible and convincing expert witness from the Federal Reserve Board who testified at the trial, there are a number of hallmarks or characteristics of financial instrument fraud, including
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the use of the term "prime bank" or an equivalent like top 50 world banks, top 25 European banks or top 100 Latin American banks; |
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the promise of unrealistic rates of return with little or no risk; |
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overly complex, nonsensical "gobbledygook"; |
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an emphasis on secrecy; |
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a guarantee that the investors' principal is absolutely safe because it is going into an attorney's or some other special account, or secured by a bond or other guarantee; |
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use of jargon from a bucket of 30 or so bogus terms and phrases, such as "international banking day" and "commitment holder"; and |
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alleged involvement in a charitable endeavor or world humanitarian effort. |
The Court ordered him to pay $5.166 million in disgorgement plus approximately $1.391 million in prejudgment interest. The Court explained that the disgorgement amount represents the $6.239 million invested by the four investor groups in the "trading program," less amounts recovered to date on behalf of investors, including $873,000 the SEC obtained from relief defendants in Greece. Of that amount, $650,000 was returned to the Ecuadorian girls' school.
The original complaint also named Edwin Earl Huling III and Alfred Huascar Velarde with Z-Finance S.A, Anthony P. Zioudas, Hedley Finance Ltd, Christian Dante and Chrysanthos Chrysostomou as relief defendants.
It is uncertain what happened to the 1998 order by U.S. District Court Judge Royce C. Lambert that Rivlin pay back the charities original $1 million dollar investment plus the anticipated $15 million in profits that were promised.
08/01 - From August 1998 through February 1999, Donald Barry Tamres of Indiana ran a fictitious prime bank investment scheme called the Asset Enhancement Program which misrepresented that the prime bank "investment" he was promoting would provide a risk-free return of $1,500,000 in six weeks for an initial investment of $30,000.
He used the name of the United States Federal Reserve to cloak his "low entry" "high yield trading program" with an air of legitimacy and told investors that the investments were guaranteed by a prime "top 4" European insurance company.
Instead of investing the funds entrusted to him by about 25 investors, Tamres used the funds to pay off other investors or to buy houses, cars and other items for himself and his family. As a result of violating the antifraud and registration provisions of the federal securities laws, he was permanently enjoined from violating the federal securities laws and ordered to disgorge $2.3 million of his ill-gotten gains and pay a civil penalty of $110,000.
04/01 - The SEC filed an emergency civil fraud action against Voldemar A. VonStrasdas of Nassau, the Bahamas, Charles G. Dyer of Massachusetts, and two Massachusetts-based companies controlled by Dyer, Resource F, LLC and Bunker Hill Aviation, LLC, who were involved in a fraudulent prime bank trading scheme that raised approximately $22 million from at least 50 investors, many of whom were members of the Christian Science Church.
The complaint also charges Eric E. Resteiner, most recently of Nassau, the Bahamas, and Miles M. Harbur of Florida, for their participation.
They promoted their international bank-related financial instrument trading program under various names, including Swiss Asset Management, Wall Street South, and Resource F.
Their misrepresentations included that the investment involved high-quality debt instruments of very large international banks, that the investors' principal was never at risk and could be returned after one year, and that one would receive profits of approximately 4-5% every month (or 48-60% annually).
Instead, Dyer and Resource F funneled investor funds to their bank accounts in the Bahamas, and Bunker Hill Aviation received payments for administering the investment scheme. In addition, Dyer allegedly misappropriated at least $795,000 and used it to, among other things, buy a golf course in Georgia, an airplane, and an interest in a restaurant in Boston.
During the initial stages of the fraud, investors received monthly payments that they represented were "profits" on their investment. However, these ponzi payments to Resource F investors ceased around May 2000.
To date, although requested, no investors are known to have received the promised return of their investment. Furthermore, since the cessation of monthly payments, VonStrasdas has regularly sent lulling letters to investors making excuses for the cessation of payments, stating that he expected trading and monthly payments to resume soon.
More recently, VonStrasdas and Dyer have each solicited investors to contribute money for purported legal efforts to obtain the return of investors' funds.
09/01 - The SEC got an Order of Permanent Injunction against James R. Harrold, a resident of Indiana and the Entity Defendants alleging that they raised approximately $2 million in a fraudulent prime bank scheme. The defendants consented to the order without admitting or denying the allegations.
Even after the FBI warned Harrold in October 1999 that prime trading programs do not exist, since October 1999 through at least February 2001, they raised at least $2 million by selling investments in the Rubix Program, a purported "prime bank trading program" and are currently soliciting investors to invest in at least two other fraudulent investment programs.
In the Rubix Program, they made false claims that the money raised would be used to purchase prime bank debentures issued by top world banks; that their principal was never at risk and promised a 20% monthly rate of return; when actually the majority of funds raised were misappropriated and used for business and personal expenses.
08/01 - The SEC was granted its Motion for Summary Judgment against relief defendants Gordon Dunlop and his entity, First Consortium International.
Dunlop and First Consortium received ill-gotten gains obtained by Daniel Schneider in an illegal prime bank trading scheme and were ordered to pay disgorgement in the amount of $456,000 plus prejudgment interest.
06/01 - The SEC issued emergency orders, including a temporary restraining order and asset freeze, against Garry W. Stroud, 55, an alleged swindler operating from British Columbia, Canada, and Lynden, Washington who conducted an ongoing Internet investment scheme that fleeced over 2,200 investors worldwide of approximately $1 million since 1998.
Stroud, operating under several fictitious businesses, including "Diamond Global Holding Trust," "Euro Credit and Exchange Bank Ltd.," and "Angelic International" he used Internet websites and e-mail to hawk seven spurious investments, including so-called "Morgenthau Gold Bond Certificates," foreign gold-mining projects, and "prime-bank" trading programs, promising investors extraordinary returns with little or no risk. Not a single investor was paid the promised returns.
He targeted his fraudulent investment offerings mainly to investors who were recently defrauded in another investment scheme known as E-Biz Ventures which involved over 20,000 investors and over $9 million. SEC v. E-Biz Ventures, et. al, 02/01
Stroud was assisted in the scheme by relief defendant Adele Louros, of Quebec, who was the named holder of several Internet payment accounts into which at least $300,000 of investor funds solicited by Stroud has been deposited.
see full story on separate page - link above
09/01 - Enrico Cortesano, age 49, of Florida, established a website at www.europeancontact.com and from late September 2000 through late March 2001, engaged in a prime bank scheme by offering for sale securities in the form of participation interests in bank debenture trading programs that purportedly lasted for a time period of one year and one week.
He claimed that the securities offered existed; that the returns were guaranteed to be paid on a daily, weekly, or monthly basis; that the returns ranged from approximately 60% to 200% per month, depending on the amount invested; and that there were no risks associated with investing in the trading programs.
As a result of the foregoing, he was issued a cease and desist order from the SEC.
03/01 - Michael P. Keating, 38, of Maryland was a registered representative and a principal of Delta Equity Services Corporation, a registered broker-dealer and was also the owner of Keating Advisory Group, which operated as a registered branch office of Delta.
Andrew P. Bodnar, age 46, was also registered as a representative and principal of Delta. He was also the president, owner and manager of Bodnar & Associates, which operated as a branch office of Delta in Akron, Ohio.From at least November 1996 through July 1997, Bodnar and another individual directed a fraudulent scheme through which they, together with other sales representatives, raised $6.4 million from the sale of unregistered securities to at least 148 investors. The scheme was conducted through Bodnar & Associates and Keating Advisory Group.
All of the investors were either told or led to believe that their funds would be used to purchase low-risk instruments that were certificates of deposit which were issued by an off-shore or a "world" bank. They were told that the instruments would earn 12 percent annually, payable on a quarterly basis.
After they were solicited, the investors received documents in the form of unsecured promissory notes issued by CBT and CBT-Ohio. However, Bodnar, Keating and other sales representatives continued to assure investors that their funds would be used to purchase certificates of deposit.
CBT Holding Corporation was incorporated in Nevis, British West Indies in November 1996. CBT-Ohio, Ltd. is an Ohio limited liability company formed in February 1997. Its principal office is located in Akron, Ohio. These entities were formed and/or controlled by Bodnar.
In fact, rather than using the funds as represented to investors, Bodnar misappropriated the funds. He used most of the funds to pay for his business and personal expenses. He also diverted a substantial sum of money to entities and individuals who were operating a Prime Bank scheme. Finally, he used the remaining funds to make payments to prior CBT and CBT-Ohio investors.
From November 1996 through July 1997, Keating, through Keating Advisory Group, sold at least $3 million of CBT and CBT-Ohio securities to 69 investors.
Specifically, he told many investors that their funds would be invested in certificates of deposit secured by a "world bank." He also either expressly told or led investors to believe that the 12 percent rate of return was "guaranteed" and/or "backed by the full faith and credit of the United States."
However, he either knew or was reckless in not knowing that these statements were false. In this regard, he relied solely upon the verbal representations of Bodnar and conducted no due diligence of CBT or CBT-Ohio.
He failed to review even the most basic documentation regarding the financial conditions or operations of these companies even though he knew that Bodnar intended to use some of the proceeds from investments in CBT and CBT-Ohio to repay investors in another failed venture which Bodnar had sponsored.
Under an accepted Offer of Settlement, that neither admitted or denied the findings, Keating and Keating Advisory Group were barred from association with any broker, dealer or investment adviser and the registration of Keating Advisory Group was revoked.
Power Broke Her
In 1997, a financial advisor in Coronado, California named Emmanuel Richard Giglio made contact with our mother and advised her to sell her holdings in San Diego Gas and Electric Company.
She liquidated this stock and the proceeds were transferred to a William T. Lewis in Connecticut who had formed a dummy offshore corporation called "Terra Corporation". We didn't find out about it until long afterwards so thank God she did not give him any more money.
He has been promising for four years that she will get her money back, "Next week." This has been a complete nightmare which started out as a prime bank note scheme and has gotten worse.
Lewis has already been to trial on fraud charges in Los Angeles in 2001. That resulted in a hung jury and he is now being charged with wire fraud and money laundering and is supposed to go to trial on April 16, 2002 in Los Angeles.
Bill Walkup 03/25/02
09/00 The key players in Omega Trust and Trading which bilked 10,000 people around the globe of at least $12.5 million US are well-known longtime Mattoon, Illinois residents.
Among the nineteen arrested are business owners, a minister, a former city police officer and a former sheriff's officer from the farming and industrial community of 19,000, which is about 300 kilometres south of Chicago.
Court documents allege Omega sales representatives, starting in 1994, persuaded customers to lend them money to invest in offshore banks. Investors could get in for as little as $100 and were promised $5,100 in just nine months. Put in $5,000, and they were promised a $225,000 payout.
But investors never got paid.
Suspicion arose when bankers started getting millions of dollars in deposits from locals who held modest jobs.
JILAK Group, Ltd. (JILAK supposedly stands for Jesus Is Lord and King) have been advertising an offshore investment that yields 40-50% weekly. Targeting churches, James Rumpf is the individual behind these offerings.
04/02 - A federal judge issued emergency orders shutting down an $88-million nationwide investment scam operating from Phoenix, Chicago and Houston which sold several bogus investments, including "prime" bank investments and certificates of deposit from a bogus Native American chartered bank which, in turn, was granted business charters by the Scottsdale, Ariz.-based Rosebud Sioux tribe.
Not All Circles Roll
04/02 - Four men who in the mid-1990s operated an investment scheme that cost more than 30 victims approximately $3.45 million have all pleaded guilty to federal fraud and money laundering charges after an FBI investigation.
The scam was an investment program named Circle Foundation Investment Trust (CFIT), which purported to be a prime bank program or “Roll”program in which investor funds would be leveraged several times and then traded among the world’s top banks.
Two defendants in the case pleaded guilty in Los Angeles.
•John M. Thomas, 55, of Laguna Hills,
the program manager, who pleaded guilty to one count of wire
fraud and one count of money laundering, and
•Cenobio Herrera Lanz (also known as Bert Herrera),
57, of Downey, who portrayed himself as a licensed escrow office and who pleaded
guilty to two counts of wire fraud.
A third defendant in the case, Michael J. Gibbons, 70, of El Segundo, who told investors that he was the program trustee, pleaded guilty on February 20, 2001 to one count of wire fraud and one count of money laundering.
The fourth defendant William T. Lewis, 50, of New Haven, Connecticut, a broker in the scheme, pleaded guilty on April 16, 2002 to two counts of wire fraud, one of which is related to a second scheme that is outlined below.
Investors in CFIT were told that their money was to be held in an escrow account where it would be bonded and never be at risk. The victims were also told told that they would receive up to 2,000 percent annual returns with no risk.
As part of the scheme, Herrera falsely told investors he was the escrow officer responsible for the CFIT escrow account maintained at Bank of America in Downey. Investors were instructed to wire transfer their investment funds into this account, which was actually only a simple checking account under his sole control.
Herrera would begin writing checks to himself and the other defendants almost as fast as the funds were coming into the account on cars and houses while telling investors that their money was still in the account and that they were experiencing trading problems which would soon be resolved.
Most of the victims, from around the U.S. and Canada, never received their investment back.
In addition to the CFIT scheme, Lewis was involved in another prime bank/roll program that he created in 1997 and continued to operated through March 2002. This new conduct, which came to the attention of the FBI earlier this year, resulted in the revoking of his bail.
This second program, the Private Placement program, was very similar to CFIT, and allowed him to funnel more than $3 million in investor funds to companies set up by him in the Bahamas and in Mexico.
The crime of wire fraud carries a maximum possible penalty of five years in federal prison, and the maximum statutory penalty for money laundering is 20 years in prison. In addition, each defendant may be ordered to pay restitution to the victims.
Lets say that some wrongdoers are involved in a prime bank deal, only they've changed their tune ever so slightly. Instead of convincing people to invest in a high yield trade, they tell them that they are investing into, say, a helicopter project. So now, they are sounding more legit by having business plans along with verifiable intellectual property.
You see, I hold a US Patent and have, at my partners discretion and through an individual he's known for 20 years, mandated a business plan prior to the funding of a massive helicopter project which has been labeled "humanitarian" because of the adaptabilities for Search and Rescue (SAR) work.
On paper, based on this plan, we now have a patent valued at $498,000 and a patent protected market of $1,025,000+ a year in projected annual sales..
Ever come across this angle of using patents for convincing investors? I'd hate to have our patent devalued by being used in a scam.
Joseph Moylan 08/08/02
09/02 DENVER -- Claude Lefebvre, a Canadian posing as a licensed bond trader, swindled a company half-owned by Joseph Coors Jr., the 60 year old great-grandson of brewery founder Adolph Coors, out of $40 million, the SEC alleges.
Before they were caught, he and his colleagues had spent $4 million of the money on ritzy hotels in Los Angeles and Miami, shopping sprees at high-end department stores and on a car. About $87,000 was spent at a jewelry store.
Coors and K. Mack Robinson of Jackson, Miss., owned a company called Comet Enterprises LLC that invested in a scheme involving relatively safe "prime bank investments" which promised a minimum weekly return of 75 percent in what they were told was an exclusive fund of bonds rated AA or better.
Before Comet invested in June, Robinson asked his Merrill Lynch broker about Lefebvre. He apparently said he knew Lefebvre a short time but had known one of his associates, Dennis S. Herula, for about 22 years. Herula and his wife, Mary Lee Capalbo, were named as defendants in the complaint.
Fraudsters are Financial Terrorists
03/03 Washington D.C. - FBI Agents around the country executed arrest and search warrants in the culmination of a national anti-fraud initiative. So far this year, the FBI has successfully targeted 100 individuals involved in high yield investment frauds (HYIF), also known as Prime bank investment frauds (PBIF), that defrauded Americans out of approximately $500 million.
FBI Director Robert Mueller said that "even though the FBI is preoccupied with tracking down terrorists, we are not going to let greedy individuals empty the pockets of unsuspecting investors."
Perpetrators of these schemes tell potential investors that they have unique access to a trading program and that by pooling their money with that of other investors they can participate.
These opportunities are allegedly only available because the fraudulent solicitor has high-level contacts in the banking world.
Investors must often abide by a non-disclosure agreement to protect the secret arrangement.
In the end, the investor realizes that there are no such arrangements and what is essentially a Ponzi scheme collapses, costing victims their investment.
Many PBIF crimes have an international aspect. The base of operations of the con artist may be overseas while the victims are in the US.
Proceeds are often moved to foreign bank accounts, such as the Bahamas or Switzerland.
Subjects also fraudulently represent that the investment is insured against loss or non-performance by a foreign insurance entity.
One such case, known as the "Sweet Tea Masquerade," was part of the crackdown. FBI Agents in Columbia and Greenville, South Carolina, conducted an undercover operation, acting as potential investors to target 27 groups of subjects who defrauded other innocent investors of over $31 million.
This investigation was initiated in June 2001 and culminated with the filing of Complaints and the issuance of arrest warrants relating to 51 individuals to be executed in 22 states and the District of Columbia.
Thirteen of the subjects are in 6 foreign countries (Canada, England, Germany, Greece, South Africa, and Mexico) and provisional arrest warrants for extradition will be sought where appropriate.
In Los Angeles, Nicholas Roblee, also known as Nicholas Richmond, the operator of Premier Marketing and Investments, Inc., was arrested on wire fraud and money laundering charges. Roblee solicited in excess of $4.5 million from investors, promising returns up to 200% per month through the trading of medium term notes, real estate-related bridge loans, and investments in gold, gold concentrate and other precious metals.
Allegedly, Roblee diverted the funds for his own benefit and to pay back prior investors through Ponzi-type payments.
A similar story played out today in Jacksonville, Florida, where Agents executed a search warrant on the residence of Gregory Smith. Acting through Tri C Holdings, Smith solicited investors in a high yield investment program which promised rates of return ranging from 15% to 20% every 35 to 70 days, with no risk to the investors' principal.
The approximately $1 million investors sent to Tri C Holdings was never invested and was allegedly diverted by Smith.
Other warrants were executed today in a Denver-based investigation that extended into 33 states and 14 foreign countries.
Also today, a number of indictments related to PBIFs were unsealed, including two indictments in Dallas involving a fraud worth $17 million, and another indictment in Phoenix for a fraud worth $23 million.
Millions taken in 'trading' scam
DEBORA VAN BRENK, London Free Press Reporter
2004-02-08 04:11:53
The bait: a can't-miss, lucrative return on a secret overseas investment. The fish: hundreds of Southwestern Ontario residents who were wined and dined and even treated to a private concert by an award-winning singer.
The haul: millions of dollars, willingly handed over by hopeful investors, most of whom have never seen a cent of it again.
RCMP Cpl. Rebecca Herrington of London knows of at least one person who lost $1 million in a so-called "trading program" that has bilked area residents of large and small fortunes totalling millions.
"I've actually had people crying because they've invested $50,000 from their father who recently passed away and they've lost all their money," she said.
The scam has been around since at least 2001 in Ontario. Police don't know exactly how many people have been sucked in because they are often too embarrassed to report losses, Herrington said.
One area woman, who asked her real name not be used because others trust her business acumen, told The Free Press recently she lost $5,000 US.
A relative had learned of the plan through a church group and told the woman she might be included in an offshore bank-debenture plan open only to an elite group.
At an information session, the woman learned she could pool her money with others and earn 30 per cent a month, compounded, for 10 months.
The speaker's words, delivered with religious fervour, were compelling.
"Every single question I asked there was an answer to," the woman recalled. "A good con artist you're going to believe."
The allure of a six-figure payoff was too much to resist.
The woman scraped together $5,000 US, the minimum investment amount, using some of her savings and borrowing the rest.
At the end of 10 months, the "investment" organizers staged a big party for fund participants at a downtown London hotel.
Luther Vandross, an award-winning R&B artist, was even brought in to give a private concert, as investors celebrated their imminent windfall.
After that, nothing.
The investment leaders kept coming up with excuses, the woman said: the computers crashed; the terrorist attacks had shrunk their investment temporarily; the banks didn't trade that day; accountants were still working on the numbers.
Two years later, the woman warns others not to be suckered like she was.
RCMP in Toronto have charged three men, including two Londoners, with fraud and conspiracy after investors in Toronto and Grimsby complained of losses.
The local investigation continues, police said.
Herrington said financial scams are pervasive during RSP season, as Canadians look to shelter money in high-return retirement funds and "the legitimate ones don't seem to be working out so well."
The scam is also "running rampant" through factories, Herrington said.
People think they know a con when they see one and they can't pass up the promise of getting rich quick.
"It's boiling down to greed," Herrington said.
Only a few who scream loudest ever see a portion of their money back. The rest goes into organizers' pockets, she believes. "These trading programs don't exist."
Herrington advises anyone tempted by a too-good-to-be-true deal to contact the Better Business Bureau.
The area woman who spoke with The Free Press wishes she had: "Don't hesitate to call the RCMP. That phone call could save you thousands."
She said the scammers who took her money are "despicable."
And it's cost her more than money. She and the family member who brought her into the scheme don't talk anymore.
"I believe in God and all that stuff, but I don't believe you need to use God to scam people," she said.
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