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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
use of the term "prime bank" or an equivalent like
top 50 world banks, top 25 European banks or top 100 Latin
promise of unrealistic rates of return with little or no
complex, nonsensical "gobbledygook";
emphasis on secrecy;
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;
of jargon from a bucket of 30 or so bogus terms and phrases,
such as "international banking day" and "commitment
involvement in a charitable endeavor or world humanitarian
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
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
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
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
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
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
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
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
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
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
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
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.
taken in 'trading' scam
DEBORA VAN BRENK, London Free Press Reporter
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
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,
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
"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
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,
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.