August 2022 Ponzi Scheme Roundup

From Kathy Bazoian Phelps' Ponzi Scheme Blog - a summary of activity reported for August 2022 in the Ponzi scheme space. The reported stories reflect at least 4 new Ponzi schemes worldwide, 1 guilty plea, more than 71 years of prison sentences, and an average age of approximately 51 for the alleged Ponzi schemers.

http://theponzibook.blogspot.com/2022/08/august-2022-ponzi-scheme-roundup.html

January 2022 Ponzi Schemes

From Kathy Bazoian Phelps' Ponzi Scheme Blo. The reported stories reflect at least 5 new Ponzi schemes worldwide, 3 guilty pleas, more than 48 years of prison sentences, and an average age of approximately 47 for the alleged Ponzi schemers.

https://www.linkedin.com/feed/update/urn:li:activity:6895247004092514304

Let Us Know - Ebola Related Scams

While there have been a significant number of deaths from Ebola, the "outbreak" seemed to be largely a news story scam, at least in the United States.

It is therefore hard to believe that a serious investor would even consider an investment in an Ebola treatment/cure/vaccine. But apparently that is not the case.

FINRA has released an "investor alert" regarding Ebola related scams. FINRA advises "[i]f you are considering investing in a company that purports to develop products or services relating to Ebola, be aware that fraudsters often attempt to take advantage of the news as a hook for investment schemes touting “the latest growth industry” whether it be oil and gas, virtual currency, or marijuana."

Be on the lookout for such scams, and if you come across one, please let us know.

For more information - Investor Alert: Investment Scams Involving Ebola-Related Companies

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, nationwide. For more information call 212-509-6544 or send an email.

Virtual Concierge Receivership News Story

Jim Sallah is featured in this news story about the Virtual Concierge receivership.
WSVN-TV - 7NEWS Miami Ft. Lauderdale News, Weather, Deco

Townhall Meeting for Receivership Held in Palm Beach

Jim Sallah of Sallah Astarita & Cox, LLC is the court appointed receiver of a number of entities who are accused of being part of a $70 million Ponzi scheme. At a town hall meeting Jim spoke to investors to explain the receivership process, and the work that has been done so far.

The Palm Beach Post has a video interview with Jim, explaining the process, and a lengthy article praising Jim, Sallah Astarita & Cox, and the rest of the receiver's team for the work done thus far.

Jupiter Ponzi scheme investors get update at town hall meeting

Securities Fraud Cases Can Be Criminal Cases

Defending a SEC securities fraud case is not simply about the civil charges and penalties. Most securities law violations are also criminal violations, and violators can be charged both civilly and criminally.

As securities litigators, we are aware of the issue, and sometimes the cases are not brought together. When resolving an SEC case, or even a FINRA enforcement case, we are always mindful of the potential for a criminal case, or  an enforcement proceeding from a state agency.

In the usual case, if a criminal case is going to be filed, it is filed at or about the same time as the civil charges. Or, there is at least notice that a prosecutor is interested in the case. However, not always.

Case in point -  as a result of the investigation of Bernie Madoff's massive fraud, the SEC found that a former deputy dean of MIT's business school and his son were running a Ponzi scheme of their own. The father-son team settled fraud charges with the SEC in 2012 for $4.8 million and a permanent bar.

Last week, over two years later,  federal prosecutors announced that the duo are going to plead guilty to criminal charges. According to CNN they face between two and five years in prison. They could also be forced to pay as much as $290 million in fines plus payments to victims.

According to the government the duo falsely told clients that their hedge fund was delivering annual returns between 16% and 23%, enticing investors to entrust more than $500 million with them. They also falsely claimed that the money would be invested using a complex trading model based on research they conducted at MIT. In fact, they placed investor money with Bernie Madoff and the Petters Group Worldwide, both of which were later found to be Ponzi schemes.

Nearly $5 million in fines with the SEC, and then, two years later, up to 5 years in jail plus $290,000,000 in fines, PLUS repayment to victims.

Most of these schemes do not start out at schemes - they become schemes when the manager, trader, owner suffers a loss and thinks he can trade it way out of it. Regardless of how the scheme evolves, or what the oringinal good motives were, securities fraud cases carry significant civil and criminal consequences, and  require representation by securities law attorneys, with the knowledge and skill that only decades of experience can provide.

One side note - I continue to be amazed at what defendants say in emails.  Sending emails can sometimes be worse than a phone tap. In this case, the government alleges that emails between the defendants included these two gems:

We have mislead [sic] a lot of people with a range of statements that were incorrect simply to increase our income. . .

We are certainly sharing equally in this dad … Lots of our problems were caused by my good intentions but very poor actions when it came to true honesty.

 If you have an issue, if you need to respond to a subpoena or "voluntary" request from the SEC, call us.

And don't send emails to your co-workers or friends discussing the case.

Related Articles:

Ex-MIT dean and son plead guilty to hedge fund scam - Aug. 12, 2014

SEC Charges Father-and-Son Hedge Fund Managers April 20, 2012


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If you are the victim of a Ponzi scheme or the subject of an SEC investigation, call our office. Our attorneys include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, We represent investors, financial professionals, and investment firms. For more information contact Mark Astarita at 212-509-6544 or email us.

Former MIT Dean Settles with SEC, Now Pleads Guilty to Running $500 Million Hedge Fund Scam

Just a reminder. Defending a SEC securities fraud case is not simply about the civil charges and penalties. Most securities law violation s are also criminal violations, and violators can be charged both civilly and criminally.

Case in point - a former deputy dean of MIT's business school and his son settled fraud charges with the SEC in 2012 for $4.8 million and a permanent bar.

Today federal prosecutors announced that the duo are going to plead guilty to criminal charges. According to CNN they face between two and five years in prison. They could also be forced to pay as much as $290 million in fines plus payments to victims.

According to the government the duo falsely told clients that their hedge fund was delivering annual returns between 16% and 23%, according to federal prosecutors, enticing investors to entrust more than $500 million with them.

They also falsely claimed that the money would be invested using a complex trading model based on research they conducted at MIT. In fact, they placed investor money with Bernie Madoff and the Petters Group Worldwide, both of which were later found to be Ponzi schemes.

Securities fraud cases require securities law attorneys, with the knowledge and skill that only decades of  experience can provide.

For more information, Ex-MIT dean and son plead guilty to hedge fund scam - Aug. 12, 2014

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If you are the victim of a Ponzi scheme or the subject of an SEC investigation, call our office. Our attorneys include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, We represent investors, financial professionals, and investment firms. For more information contact Mark Astarita at 212-509-6544 or email us.

What is a Corporate Monitor in a Securities Fraud Case

With high-profile Ponzi scheme cases such as Bernie Madoff and Scott Rothstein being front-page news for several years now, the public has grown accustomed to court-appointed fiduciaries, such as bankruptcy trustees and receivers. But there is another type of court-appointed fiduciary that is less known but equally effective these days—the corporate monitor.

So what is a corporate monitor? Sallah Astarita & Cox, LLC partner James Sallah, and his co-authors address the question in this article from the Daily Business Review. Mr. Sallah has been appointed by various courts as a receiver, as well as a corporate monitor.

The article explains that like a receiver and trustee, a corporate monitor is a lawyer, accountant or other disinterested professional appointed by the court as a neutral third party over something. However, unlike a receiver or trustee who typically has expansive powers (and thus potentially more costs), a corporate monitor traditionally performs a specific set of functions or has a single-purpose duty.

For more information - Board Of Contributors: Corporate Monitors Keep Status Quo During Crises | Daily Business Review

Top 10 List of Ponzi Schemes

Here is a list that you do not want to see include your investment - the Top 10 List of Crazy Ponzi Schemes. Unfortunately, toll many investors have found themselves in an investment that turned out to be a Ponzi Scheme.

Please, do yourself a favor. If someone offers you an investment with a 50% annual return, run. At the least, make sure to investigate the business completely. There are investments which generate significant above market rate returns - many hedge funds do so - but you need to be careful in making those investments. Ask questions and do your due diligence.

The functioning of a Ponzi scheme is inherently simple. Investors are promised above-average returns that generally carry little risk. However, the payment of these returns is made not from legitimate business activities, but rather from incoming funds from new investors. Little if any legitimate investing actually takes place, and the Ponzi scheme depends on the continuous flow of funds from new investors to meet obligations to existing investors. When the so-called “lifeblood” of a Ponzi scheme dries up and investor obligations cannot be met, the scheme unravels.

Making it more difficult to detect a Ponzi scheme is the fact that many do not start out as Ponzi schemes. Often a legitimate investment has a bad year, and the manager does not want to tell his investors. so he starts using new money to pay returns to old investors. Of course, that does not work for very long, and with each passing day it gets harder and harder to return everyone's money.

While tracing its origin back at least 80 years, the past decade has been unprecedented in terms of the number and severity of Ponzi schemes. Since 2008, at least 500 Ponzi schemes were uncovered worldwide, including Bernard “Bernie” Madoff’s legendary $17 billion scheme. All told, the financial impact of Ponzi schemes is pegged at more than $50 billion over the past six years.

InvestorPlace has recapped the data tracked by PonziTracker.com, and you can follow the link for the details. 10 of the World's Craziest Ponzi Schemes | InvestorPlace

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including representation of investors in Ponzi Schemes, and those accused of operating such schemes. One of our partners has also been appointed by the Courts as a receiver, conservator and monitor of business entities suspected of being Ponzi schemes or other wise fraudulently operated. Have a question? Give us a call at 212-509-6544 or send an email.