Articles Posted in Ponzi Schemes

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Las Vegas-based MRI International Inc.’s former president/chief executive Edwin Fujinaga, Asia-Pacific executive vice president Junzo Suzuki, and general manager of Japan operations Paul Suzuki, have all been indicted on eight counts of mail fraud and nine counts of wire fraud in connection with a Ponzi scheme that defrauded thousands of victims, according to a Fox News article.

According to U.S Attorney Daniel Bodgen, the men told thousands of overseas investors that their investments were safely managed by a third party escrow agent in Nevada. Nevertheless the men are accused of using investors’ funds to pay for gambling, a private jet, and other personal expenses. The government alleges that this Ponzi scheme preyed on new enrollees’ money that they turned and used to pay early-stage investors and to give other investors incentive to take part.

According to the indictment filed by the U.S. District Court, the scheme was exposed in April 2013 after four years of operation and individually charges Fujinaga with three counts of money laundering. The document also seeks from the defendants the forfeiture of proceeds from the alleged crime. As a result the defendants could also face decades in prison if convicted.

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The Securities and Exchange Commission recently filed fraud charges against a Fort Lauderdale, Florida-based investment advisor and related funds in the federal district court for the Southern District of Florida. The SEC’s complaint names Frederic Elm (formerly known as Frederic Elmaleh), his unregistered advisory firm Elm Tree Investment Advisors LLC, and three funds: Elm Tree Investment Fund LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Motion Opportunity LP.

According to the SEC, Elm perpetrated a Ponzi scheme – in effect recycling new investor money to earlier investors, and using investor funds the funds for personal expenses, such as a $1.75 million home, luxury automobiles, and jewelry. In this way, Elm allegedly stole at least $17 million from unsuspecting investors. This kind of misconduct violates the anti-fraud provisions of federal securities laws and SEC rules.

The investors sent their investment funds to Elm by wire transfer or by mailing a check. Elm deposited the funds in various bank account that he controlled. In this way, Elm had custody and control over the investors’ funds, and was able to misappropriate the funds.

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As if ISIS terrorists, ebola, militarized police, and race riots are not enough, we now read in the Atlanta Business Chronicle that white collar crime is on the rise (“White Collar Crime Wave,” by Dave Williams, August 22-28, 2014). Prosecutors report a significant increase in white collar criminal activity, according to the article. One former federal prosecutor was quoted as saying: “It’s a national trend.”

White collar crime includes various forms of financial fraud. Examples include Ponzi schemes (think Madoff, where cash flow from newer victims was used to pay previous investors until the house of cards collapsed) and affinity fraud. In an affinity fraud scenario, the investment promoter gains credibility and hooks victims by playing up things they have in common.

Perhaps the most common and outrageous example of affinity fraud that is the proverbial “wolf in sheep’s clothing” who preys on church members. The article mentioned the sad case of Ephren Taylor II, the purported wealth builder who defrauded members of a prominent Atlanta church out of millions of dollars.

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Private placements are investments that have not been registered with the United States Securities and Exchange Commission. The lack of registration is either unlawful, or lawful due to an exemption from registration under the securities laws. Private placement investments are always high-risk investments that are complex, not transparent, and illiquid (cannot be readily sold) – despite the fact that they are often presented as having little or no risk, and are sometimes fraudulent.

Issuers of private placement investments often employ unregistered brokers and financial advisers to sell them to individual (or retail) investors. The sellers of private placements typically receive outsized commissions, and thus do very well indeed. On the other hand, many investors who could ill afford it have lost a substantial portion of their life savings by investing in private placements.

The SEC recently published an Investor Alert identifying 10 red flags that an unregistered offering (private placement) may be fraudulent. The red flags include such things as promises of high returns with little or no risk; involvement of unregistered sales people; high-pressure sales tactics; amateurish, sloppy or no documentation; absence of the “usual suspects” involved in “legitimate” private placements (lawyers, accountants, etc.); the old “mail drop as corporate address” trick; cold call solicitations; and phony backgrounds of managers or promoters.

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Banking giant J. P. Morgan Chase has reached a deal with federal prosecutors to avoid criminal prosecution for its role in the Bernard Madoff Ponzi scheme. According to the prosecutors, J. P. Morgan, which had custody of Madoff accounts, witnessed suspicious money transfers, too-good-to-be-true investment returns, unverifiable trading activity, and the use of a one-man accounting firm. But while the bank connected the dots, filed a suspicious activity report with British officials, and was concerned enough to withdraw its own money from Madoff feeder funds, it failed to protect investors in that it “never closed or even seriously questioned Madoff’s Ponzi-enabling 703 account,” according to U. S. Attorney Preet Bharara.

The nation’s largest bank faced two felony charges of violating the Bank Secrecy Act because it did not file a Suspicious Activity Report after witnessing red flags about Madoff and did not have appropriate anti-money laundering compliance procedures in place. The charges come on top of other legal woes at J. P. Morgan, including a $13 billion settlement with the U. S. government in connection with its mortgage practices that led up to the financial crisis.

Madoff reportedly perpetrated his Ponzi scheme through accounts at J. P. Morgan from 1986 up until his arrest in 2008. Almost all of his clients’ funds were deposited at J. P. Morgan, and money flowed into and out of those accounts. In October 2008, one of J. P. Morgan’s analysts wrote a memo indicating that the bank could not verify Madoff’s trading activities or custody of assets. It also questioned Madoff’s “odd choice” of using a small, unknown accounting firm. Also in October 2008, J. P. Morgan filed a report with British regulators that stated in part that Madoff’s purported investment returns were “too good to be true.”

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Howard G. Judah and Gergory F. Jablonski, former executives at National Life Settlements LLC, were each sentenced to 10 years in prison for their parts in a $30 million investment scheme that utilized insurance agents to sell products. In 2009, the Texas Securities Board uncovered their securities fraud and selling of unregistered securities. They have since pleaded guilty.

National Life Settlements, LLC solicited money from both active and retired state employees and teachers by having funds rolled out of retirement funds and into National Life Settlements investments. According to the Texas Securities Board, the company quickly grew by using insurance agents to sell products. Agents, many of whom were not licensed to sell securities, earned more than $4 million in commissions.

However, the company never acquired the necessary life insurance policies needed to pay investors. They just paid new investors with money from earlier investors (i.e. Ponzi Scheme) and told investors that the company had received billions of dollars from the Federal Reserve.

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On January 30, 2013, the SEC charged five former real-estate executives with defrauding investors in an investment scam. The investors were led to believe that they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a ponzi scheme.

The SEC alleged in the complaint that Cay Clubs Resorts and Marinas raised more than $300 million from nearly 1,400 investors nationwide through a network of hundreds of sales agents, marketing seminars, and podcasts that touted the profitability of purchasing units at Cay Clubs resort locations. The executives charged in the complaint promised immediate income from a guaranteed 15% return and a future income stream through a rental program that Cay Clubs managed. However, the Cay Clubs executives “used new investor deposits to pay leaseback returns to earlier investors.” Additionally, the executives “paid themselves exorbitant salaries and commissions totaling more than $30 million, and investor funds also were misused to buy airplanes and boats.” The scheme began in 2004 and Cay Clubs abandoned its operations in 2008, but still continued its scheme.

The SEC’s complaint filed in U.S. District Court for the Southern District of Florida charges the following former Cay Clubs executives:

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The financial publication On Wall Street published an article today discussing the fate of Michael Dimare, a former ING Financial broker who was recently permanantly barred by securities regulator FINRA for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

Accoding to Dimare’s CRD report, a report that tracks customer complaints made by customers and securities regulators, ING Financial has compensated some investors who have come forward. In the article, Jason Doss, an attorney with The Doss Firm was quoted, “The question is whether everyone will come forward.”

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

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FINRA anounced yesterday that it permanantly barred former ING Financial broker, Michael Dimare, from Ponta Vedra Beach, Florida for scamming approximately 22 victims out of approximately $2 million between 2001 and 2008.

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

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According to First Coast News in Ponte Vedra, Florida, Michael Joseph Dimare pleaded guilty to mail fraud Monday for scamming about 22 people out of approximately $2 million. He worked as a registered representative of ING Financial Partners from October 2006 to May 2008. Based on the article, it appears that Mr. Dimare engaged in the ponzi scheme fraud while he was with ING Financial Partners and the firm he worked with before ING, Signator Investors, Inc. According to Mr. Dimare’s CRD report, a publicly available report that tracks customer complaints against financial advisors, it appears that only 11 customers have filed complaints thus far. One of the victims came forward in the article and stated that she received every penny of her money back from a financial firm. That firm is likely ING Financial Partners and/or Signator Investors, Inc.

Given that he pleaded guilty to defrauding 22 people, there are likely more victims who have not come forward yet.

The Doss Firm, LLC represents investors across the nation against financial firms and seeks to recover investment losses that result from fraud. If you believe you have been defrauded by Mr. Dimare, feel free to contact us.