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October 19, 2010 - Bruce Prevost and David Harrold allegedly filtered over $1 billion from their hedge fund firms Palm Beach Capital Management LP and Palm Beach Capital Management LLC to the Thomas Petters investment scam. The Securities and Exchange Commission ("SEC") filed a complaint that alleges from approximately 2004 through June 2008, Prevost and Harrold invested all of their clients' money in the Petters scam while taking over $58 million in fees for themselves.

Petters' firm, Petters Company, Inc., allegedly told investors that it used their money to purchase large quantities of consumer electronics and resold them to large retailers like Walmart and Costco. The SEC claims that Petters Company did not purchase any actual electronics and merely operated as a massive Ponzi scheme. The complaint alleges that Prevost and Harrold invested all of their clients money in the Petters scheme, while falsely claiming their money was collateralized by other accounts.

The SEC further alleges that Prevost and Harrold told their investors that the retailers' payments for the electronics went directly into accounts that would pay off promissory notes held by the Palm Beach Capital investors. In reality, the SEC claims that return payments to investors came from Petters' company, which was ostensibly other investors' money.

Continue reading "Bruce Prevost, David Harrold, Palm Beach Capital Management Busted in Connection with Ponzi Scheme" »

September 30, 2010 - Benjamin Lee Grant, of Boston, Massachusetts, allegedly ran his brokerage firm, Sage Advisory Group, LLC, as a massive investment scam. The Securities and Exchange Commission ("SEC") filed a complaint that alleges Grant fraudulently enticed more than 300 customers with over $100 million in assets to join his firm. Apparently, Grant recruited clients whose accounts he managed at his former employer, Wedbush Morgan Securities, shortly after his departure in September 2005.

The SEC claims that Grant was a registered representative of Wedbush and almost all of his accounts were by First Wilshire Securities Management, a California investment adviser. Apparently, days after resigning from his position at Wedbush, Grant sent a letter to his former clients on October 4, 2005 advising them that they should switch their accounts to his new operation, Sage. The complaint alleges that Grant's letter told his former clients that Sage was formed solely to manage their funds and First Wilshire suggested moving their accounts from Wedbush to a discount broker, Charles Schwab & Co.

Grant's letter also allegedly advised clients that a new fee and commission structure called a "wrap fee" was cheaper according to First Wilshire. The complaint also claims that Grant subsequently told clients that First Wilshire was no longer willing to manage their assets at Wedbush and they had to switch to Sage.

Continue reading "Benjamin Lee Grant, Sage Advisory Group Massachusetts Investment Scam Discovered" »

September 10, 2009 - Sandra Venetis was allegedly operating her three entities, Systematic Financial Services, Inc., Systematic Financial Associates Inc., and Systematic Financial Services LLC, as a Ponzi scheme. According to the complaint filed by the Securities and Exchange Commission ("SEC"), Venetis bilked investors for at least $11 million since 1997 by promising returns of 6 to 11 percent per year. Apparently, Venetis misappropriated investor funds for her own personal use and for her relatives.

Apparently, Venetis lured investors by offering promissory notes, fixed income investments, and other supposedly lucrative investments. The complaint alleges that Venetis claimed that the promissory notes were backed by the Federal Deposit Insurance Corporation ("FDIC") and that the interest payments would be tax free. Venetis also apparently told some investors that their money would be used for loans to various doctors backed by Medicare reimbursements. The SEC claims that Venetis completely made up the names of the doctors and falsified their signatures on loan documents.

According to the complaint, the promissory notes and other offerings were not backed by any legitimate investments. Venetis apparently used the money to pay her personal and business debts, as well as finance her gambling and extravagant vacations. Venetis also allegedly bought a house for her daughter and paid for improvements on her brother's home.

Continue reading "Sandra Venetis, Systematic Financial Investment Fraud Busted" »

June 30, 2010 - David Spitzer allegedly operated several business entities as a foreign currency investment fraud, which raised over $105 million from 400 investors. This week, the Securities and Exchange Commission ("SEC") filed a complaint that claims Spitzer misled investors from at least 2004 until as recently as March 2010. Spitzer, a resident of St. Thomas, recruited investors from all over the United States.

According to the complaint, Spitzer and his sales team told investors that their money would be placed in investment funds that would, in turn, primarily be invested in foreign currency. Spitzer allegedly enticed new clients by claiming he was an extremely successful fund manager and always produced exorbitant annual returns, including one year of 180%. To facilitate his purported scheme, Spitzer allegedly issued phony documents, including false K-1s, to clients.

The SEC claims that, in reality, Spitzer only invested $30 million of client funds, including $16.5 million in a foreign entity that ultimately lost money and was liquidated back to Spitzer. Spitzer also apparently invested $16 million in money market funds but only earned a few thousand dollars.

Continue reading "Daniel Spitzer Ponzi Scheme Busted" »

June 17, 2010 - Milowe Brost, Gary Sorenson, Larry Adair, Ward Capstick, Bradley Regier, and Martin Werner allegedly operated their entities Syndicated Gold Depository, Merendon Mining Corp. Ltd., Merendon Mining (Nevada) Inc., and the Institute for Financial Learning Group of Companies, Inc. as a massive $300 million Ponzi scheme. Last week, the Securities and Exchange Commission ("SEC") filed a complaint that alleges Brost and Sorenson were the leaders of the alleged Gold mining fraud, which convinced 3,000 investors to cough up large amounts of money.

The SEC claims that Brost led a sales team, called Structurists, which held investment seminars where they claimed to be independent financial professionals. At the seminars, the men allegedly pushed investments in gold mining businesses that could generate annual returns ranging from 18 to 36 percent.
The SEC also alleges that Brost and the Structurists promised that all investments were collateralized by gold.

The complaint claims that Brost and his sales team sold shares in various entities and then through a unique "structuring" process that ultimately led to the transfer of funds from Syndicated Gold Depository to Merendon Mining Corp. Ltd. Apparently, Sorenson claims to be an independent businessman making loans to Merendon, but in reality controlled the company.

Continue reading "Milowe Brost, Gary Sorenson Gold Investment Fraud Stopped by Feds" »

June 3, 2010 - Luis Felipe Perez allegedly operated his investment business, which he claimed financed jewelry stores and pawn shops, as a massive $40 million Ponzi scheme. The Securities and Exchange Commission ("SEC") filed a complaint, which alleges that from 2006 to June 2009 Perez operated his scam by recruiting primarily Hispanic investors from the Miami area. Allegedly, Perez told investors that their money would be used to finance his jewelry stores, Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp., as well as pawn shops in New York City.

According to the SEC, Perez was able to grow his scam primarily by word of mouth, especially in the Hispanic community. The complaint says that Perez enticed investors by offering "no-risk" loan agreements with annual returns ranging from 18 to 120 percent. The SEC claims that Perez falsely told investors that their loans were secured by diamonds that had specifically been set aside for them in New York City pawn shops, which he financed. Perez apparently even duped clients by providing them access to safety deposit boxes that contained, unknown by investors, fake diamonds. The SEC further claims that Perez misled investors by telling them they were added as beneficiaries to his life insurance policy, which had lapsed at the time.

Continue reading "Luis Felipe Perez Diamond Investment Fraud Busted" »

May 22, 2010 - Edward Allen and David Olson operated their real estate company, A & O Investments, LLC, as a Ponzi scheme according to the Securities and Exchange Commission ("SEC"). The SEC's complaint filed in an Ohio federal court claims that from September 2005 to December 2008 Allen and Olson raised about $14.8 million from at least 100 investors.

Apparently, A & O Investments enticed buyers by offering promissory notes with annual interest rates of 20%. Allegedly, Allen and Olson claimed that the money raised from the notes would be used to purchase and rehabilitate real estate, primarily in Florida. The complaint further alleges that A & O would profit from sales of the refurbished real estate and Allen and Olson represented to clients that they had been making successful transactions.

The SEC alleges that Allen and Olson recruited investors by sending mass mailings and word of mouth. Also, Allen and Olson apparently solicited customer of their former employer World Group Securities, Inc., a Georgia based securities broker-dealer.

Continue reading "Edward Allen, David Olson, and A & O Investments Scam Halted" »

May 10, 2010 - Victims of the Millennium Bank Ponzi scheme have survived a motion to dismiss filed by Defendant JPMorgan Chase Bank in their class action lawsuit. The complaint alleges that the bank aided and abetted the perpetrators of a $200 million Ponzi scheme which operated out of offices located in Napa, California. U.S. Magistrate Judge Edward Chen refused to dismiss four out of five of the counts, which will now proceed into a discovery phase requiring JPMorgan to produce documents and answer questions about its banking activities.

JPMorgan is the successor of failed Washington Mutual Bank ("WAMU"), which had branches in Napa, where Millennium's mastermind, William Wise and his associates, carried out their banking activities. Wise lured over 250 investors by offering certificates of deposit (CDs) with unrealistically high interest rates. Millennium Investors were instructed to mail checks to Napa, which were presented for deposit at the WAMU branches. Millions were commingled and then either transferred offshore or used by Wise and his cohorts for personal expenses, including payments for a private jet, an extensive wine collection, and to support Wise and his family's extravagant lifestyle.

The complaint alleges that WAMU continued to conduct business with Millennium even though it knew that investor monies were being siphoned away. Judge Chen determined that the allegations in the Complaint, if proved, would state a cause of action. Specifically, he permitted the claims of aiding and abetting fraud, aiding and abetting conversion, breach of fiduciary duty, and violation of California Business Code to proceed. However, he found no evidence to support the claim that there was a conspiracy to commit fraud.