Articles Posted in INVESTMENT FRAUD

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.

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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 abettedThumbnail image for Thumbnail image for jpmorgan_logo.jpg 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 wamu_logo.jpgof 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.

The judge’s decision appears below:

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April 22, 2010 – Nevin Shapiro allegedly operated Capitol Investments USA, Inc. (“Capitol”), a Miami based grocery diverter, as an investment fraud. According to the complaint filed by the


  Securities and Exchange Commission (“SEC”), Shapiro’s fraud raised $900 million from at least 60 investors across the country.
According to the SEC, from February 2003 to November 2009, Shapiro sold Capitol promissory notes with interest rates ranging from 10 to 26 percent. Apparently, Capitol couldn’t keep up with the payments to investors and in January 2005, Shapiro began operating Capitol as a Ponzi Scheme. The complaint claims that Shapiro used his business contacts and word of mouth to attract investors and told them that their money would be used to finance the purchasing and reselling of groceries.

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April 5, 2010 – IRA custodians, Zia Trust, Inc., Sunwest Trust, Inc., and Sterling Trust Company, hold funds as custodians for investors with self-directed Individual Retirement Accounts (“IRAs”). It is now being alleged that at least one of these companies actively promoted investments with Douglas Vaughan, and his fictitious entities, now accused by the Securities and Exchange Commission of being part of an $80 million Ponzi scheme. The SEC brought a
civil complaint against Vaughan last week, claiming that Vaughn defrauded at least 600 investors, using his companies, The Vaughan Company, Realtor’s Inc., and Vaughan Capital, LLC.
According to the complaint filed by the SEC, Vaughan offered promissory notes with interest rates ranging from 10 to 25 percent. Apparently, some investors structured their investments as self-directed IRA’s. To comply with federal laws, the notes were required to be held by third party custodians, in this case by Zia Trust, Sunwest Trust, and Sterling Trust.
In his recent bankruptcy filing, Vaughan lists the following creditors and amounts owed: Zia Trust Company for $6.63 million, Sunwest Trust Company for $2.78 million, and Sterling Trust for $3.78 million. Several of those investors are now claiming that it was their IRA custodians, who initially suggested that the Vaughn notes were a good place to earn high investment returns, and a safe one.  

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March 30, 2010 – Enrique Villalba allegedly used his various business entities Money Market Alternative, L.P., Money Market Alternative Ltd., Money Market Plus, and Hybrid Money Market Management LLC to perpetrate a $39 million Ponzi scheme. In an Ohio federal court on Monday, the Securities and Exchange Commission (“SEC”) filed a complaint against Villalba alleging that he ran an investment scam from 1996 to 2009 that defrauded at least 26 investors.
According to the complaint, Villalba, 47, from Cuyahoa Falls, Ohio and a graduate of West Point, solicited investors by offering annual returns of 8% to 12% on their money. Apparently, Villalba claimed his “Money Market Plus Method” and “momentum filter” could predict changes in the market. Villalba also allegedly claimed that client funds would be secured by stop orders that would not allow the investments to lose more than 2% of the initial amounts. The SEC claims that Villalba promised clients that their money would only be invested in securities, including S&P 500 Index contracts, treasury bills or interest earning money market accounts.

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March 24, 2010 – Douglas Vaughan allegedly ran his entities The Vaughan Company, Realtor’s Inc., and Vaughan Capital, LLC as an investment scam that robbed approximately 600 investors of $80 million. On Tuesday, the Securities and Exchange Commission (“SEC”) filed a complaint in a New Mexico federal court against Vaughan and his entities alleging fraud.

Apparently, Vaughan lured investors by offering promissory notes with interest rates between 10 and 25 percent over one to three years. Vaughan allegedly claimed that the notes were secured by various real estate properties and his personal assets. The SEC claims that in reality, Vaughan used client funds to make Ponzi payments to other investors and pilfered funds for personal use. The complaint further alleges that Vaughan transferred almost all of the money raised through Vaughan Capital, LLC to The Vaughan Company.

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March 4, 2010 – The Securities and Exchange Commission (“SEC”) filed a complaint against Gaston Cantens and Teresita Cantens for allegedly running their real estate firm, Royal West Properties, Inc., as a Ponzi scheme. According to the complaint, the Cantens’ raised over $135 million from over 400 investors, who were primarily Cuban-Americans from the South Florida area. Royal West Properties Logo.gif

The SEC claims that the Cantens’ lured investors by offering promissory with annual returns ranging from 9 to 16 percent. Their promises were backed by the purported success of Royal West’s real estate business and claims that the Cantens’ were personally worth $65 million, even signing personal guarantees to some investors. The Cantens have operated Royal West Properties since 1993 and the SEC claims that they started using it as an investment scam in 2002.

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February 23, 2010 – Lawrence “Lee” Loomis and his father-in-law John Hagener were allegedly running an investment scam through their entities Loomis Wealth Solutions, LLC and Lismar Financial Services, LLC. According to a complaint filed by the Securities and Exchange Commission (“SEC”) today in a California federal court, the two men raised approximately $10 million from over 100 investors since 2007.

Lee Loomis Pic.jpgLoomis and Hagener attracted investors by promising 12 percent annual returns on alleged real estate investments. Apparently, Loomis told prospective clients that their money would be invested in two funds called the “Naras Secured Funds,” which would loan money to homebuyers and the loans would be secured by real estate deeds of trust. In reality, the SEC claims that no such trusts existed the victims’ money was used to pay other investors, to pay the operating expenses of other Loomis entities, and for Loomis’ and Hagener’s personal use.

The complaint further states that Loomis held investment seminars in Sacramento, California in 2007 and 2008, where he encouraged people to invest in Loomis Wealth Solutions. Loomis apparently attracted investors to these seminars with newspaper ads and direct mailings.

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January 13, 2010 – Neil Moody and his son, Christopher Moody, have been linked by the SEC to a hedge fund scam run by Arthur Nadel. The Moodys used Nadel as the sole investment adviser for their Sarasota, Florida based hedge funds: Valhalla Investment Partners, L.P., Viking IRA Fund, LLC, and Viking Fund, LLC. On Monday, the SEC filed a complaint in federal court in
Moody, Chris and Neil.jpgthe middle district of Florida, alleging that the Moodys provided false information to investors about their funds.

According to the SEC, from 2003 to December 2008 the Moodys disclosed information to their clients and future investors, which grossly overstated the historical returns and current value of their funds by as much as $160 million. The complaint claims that statements made by the Moodys were based on Nadel’s unverified figures. The SEC claims that there were several indications to the Moodys that should have caused them to question Nadel’s numbers.

The SEC also claims that the Moodys told investors that they made all of their own investment and trading decisions, when in fact it was Nadel that maintained virtually total control over these decisions. According to the complaint, the Moodys did not exercise any legitimate supervisory role over Nadel, and failed to independently verify any of his numbers.

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January 8, 2010 – The SEC alleges Richard Elkinson operated an investment scam that bilked 130 investors out of at least $28 million dollars, based on a civil complaint filed yesterday. According to the complaint, which was filed in a federal court in Massachusetts, Elkinson ran the scam out of his Framingham, Massachusetts home. Elkinson was arrested earlier this week in Mississippi and a criminal complaint was filed by the U.S. Attorney’s Office for the District of Massachusetts.

Elkinson told investors that his business, Northeast Sales, facilitated deals between the Japanese uniform manufacturer and large purchasers including state and local governments and even the U.S. Olympic Committee. Elkinson sought investors to help finance the 50% down payments required for these supposed contracts. To raise these funds, Northeast Sales issued promissory notes with annual interest rates ranging from 9-13%. The SEC alleges that in reality Northeast Sales did not have a relationship with a Japanese uniform manufacturer and no supply contracts actually existed.

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