Articles Posted in SECURITIES FRAUD

December 7, 2009 – Striker Petroleum, LLC, a Dallas based oil and gas company controlled by Mark S. Roberts, 58, and Christopher E. Pippin, 35, was a massive Ponzi scheme, according to the complaint filed by the SEC last week. According to the SEC complaint, Striker
oil-rig.jpgraised approximately $57 million from about 540 investors throughout the U.S. by offering debentures backed by false disclosures about Striker’s financial health. Striker further maintained that collateral backing the debentures was held by an independent third party trustee, which was also false.

Between September 2006 and September 2009, Striker offered debentures to investors in an effort to raise additional capital. Debentures function as an unsecured bond backed by the reliability of the borrower. Each series of debentures issued by Striker was accompanied by a Private Placement Memorandum (“PPM”), which contained vital financial statistics about Striker and further claimed that the money would be used to acquire, develop and maintain existing oil and gas properties, to purchase additional collateral, and for general working capital.

According to the SEC, Striker did not use the funds as advertised, but for other puposes, including paying out fixed returns to prior investors who had acquired working interests, known as “Legacy Offerings”. Striker also sent funds to a related operating company, Reichman Petroleum, which shortly after filed for bankruptcy.

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November 26, 2009 – Trevor G. Cook and Patrick J. Kiley, both Minnesota residents, allegedly operated a foreign currency investment scam through their four main entities: UBS Diversified Growth LLC, Universal Brokerage FX Management LLC, Oxford Global Advisors LLC, and Oxford Global Partners LLC. According to the complaint filed by the SEC this week, Cook and Kiley ran a Ponzi scheme, which took in over $190 million and had at least 1,000 investors.

The SEC alleges that from July 2006 through July 2009, Cook and Kiley enticed over 1,000 investors by promising annual returns of 10-12%. Cook and Kiley promised their clients that their money would be kept in separate accounts for each individual and invested in foreign currency trading. In reality, the SEC claims investor money was pooled together and deposited into the accounts of various entities controlled by Cook and Kiley.

According to the complaint, Cook and Kiley moved $108 million through their various entities and did use a portion of that money for foreign currency trading, but this resulted in losses of $48 million. The SEC claims that Cook and Kiley pocketed $42.8 million for personal use, including $18 million used to purchase ownership interests in two trading companies, $12.8 million, which was moved to Panama, ostensibly for the construction of a casino, $2.8 million to purchase the Van Dusen Mansion, and $4.8 million, which Cook lost gambling. Also, it is alleged that nearly $51 million was used to make payments to prior investors in a Ponzi-like fashion.

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November 24, 2009 – The SEC alleges that Derek A. Nelson ran a Ponzi Scheme using fictitious companies: Capital Mountain Holding Corporation (“CMHC”), Systems XXI, Act I, LLC, and Systems XXI, Act II, LLC. In a Complaint filed last week in federal court for the Northern District of Texas, the SEC brought civil claims against Nelson, CMHC, Act I, and Act II. The SEC also named two other Nelson entities, Plouteo, Inc. and Homaide Real Estate Services, Inc., as relief defendants. According to the complaint, Nelson’s scam enticed hundreds of investors and raised over $25 million from June 2008 through September 2009.

In June 2008, CMHC, based in Dallas, Texas, began offering promissory notes purportedly to raise capital for investment in distressed homes. Nelson, 42 from Fairview, Texas, told David Nelson World Finance Cover.jpginvestors that he would use the money to purchase these properties at a discount and then renovate or rent them and eventually sell them at a profit. Nelson gathered investors through vigorous internet marketing and a Canadian-based marketing firm. The CMHC notes promised returns of 10% per month for three months. CMHC allegedly raised $15 million from these sales.

In October 2008, Nelson began offering similar notes from Act I and Act II. The Act I notes offered 18% yearly returns for two year investments and the Act II notes 21% yearly returns for five years. These notes also declared that 90% of investor funds would be used to purchase and rehab properties. According to the SEC, Nelson raised at least $10 million from sales of Act I and Act II notes.

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November 18, 2009 – Mantria Corporation and Speed of Wealth, LLC operated a ponzi scheme, claims the Securities and Exchange Commission (“SEC”) in a complaint just filed in federal Court in Colorado. The SEC has filed a civil action against Mantria Corporation, Troy B. Wragg, Amanda E. Knorr, Speed of Wealth, LLC, Wayde M. McKelvy, and Donna M. McKelvy in the United States District Court for the District of Colorado, alleging that they operated a $30 million investment scam. According the SEC’s complaint, over 300 individuals, mostly elderly, unknowingly participated in the scheme, which sought investors to support Mantria’s environmentally conscious investments.

Mantria Corp Logo.jpgMantria, based in Bala Cynwyd, Pennsylvania, was run by Wragg and Knorr and offered potential investors unregistered securities with yearly rates of return between 17% and “hundreds of percent.” Investors thought they were financing Mantria’s “green” initiatives including a “carbon negative” housing development in Tennessee, and a “biochar” charcoal alternative made from organic waste. The SEC alleges that Mantria’s supposed projects did not produce significant returns and a majority of payments made to investors were from funds accumulated from earlier investors.

 

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Speed of Wealth, LLC, headquartered in Centennial, Colorado is operated by Wayne and Donna McKelvy and apparently worked in conjunction with Wragg, and Knorr to market and promote investments in Mantria. Speed of Wealth was a “wealth education” program founded by the McKelvys that offered investment seminars, online webinars, telephone conference calls, and hosted online radio programs.

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October 23, 2009 – The SEC and CFTC have filed civil actions against David F. Merrick and his Trader’s International Return Network ( TIRN ), and Merrick’s other corporate shells, most of them registered in Florida. The government alleges that Merrick and TIRN operated a $22 million Ponzi scheme, raising money from thousands of unsuspecting investors. 


TIRN.jpgIt is alleged that Merrick, 61, organized a group of “finders” who earned commissions by soliciting  potential new investors touting TIRN”s double-digit monthly returns on investment in foreign currencies, real estate and precious metals. It appears that little or no money was ever invested at all. Rather, Merrick diverted the money to his own use or to paying redemptions to other investors.

Merrick also conducted investment seminars seeking to lure new customers in the U.S. and elsewhere, including Panama, Antigua and Punta Cana (See Youtube video below). It has been reported that Anres representatives were present at some of these seminars. Merrick had plans to export his investment club to many foreign countries, and some Spanish and Portuguese language websites are still active.

 

 

One unique feature of this scam was Merrick’s use of debit cards as a vehicle for investors obtaining interest or principal from the investments. Merrick teamed up with a private Nevada corporation, Anres Technologies Corporation, base in Plano, Texas, to supply the debit cards. Investors used the Anres website to transfer funds to their cards, and were charged fees for the transactions, including link up charges for use of the site.

images[6].jpgIt is alleged that Merrick transferred at least $8.8 million to Anres in order to fund the cards, which appears to have been affiliated with the Palm Desert National Bank, a California bank with branches in Palm Desert and several other California locations. Although some investors successfully used the debit card to make withdrawals, it is unclear how much was distributed using the cards.

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October 15, 2009 – The SEC has filed an emergency civil action against David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services, Inc., MDD Consulting, Inc., and Go ! Tourism, Inc alleging financial fraud. According to the complaint, Merrick and his business entities operated a $22 million Ponzi scheme since at least July 2008.

Using a website, www.mytirn.com, Merrick allegedly raised funds from at least 2500 investors by promising monthly dividends of
TIRN.jpgup to 22% stating that investor money would be used to buy foreign currency trading, international bonds, international stocks and other investments. Merrick and TIRN instructed customers to deposit funds into accounts in the name of MS and GTT, entities controlled by Merrick. Merrick then allegedly transferred money from those accounts into other accounts in the names of MS, GTT Services, MDD Consulting, and Go ! Tourism.

According to the SEC, Merrick and TIRN did not invest in any type of securities but instead used the money for Merrick’s personal use and to repay earlier investors. The SEC also claims that Merrick used at least $3.7 million to finance his lifestyle and to pay credit card bills from MS and GTT Services.

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October 9, 2009 – Gregory Bell, a former Chicago hedge fund manager and owner of Lancelot Investment Management, LLC, pled guilty to one count of wire fraud yesterday in the United States District Court for the District of Minnesota. Wire fraud carries a maximum of 20 years imprisonment and a fine of $250,000. Bell’s sentencing will be decided at a later date.

Bell is just one of several defendants in a pending civil action filed by the SEC against Thomas J. Petters, a Minnesota businessman charged with operating a multi-billion dollar Ponzi scheme from 1995 to 2008. Bell started Lancelot in 2001 and from 2002 to 2008 raised over $2.62 billion from hundreds of investors, who sold security interests in hedge funds they managed to Lancelot. According to the SEC’s complaint, Bell exchanged almost all of the investor funds for notes from Petters Company Inc. and fraudulently assured that their investments were in safe hands.

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October 9, 2009 – Richard M. Harkless, 65 years old from Riverside, California, was sentenced to 100 years in federal prison on September 28, 2009. Harkless was convicted of three counts of mail fraud, three counts of wire fraud, and one count of money laundering. Apparently Harkless operated a multi-million dollar investment scam through his business entities Mx Factors LLC, BBH resources LLC and JTL Financial Group LLC. Harkless’ three sales agents, Daniel Berardi, Jr., Thomas Hawkesworth, and Randal W. Harding were all sentenced to 6 years in federal prison for their involvement.

Jail Bars.jpgIn addition to jail time, Harkless was ordered to pay over $42 million in disgorgement, civil penalties, and prejudgment interest. The judgment ordered Berardi and Hawkesworth, managing members of BBH Resources, LLC, to pay over $11 million and Harding, managing member of JTL Financial Group, LLC, to pay over $17 million.

According to the SEC, between 2000 and 2003 Harkless and his sales agents induced approximately 600 investors from all over the country to invest over $60 million. Mx Factors offered potential investors 14% returns on short term 2 to 3 month investments. Most of Mx Factors’ clients were construction contractors, wholesalers, and manufacturers who sought accounts receivable financing.

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September 29, 2009 – Yesterday, a federal court judge in Los Angeles, California entered a default judgment against Clelia A. Flores and her business Maximum Return Investments, Inc (“MRI”) in a lawsuit brought by the SEC. According to the SEC’s complaint filed in April, Flores and MRI operated a $23 million Ponzi scheme targeting the Hispanic-American community. The judgment entered ordered a permanent injunction against Flores and MRI from committing future violations of various SEC regulations as well as ordering Flores and MRI to pay over $11 million in fines and disgorgement fees.



Money Stacks.jpgFlores and MRI allegedly solicited investors by offering rates of return as high as 25% in just 30 to 45 days. The funds were supposedly invested in real estate, commodities, and bank trading instruments. However, the complaint alleged that neither Flores nor MRI invested in the promised securities.

Instead, the SEC claims that Flores and MRI paid out approximately $13 million to older investors, in a typical Ponzi scheme pattern, and used $5.6 million for high-risk investments and start-up companies that never paid MRI any returns. Apparently, Flores used $3.5 million for personal expenses including a $443,000 house and $1.5 million for MRI’s operating expenses and an extravagant party for investors.

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September 9, 2009 – Philip G. Barry and his business entities Leverage Group, Leverage Option Management Co., Inc., and North American Financial Services were sued yesterday by the Securities and Exchange Commission. The SEC has charged Barry with securities fraud alleging that he operated a Ponzi scheme, which commenced in 1978, involved approximately 800 investors with over $40 million in losses.


Barry, Philip.jpgThe fraudulent investment scam operated out of Barry’s Brooklyn, New York offices. The alleged victims include many residents and friends from his own Bay Ridge neighborhood, where he grew up and still resides.

According to the SEC’s complaint, Barry lured investors with promises of returns as high as 21% on investments in options and other securities. However, Barry apparently used investor funds for other investments including real estate, a mail order pornography business, and other personal uses. Allegedly, Barry ceased making investments in options and other securities as early as 1999.

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