Ponzi Schemes


SEC accuses GPB Capital of running $1.7 billion Ponzi scheme

Around 17,000 investors were defrauded, according to the complaint

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The U.S. Securities and Exchange Commission (SEC) has charged investment adviser GPB Capital Holdings and a trio of executives with defrauding around 17,000 retail investors as part of a massive $1.7 billion “Ponzi-like” scheme.  

In a statement, the SEC said three GPB executives “lied to investors about the source of money used to make an 8% annualized distribution payment to investors.” 

Investors were allegedly told that the distribution payments were fully covered by ...

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    Thogensen Family Farm recalls raw frozen ground pet food

    The products may be contaminated with Listeria monocytogenes

    Thogersen Family Farm of Stanwood, Wash., is recalling raw frozen ground pet food that may be contaminated with Listeria monocytogenes.

    The following varieties, packaged in two pound packs, are included in this recall: course ground rabbit, course ground mallard duck, ground llama, and ground pork frozen raw pet food.

    No illnesses have been reported to date.

    The recalled products were packaged in two pound flattened, rectangular clear plastic packages and stored frozen. The front of the package contains one large white square label with the company name, product type and weight.

    The product labels do not contain any lot identification, batch codes, or expiration dates.

    The recalled products were either sold to individual customers or two retail establishments that have been notified.

    What to do

    Customers who the purchased the recalled products should discontinue using them.

    Consumers with questions may call (360) 929-9808.

    Thogersen Family Farm of Stanwood, Wash., is recalling raw frozen ground pet food that may be contaminated with Listeria monocytogenes.The following va...

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    Former NJ Nets player sentenced to nine years in Ponzi scheme

    C. Tate George scammed victims for more than $2 million, feds charged

    Former New Jersey Nets and Milwaukee Bucks player C. Tate George has been sentenced to nine years in prison for his role in orchestrating a $2 million investment fraud scheme.

    After a three-week trial before U.S. District Judge Mary L. Cooper in September 2013, a jury deliberated for four hours before convicting George, 47, of Newark, N.J., of all of four counts of the indictment. 

    According to testimony in the case, George held himself out as the CEO of The George Group and claimed to have more than $500 million in assets under management.  He pitched prospective investors, including several former professional athletes, to invest with the firm and told them their money would be used to fund The George Group’s purchase and development of real estate development projects, including projects in Connecticut and New Jersey.  

    But, said prosecutors, the supposed "opportunity" was really nothing more than a Ponzi scheme.

    “Those who perpetrate Ponzi schemes shamelessly trade on relationships with those who trust them,” U.S. Attorney Paul J. Fishman said.  “In this case, George relied on his sports stardom to attract unwitting investors. His crimes justified today’s lengthy sentence.”

    “By shamelessly cashing in on his celebrity C. Tate George stole $2 million from investors who trusted him as a former NBA athlete,” said Special Agent in Charge Richard M. Frankel for the FBI’s Newark Division.  “George used the money to pay other investors in the Ponzi-style scheme and lined his pockets with the rest, funding extensive renovations on his home, paying for his daughter’s sixteenth birthday party, and producing a reality video about himself.”

    During the sentencing proceeding, prosecutors asserted George had presented the court with fraudulent character witness letters arguing in favor of a light sentence.

    The prosecutors became suspicious when they noted the letters were strikingly similar. They checked with the individuals who purportedly sent the letters and found that they denied writing them.

    In addition to prison time, Judge Cooper also sentenced George to three years of supervised release, ordered him to pay $2.55 million in restitution and entered a forfeiture money judgment of $2.55 million.

    Former New Jersey Nets and Milwaukee Bucks player C. Tate George has been sentenced to nine years in prison for his role in orchestrating a $2 million inve...

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    Movie production "opportunity" didn't turn out that way

    Consumers cashed in their annuities to make it big in Hollywood

    Lots of people want to be movie stars. Lots of others would like to make big bucks as movie producers, but like any other specialized business, novice investors can find themselves fleeced.
    That's what prosecutors allege Michelle Kenen Seward, 42, and Dror Soref, 75 were doing. They're charged with operating a Ponzi scheme that allegedly bilked investors from the Los Angeles area out of $21 million dollars in an elaborate movie investment scheme.
    The California Department of Insurance Investigation Division says it found evidence that Seward, a former licensed insurance agent, allegedly convinced some of her clients to invest their life savings in a film directed by Soref titled "Not Forgotten," which was an unsecured investment.
    In some cases, Seward allegedly talked clients into surrendering annuities early and paying large penalties by promising returns of between 10 and 18 percent. Investors who surrendered annuities paid more than $600,000 in penalties and fees for early withdrawal.
    After the film's completion, the two formed a new entity titled Windsor Pictures, LLC, which investors were promised would produce several films. Investors were given promissory notes and told they would again earn between 10 and 18 percent on their investment.
    But investigators say they found evidence that investors' money used to form Windsor Pictures was used to pay investors in the production of "Not Forgotten." Additionally, Seward and Soref were not licensed to sell securities or provide investment advice.
    The case is being prosecuted by the Los Angeles County District Attorney's office.

    Charles PonziLots of people want to be movie stars. Lots of others would like to make big bucks as movie producers, but like any other specialized busi...

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    Bitcoin used in Ponzi scheme, feds charge

    Investors were promised a 7% weekly return on their money

    It's commonly accepted that the early adopters of new technologies are pornographers and scam artists. In that spirit, the Securities and Exchange Commission has filed its first fraud case involving Bitcoin, the virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online. 

    The Securities and Exchange Commission (SEC) yesterday charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin.

    The SEC alleges that Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.”

    The SEC says that Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold.  Today the value of 700,000 Bitcoin exceeds $60 million.

    “Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”

    7 percent weekly return

    The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities. 

    In reality, the SEC says BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments.  Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses, the agency said.

    The SEC issued an investor alert warning investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet. 

    It's commonly accepted that the early adopters of new technologies are pornographers and scam artists. In that spirit, the Securities and Exchange Commissi...

    New York Arrests Prominent Accountant In Alleged Ponzi Scheme

    Scheme allegedly raked in millions of dollars

    A well-established Bronx, N.Y. tax preparer has been indicted on 29 counts of grand larceny, accused of operating a “massive” Ponzi scheme that defrauded dozens of New Yorkers out of millions of dollars.

    New York Attorney General Eric T. Schneiderman says Robert H. Van Zandt, owner of the Van Zandt Agency, was also charged with two counts of money laundering.

    "Money laundering and securities fraud are serious crimes, and when someone abuses the trust built upon longstanding relationships to steal individuals' life savings, our office will prosecute that person to the fullest extent of the law," Schneiderman said. "It's unconscionable that many hard-working people put their futures in the hands on this defendant only to see their financial security destroyed by greed. Mr. Van Zandt stole his victims’ life savings, and forced some of them to re-enter the workplace or rely on government assistance to survive, while others face foreclosure on their homes or bankruptcy. The perpetrator of this despicable Ponzi scheme will be brought to justice."

    Began in 2007

    Schneideran says Van Zandt ran is tax preparation business for decades. Starting in 2007, Schneiderman said Van Zandt began accepting investments from tax preparation clients, who trusted him to manage their retirement funds and savings. In many cases, these investors handed over their entire life savings or retirement accounts, only to see their money disappear. From at least February 2008 through January 2011, Van Zandt solicited money from unsuspecting clients, promising guaranteed rates of returns.

    According to the indictment and statements made by prosecutors at the arraignment, Van Zandt's alleged investment opportunities turned into a purely Ponzi-style scheme starting in approximately 2008. Van Zandt guaranteed high rates of return to new investors, promising to invest their money in lucrative securities, including real estate projects that were, in fact, impossible to build.

    Money not invested

    The Attorney General said the money was not invested as promised, but rather was used to pay previous investors or diverted for personal expenditures. The scheme brought in over $4.6 million from February 2008 through January 2011 alone.

    Van Zandt also allegedly abused his position as a manager of a tax preparations business to identify and lure new investors, targeting victims who had large amounts of money available, such as retirement funds, savings, inheritances or settlements.

    Up to $900,000 in losses

    Van Zandt allegedly made materially false representations and failed to disclose material facts to his investors in order to induce them to invest enormous sums of money with him, ranging from $25,000 to nearly $900,000. The invested monies were allegedly deposited into accounts affiliated with the Van Zandt Agency or controlled by Van Zandt and then commingled and transferred between accounts as needed, to pay investors, business expenses, and for personal use.

    The indictment claims the money was never legitimately investment. In particularly egregious cases, although Van Zandt promised that investors' money would be used to purchase government bonds or corporate securities, no such bonds or securities were ever purchased for the victims, Schneiderman said.

    A Ponzi scheme works by paying early investors with money invested by new victims. As long as a large number of investors don't withdraw money at the same time, the scheme can go on indefinitely.

    In 2008, when a financial crisis gripped the world, many investors moved to cash, exposing a number of Ponzi schemes, most notably Bernard Madoff's, whose clients included some of the wealthiest people in New York.

    A well-established Bronx, N.Y. tax preparer has been indicted on 29 counts of grand larceny, accused of operating a “massive” Ponzi scheme that...

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    Feds Shut Down Alleged Father-Son Ponzi Scheme

    Statewide scheme took in $220 million in Utah

    The Securities and Exchange Commission has charged a father and son in Utah with securities fraud for selling purported investments in their real estate business that turned out to be nothing more than a wide-scale $220 million Ponzi scheme.

    The SEC alleges that Wendell A. Jacobson and his son Allen R. Jacobson operate from a base in Fountain Green, Utah, and offer investors the opportunity to invest in limited liability companies (LLCs) in order to share ownership of large apartment communities in eight states.

    The Jacobsons solicit investors personally and through word of mouth, and appear to be using their memberships in the Church of Jesus Christ of Latter-Day Saints to make connections and win over the trust of prospective investors.

    The SEC alleges that the Jacobsons represent that they buy apartment complexes with low occupancy rates at significantly discounted prices. They then renovate them and improve their management, and aim to resell them within five years.

    Investors are said to share in the profits derived from rental income at the apartment complexes as well as the eventual sales. But in reality, the LLCs are suffering significant losses and the Jacobsons are merely pooling the money raised from investors into large bank accounts from which they are siphoning money to pay family expenses and the operating expenses of their various companies. They also are paying earlier investors with funds received from new investors in classic Ponzi scheme fashion.

    Assets frozen

    After filing its complaint yesterday in federal court in Salt Lake City, the SEC obtained an emergency court order freezing the assets of the Jacobsons and their companies.

    “Wendell and Allen Jacobson misled investors to believe they were financially supporting what was portrayed as a widespread and reputable operation to revamp apartment communities and turn a significant profit,” said Ken Israel, Director of the SEC’s Salt Lake Regional Office. “Their promises were anything but truthful.”

    According to the SEC’s complaint, the Jacobsons raised more than $220 million from approximately 225 investors through a complex web of entities under the umbrella of Management Solutions, Inc.

    They have operated the allegedly fraudulent scheme since at least 2008, the complaint said. They sold the securities in the form of investment contracts without filing any registration statement with the SEC as required under the federal securities laws. Wendell and Allen Jacobson are acting as unregistered brokers in connection with their offers and sales of membership interests in LLCs.

    The SEC alleges that the Jacobsons falsely assure investors that the principal amount of their investment will be safe, and their funds will be used to acquire, rehabilitate, and manage certain identified properties.

    Investors are promised annual returns ranging from 5 to 8 percent per year depending upon the particular apartment complexes pertaining to their LLC, with additional profits promised when the properties are sold. Wendell and Allen Jacobson tell investors that their funds are designated for a particular LLC. Wendell Jacobson has told investors that only one time has he ever lost money on a property, and on that occasion he covered the loss personally so that investor returns would not be reduced.

    According to the SEC’s complaint, investor funds are never held and used exclusively to acquire, rehabilitate, and operate rental properties as represented by the Jacobsons.

    In fact, the LLCs are experiencing significant net losses, the complaint charges. Nevertheless, the LLCs continue to pay returns to investors, falsely leading those investors to believe their LLCs are operating at a profit. When investor funds are received, they are almost always transferred or pooled immediately in accounts of various Jacobson-owned entities, most commonly in the account of Thunder Bay Mortgage Company. Investor funds are then used for a variety of purposes that have not been disclosed to investors.

    The SEC further alleges that on numerous occasions since Jan. 1, 2010, investors have been told that the property owned in their LLC has been sold, and that they have realized a profit on the sale. In fact, those properties were not sold, and the Jacobsons used the alleged “sales” as a means of shifting investors into and out of certain properties. They have essentially been operating a shell game intended to raise additional funds from new or existing investors in order to meet the rapidly growing financial obligations of their operation.

    The Securities and Exchange Commission has charged a father and son in Utah with securities fraud for selling purported investments in their real estate bu...

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    Investment Fund Manager Scammed Clients, U.S. Charges

    Former Reno city councilman named in 41-count indictment

    A former investment fund manager has been charged with defrauding investors out of millions of dollars by falsely promising investors their money would be used to purchase corporate bonds backed by the federally funded Troubled Asset Relief Program (TARP) and then collaborating with his corporate counsel to cover-up the fraud.

    John Farahi, 54, of Bel Air Estates, Calif., was named in a 41-count indictment returned late Wednesday afternoon by a federal grand jury. The indictment charges Farahi – a former member of the Reno, Nevada, City Council and Farsi-language radio investment advisor – with various fraud offenses that include making false statements to TARP-funded banks in relation to multi-million dollar loans.

    “Farahi exploited TARP to line his own pockets and fund his lavish lifestyle,” said Christy Romero, Deputy Special Inspector General for the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). “He is accused of selling investors fake securities that he called TARP-backed securities and committing loan fraud against TARP recipient banks to cover his losses. Investors should beware that there is no such thing as a TARP-backed security.”

    Attorney named

    The indictment also charges attorney David Tamman, 44, of Santa Monica, with conspiring with Farahi to obstruct a Securities and Exchange Commission (SEC) investigation into Farahi’s fraud scheme.

    At the time of the alleged obstruction, Tamman, who is now a sole practitioner with offices in Century City, served as corporate counsel for Farahi’s investment company and was a law firm partner.

    From 2005 until early 2010, Farahi ran the Beverly Hills-based New Point Financial Services, which he used to sell more than $20 million worth of investment instruments – which he called debentures – to more than 100 investors, most of whom are members of the Southland’s Iranian-Jewish community.

    Farahi attracted many of the investors through his daily radio show in which he touted a conservative investment philosophy. When Farahi met with investors he falsely told them New Point Financial Services invested in low-risk investments like certificates of deposit, TARP-backed corporate bonds, and deeds of trust backed by substantial amounts of borrower equity.

    The indictment alleges that Farahi did not make these types of investments and that he instead used investor money for a variety of personal purposes, including to support his family’s lavish lifestyle, to make Ponzi payments to early clients of New Point Financial Services, and to trade in high-risk and speculative future options trading.

    $15 million

    Starting in 2008, Farahi allegedly failed to tell New Point Financial Services investors that he had lost at least $15 million through his undisclosed options trading – even as he continued to solicit investors for New Point Financial Services.

    In the face of huge trading losses at the end of 2008, Farahi allegedly tried to extend the scheme by drawing down extensively on lines of credit at banks while making false statements to those banks about his financial condition. The victim banks included Bank of America, U.S. Bank, and Sun West Bank. Bank of America and U.S. Bank were recipients of federal TARP funds.

    When the SEC opened an investigation into New Point Financial Services in April 2009, Farahi allegedly conspired with Tamman, who was the company’s longtime securities counsel, to cover-up and conceal the fraud scheme from the SEC.

    The indictment alleges that Farahi and Tamman engaged in a conspiracy to obstruct justice that involved, among other things, altering and backdating various documents to make it appear that New Point Financial Services investors were given full disclosures about the nature and risks of their investments, removing incriminating documents from investor files before they were produced to the SEC, and lying to the SEC in sworn testimony.

    As a result of both his investment and loan fraud schemes, investigators believe that New Point Financial Services investors and financial institutions suffered losses of at least $20 million.

    A former investment fund manager has been charged with defrauding investors out of millions of dollars by falsely promising investors their money would be ...

    New York Man Accused of Running a $12 Million Ponzi Scheme

    Investors' money was supposedly invested in real estate, private mortgages

    A New York man was arrested yesterday on charges of operating a $12 million Ponzi scheme from 2007 to 2010.

    Joseph Mazella, the founder and president of the Great Atlantic Group, Inc., a Staten Island-based real estate and financial consulting company, was charged with securities fraud, wire fraud, and money laundering in a federal indictment that was unsealed in federal court in Brooklyn.

    As alleged in the indictment, Mazella solicited investments in Third Millennium Enterprises, Inc. and 150 West State Street Corp., both of which were associated with the Great Atlantic Group that supposedly invested in real estate projects and provided private mortgages.

    Perhaps the most egregious aspect of this case is that the defendant allegedly encouraged victims—some, senior citizens—to obtain mortgages on their homes and to invest the proceeds in what the indictment charges was nothing more than a Ponzi scheme,” said United States Attorney Loretta E. Lynch. “We will aggressively investigate and prosecute those who perpetrate these crimes.”

    Mazella told prospective investors that he would invest their money in real estate projects, including projects in Trenton, New Jersey, a warehouse in Utica, New York, and a golf course development project. From approximately January 2007 until approximately December 2010, investors contributed a total of nearly $12 million to Third Millennium and 150 West State Street. As of December 2010, the combined closing balance of the bank accounts associated with the two companies was less than $15,000.

    According to the indictment, Mazella described the investments as an opportunity to receive the returns of mutual funds and stocks, without any significant loss of liquidity, and at a fixed rate during the entire time period of investment.

    Solicitation materials distributed by Mazella characterized the investments as “geared toward individuals who are interested in earning more than traditional bank savings and CD rates but without the risk of the stock market.”

    Some investors were encouraged to obtain mortgages on their homes and to invest the mortgage proceeds with Third Millennium or 150 West State Street, and other investors, typically senior citizens, were encouraged to apply for reverse mortgages on their residences and to invest the proceeds with the two companies.

    The indictment charges that, by as early as January 2007, Mazella had virtually stopped investing in real estate projects, and instead operated Third Millennium and 150 West State Street as a Ponzi scheme, in which he paid returns to investors from existing investors’ deposits or money paid by new investors. Many of the properties in which the companies held any mortgage or ownership interest were abandoned and in various states of disrepair, and the property taxes owed on several of those properties had fallen into arrears.

    Mazella also allegedly used investors’ money to pay his personal expenses, including payments for a Porsche, a mortgage on his personal residence, and family expenses.

    New York Man Accused of Running a $12 Million Ponzi Scheme Investors' money was supposedly invested in real estate, private mortgages...

    Radio Host Charged With Defrauding Real Estate Investors

    Host of MoneyDots allegedly lured investors into bogus deals

    The Securities and Exchange Commission (SEC) has charged a talk radio show host with misappropriating $2.5 million of approximately $7 million raised through the fraudulent sale of interests in two real estate investment funds.

    The SEC contends that Barbra Alexander, the former president of APS Funding, used her status as host of an internationally-syndicated radio show for entrepreneurs called MoneyDots to lure investors who thought their money would be used to fund short-term loans secured by real estate.

    Misdirected funds

    Alexander along with the Monterey, Calif.-based firm's secretary/chief financial officer Beth Pina and vice president Michael E. Swanson instead stole investor money to pay themselves $1.2 million and finance MoneyDots and other unrelated businesses unbeknownst to investors, the SEC alleges. Alexander is accused of using $200,000 of investor funds to remodel her kitchen.

    "Alexander led investors to believe she would invest their money in secured real estate financing, but she and her cohorts merely used the money for their own benefit," said Marc J. Fagel, director of the SEC's San Francisco regional office.

    No investments

    According to the SEC's complaint, Alexander, Pina and Swanson raised nearly $7 million from 50 investors for two investment funds managed by APS Funding. They claimed the funds would make short-term secured loans to homeowners and yield 12 percent annual returns to investors.

    Contrary to what investors were told, $1.2 million of their money instead went directly to Alexander, Pina, and Swanson for personal use, and $1.3 million in investor funds was used to finance other businesses owned by Alexander and APS Funding, including MoneyDots.

    The SEC further maintains that the trio advanced the scheme by sending monthly account statements to investors reflecting fictitious profits and -- in classic Ponzi scheme fashion -- paying out purported returns that actually came from new investors.

    The SEC's complaint charges Alexander, Pina, Swanson, and APS Funding with violating the antifraud provisions of the federal securities laws, and also charges Alexander, Swanson, and APS Funding with the unregistered sale of securities. The action seeks injunctive relief, disgorgement of ill-gotten gains, and monetary penalties.

    In a related criminal proceeding, the U.S. Attorney's Office for the Northern District of California filed criminal actions against Alexander, Pina, and Swanson based on the same alleged misconduct.

    Radio Host Charged With Defrauding Real Estate Investors. Host of MoneyDots allegedly lured investors into bogus deals....

    Ponzi Scammer Headed for Prison

    Investors swindled out of $158 million in 'tawdry and cheap' scheme

    Trevor Cook of Apple Valley, Minnesota, has been sentenced to a long prison term for orchestrating a Ponzi scheme that collectively cost more than 900 investors $158 million.

    United States District Court Judge James M. Rosenbaum sentenced Cook to 25 years in prison on one count of mail fraud and one count of tax evasion in connection to the crime. In imposing the sentence, Judge Rosenbaum described Cook's offense as "wretched, tawdry, and cheap." Cook was charged on March 30, 2010, and pleaded guilty on April 13, 2010.

    "Affinity fraud is a horrible crime. Victims are swindled not only of their money, but of their trust," said United States Attorney for the District of Minnesota, B. Todd Jones following sentencing. "Cook preyed upon those with whom he made connections through church or in the community. Today he atoned for his crimes."

    In his plea agreement, Cook admitted that from January 2007 through July 2009, he schemed to defraud people by purportedly selling investments in a foreign currency trading program.

    In reality, however, he diverted a substantial portion of the money provided him for other purposes, including making payments to previous investors; providing funds to Crown Forex, SA, in an effort to deceive Swiss banking regulators; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses, including substantial gambling debts; and acquiring the Van Dusen Mansion in Minneapolis.

    Investor advice

    IRS Criminal Investigation Special Agent in Charge Julio La Rosa warned the public against falling victim to schemes that involve taking money from later investors and using it to pay earlier ones.

    "Although the economics of Ponzi schemes are simple, contemporary swindlers conceal this fact with sophisticated marketing," he said. "Go beyond the sales pitch and personality to find the truth behind the numbers.

    Cook has been in jail since January because he refused to hand over more than $35 million in frozen assets, including $27 million in offshore accounts, a BMW and two Lexus automobiles, a collection of expensive watches as well as a collection of Faberge eggs, and $670,000 in cash. He has now agreed to assist the government in recovering assets to repay victims for their losses. Failure to follow through would subject him to additional court action.

    How it worked

    To carry out his massive Ponzi scheme, Cook made false statements to potential investors, including promises that the investment program would generate annual returns of 10 to 12 percent, and that trading would present little or no risk to the investors' principal. He also withheld material information from investors, such as the precarious financial position of Crown Forex, SA, in Switzerland -- an entity through which he traded. In addition, he withheld the fact that trading at PFG in Chicago generated losses in excess of $35 million between July 1, 2006, and August 31, 2009.

    To further his scheme, Cook opened an account in the name of Crown Forex, LLC, at Associated Bank, which he used to deposit investor funds subsequently diverted for his own use as well as the use of others. He also sent statements to investors that misrepresented the status of their investments. Moreover, due-diligence letters were prepared that falsely indicated that Oxford Global Advisors had more than $4 billion in assets under management, and that all accounts were liquid.

    Cook now admits that on January 29, 2009, he sent a $50,000 check through the U.S. mail from Arizona to Minnesota for investment in his foreign currency trading program.

    He also admitted that on April 15, 2009, he filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, for calendar year 2008. That return failed to report taxable income of at least $5,285,719, upon which tax was due in the amount of at least $1,844,571.

    Ponzi Scammer Headed for Prison ...

    Movie Producer Indicted In Ponzi Scheme

    Complaint says producer made millions from investors, not movies

    Investors lured by the glitter of Hollywood got taken for a ride, according to California Attorney General Jerry Brown, who has charged a Laguna Niguel movie producer with 89 felony counts for orchestrating a "cold and calculated" $9 million Ponzi scheme.

    Brown says the producer promised investors up to 35 percent returns for making loans to his B-movie production company.

    "This con artist sold securities under the guise of a loan to fool investors and try to avoid following the rules," Brown said. "He ran a cold and calculated scam, making promises he never intended to keep and using the funds of new victims to pay off the earlier ones."

    Mahmoud Karkehabadi (aka Mike Karkeh), 53, owner of Alliance Group Entertainment, was arraigned late Tuesday on the 89 felony counts, including securities fraud and grand theft. Bail has been set at $11 million. If convicted of all charges, Karkehabadi faces more than 25 years in prison.

    More than 150 individuals from across the country made "movie production loans" to Alliance Group Entertainment, which has produced four B-movie flops since 2005, including "Confessions of a Pit Fighter" (2005) starring rapper Flavor Flav and "Hotel California" (2008).

    Karkehabadi and his agents told investors they would get their money back within a year, regardless of a project's success, with returns of 18 to 35 percent. When the year was up, Karkehabadi convinced investors to roll their "loans" over into the latest movie project or agree to extensions on the date for repayment.

    Movies didn't make money

    A review of Alliance Group Entertainment bank records showed the majority of funds deposited into the company's accounts were from investors - and their money was the source of most of the principal and interest payments made to earlier investors. The accounts showed deposits of more than $11 million from investors - and just $535,000 in revenue from the movies produced by the company.

    The Department of Corporations referred the case to Brown's office in 2007 after receiving complaints from victims. Brown's office launched an investigation in 2008, searching bank records and conducting interviews with investors across the country.

    In 2003, the Attorney General's office secured a $5 million judgment against Karkehabadi for deceptively marketing credit cards that could not be used in stores and violating the state's false advertising and unfair business practices laws. Karkehabadi subsequently filed for bankruptcy. He did not disclose either of these facts to investors in Alliance Group Entertainment.

    Two California-based agents who sold securities to victims of the Alliance Group Entertainment scheme are also being charged. Timothy Cho (aka Hin-Kong Cho), 54, of Newport Beach remains at-large, while Deanna Salazar, 53, of Yucca Valley, has agreed to surrender.

    Movie Producer Indicted In Ponzi Scheme...

    Maryland Orders Halt to 'Free Rent' Pyramid Scheme

    Scheme made 'employees' out of investors

    Maryland's Securities Division has issued a cease and desist order against a firm authorities say was operating a pyramid scheme that dangled a rent-free apartment as a lure.

    The order names Diversified Marketing Consultants, Inc., d/b/a DMC and ShopD2Z, Lamondes D. Williams, and related entities Digital Zone Electronics Warehouse and Mainline Properties LLC, operating in the metro-Baltimore area.

    The company is accused of violating Maryland's securities laws by operating a fraudulent investment scheme that offered "employment" in a venture to recruit others, with the promise of profit and the use of an apartment for a year.

    Maryland Attorney General Douglas F. Gansler says the investigation revealed that DMC was soliciting investments into a supposed down-line program that would make "employees" out of investors, and promised commissions and use of an apartment or car.

    At meetings held in area hotels, Williams and others allegedly raised over $800,000 by offering the opportunity to invest in DMC for as little as an initial $100 followed by monthly payments of $100. In exchange, investors acquired the right to receive income based on the investor's recruiting other "employees." More than 115 investors/employees also took advantage of an offer, for the advance payment of a few thousand dollars, to receive use of an apartment for a year. They all now face eviction, Gansler said.

    According to the order, DMC and its agents failed to disclose to potential investors that no one was selling products but that the DMC income was based on recruiting other individuals, that commissions and rent would come from payments made by subsequent investors, and that DMC did not have sufficient funds to pay everyone's rent.

    "This has all the earmarks of a pyramid or ponzi scheme," said Gansler. "When there is no identified source of income except other investors, the risk of loss increases sharply. In addition, neither the company nor its promoters are registered with the Securities Division as required by Maryland law to sell securities."

    The Securities Division brought the action not only to halt the registration violations, but also because of the material misrepresentations and omissions made in connection with the DMC investment program, including not disclosing the fact that Williams had been previously convicted in a Maryland court for promoting a similar pyramid investment scam, and ordered in that case to pay $146,000 in restitution.

    "The law requires that investors be given material facts that could affect their investment decision," said Gansler. "This case emphasizes the need to verify with the Securities Division - before you invest -- that any investment opportunity is registered and is free of complaints."

    Maryland Orders Halt to 'Free Rent' Pyramid Scheme...