SEC Ponzi Scheme Enforcement Actions ...
Curtailing Ponzi schemes and holding those responsible for these scams accountable is a vital component of the SEC's enforcement program.
Since fiscal year 2010, the SEC has brought more than 100 enforcement actions against nearly 200 individuals and 250 entities for carrying out Ponzi schemes. 1 In these actions, more than 65 individuals have been barred from working in the securities industry. The SEC also has worked closely with the U.S. Department of Justice and other criminal authorities on parallel criminal and civil proceedings against Ponzi scheme operations.
What Is A Ponzi Scheme?
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of money from new investors to continue. Ponzi schemes inevitably collapse, most often when it becomes difficult to recruit new investors or when a large number of investors ask for their funds to be returned.
Examples of SEC enforcement actions against Ponzi schemes include:
2012 |
- Ricardo Bonilla Rojas and Shadai Yire – SEC charged a Puerto Rico resident and his company with conducting a $7 million Ponzi scheme that targeted evangelical Christians and factory workers in Puerto Rico.
- Paul Burks and Rex Venture Group – SEC shut down a $600 million Ponzi scheme on the verge of collapse after an online marketer raised money from more than one million Internet customers through the website ZeekRewards.com and the "net profits" being paid to investors were merely funds received from new investors.
- Jim Donnan and Gregory Crabtree – SEC announced fraud charges against a former college football coach who teamed with an Ohio man to conduct an $80 million Ponzi scheme that included other college coaches and former players among its victims.
- Bridge Premium Finance – SEC announced fraud charges and an emergency asset freeze against a Denver-based company and Colorado residents Michael Turnock and William Sullivan II for carrying out a $15.7 million Ponzi scheme harming more than 120 investors nationwide.
- Mark Feathers – SEC shut down a $42 Million Ponzi-like scheme in which a San Jose area man promised high returns for investors in two mortgage investment funds but paid them in part with money from new investors.
- Wayne Palmer – SEC halted a $100 million real estate-based Ponzi scheme operated by a Utah man and his company that bilked investors nationwide.
- Gurudeo “Buddy” Persaud – SEC charged a former broker from Orlando, Fla., who defrauded investors in an astrology-based Ponzi scheme in which his trading strategy was based on his belief that markets are affected by gravitational forces.
- 14 sales agents - SEC charged four sets of siblings and other sales agents who misled investors and illegally sold securities for a Long Island-based investment firm at the center of a $415 million Ponzi scheme.
- John Geringer - SEC charges a Northern California-based fund manager with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.
- George Levin and Frank Preve – SEC charged two individuals who provided the biggest influx of investor funds into one of the largest-ever Ponzi schemes in South Florida.
- David Connolly - SEC charged a New Jersey man with operating a Ponzi-like scheme involving a series of investment vehicles formed for the purported purpose of purchasing and managing rental apartment buildings in New Jersey and Pennsylvania.
- Shervin Neman - SEC halted an ongoing Ponzi scheme by a purported hedge fund manager who targeted members of the Persian-Jewish community in Los Angeles.
- Ephren Taylor II - SEC charged a self-described "Social Capitalist" with running a Ponzi scheme that raised more than $11 million by targeting socially-conscious investors in church organizations.
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2011 |
- Wendell Jacobson and Allen Jacobson - SEC charged a father and son in Utah with selling purported investments in their real estate business that turned out to be nothing more than a wide-scale $220 million Ponzi scheme.
- Garfield M. Taylor - SEC charged a Bethesda, Md. man and several family members and friends with conducting a multi-million dollar Ponzi scheme targeting investors in the Washington, D.C. metropolitan area.
- Arrowhead Capital Management LLC - SEC charged two Minnesota-based hedge fund managers and their firm for facilitating a multi-billion dollar Ponzi scheme operated by Minnesota businessman Thomas Petters. The U.S. Attorney's Office for the District of Minnesota brought parallel criminal actions against the hedge fund managers.
- Eric Aronson - SEC halted a Ponzi scheme that bilked investors of approximately $26 million based on promises of rich returns on water-filtering natural stone pavers. The U.S. Attorney's Office for the Eastern District of New York brought a parallel criminal action against Aronson and others.
- Doris E. Nelson - SEC charged the owner of a Spokane, Wash.-based payday loan business with conducting a massive Ponzi scheme that raised approximately $135 million from hundreds of investors. The U.S. Attorney's Office for the Eastern District of Washington brought a parallel criminal action against Nelson and others.
- James Davis Risher and Daniel Joseph Sebastian - SEC charged two Florida men with operating a Ponzi scheme disguised as a purported private equity fund that fraudulently raised approximately $22 million from investors, several of whom were Florida teachers or retirees. The U.S. Attorney's Office for the Middle District of Florida brought a parallel criminal action against Risher.
- Jeffrey A. Lowrance - SEC charged the CEO of a purported foreign currency trading firm for running a Ponzi scheme that raised approximately $21 million from investors nationwide by promising huge profits and purporting to share their Christian values and limited-government political views. The U.S. Attorney's Office for the Northern District of Illinois brought a parallel criminal action against Lowrance.
- David Ronald Allen - SEC halted a Ponzi scheme perpetrated by the co-founder of China Voice Holding Corp. and two associates that raised at least $8.6 million from investors who were promised returns of at least 25 percent.
- AIC Inc. - SEC charged a financial services holding company, its CEO, and others for orchestrating a Ponzi scheme that raised at least $7.7 million from many elderly investors, promising them returns ranging from 9 to 12.5 percent.
- James Clements and Zeina Smidi - SEC charged two South Florida residents for conducting a $30 million Ponzi scheme in which investors were promised guaranteed monthly returns as high as 11 percent from the trading of foreign currencies.
- John Scott Clark - SEC halted a Ponzi scheme orchestrated by a Utah resident that raised more than $47 million from at least 120 investors for purported funding of payday loans.
- Michael Watson and Joshua Escobedo - SEC charged two Utah residents with perpetrating a real estate-based Ponzi scheme that raised more than $27.5 million from at least 120 investors.
- St. Anselm Exploration Co. - SEC charged a Denver-based company and three executives for engaging in a fraudulent high-interest promissory note program to fund the company's operations. They raised more than $62 million from approximately 200 investors.
- Fair Finance Company - SEC charged three executives at an Ohio-based company with orchestrating a $230 million offering fraud involving at least 5,200 investors, many of whom were elderly. The U.S. Department of Justice and the U.S. Attorney's Office for the Southern District of Indiana brought a parallel criminal action against the three executives.
- Jason Bo-Alan Beckman - SEC obtained an emergency asset freeze against a Minnesota resident and his investment advisory firm in a Ponzi scheme that raised at least $194 million from nearly 1,000 investors in fraudulent offerings related to foreign currency trading. The U.S. Attorney's Office for the District of Minnesota brought a parallel criminal action against Beckman and others.
- Francisco Illarramendi - SEC charged a Connecticut-based investment adviser and its principal for misappropriating investor assets and misusing two hedge funds for Ponzi-like activity. The U.S. Attorney's Office for the District of Connecticut brought a parallel criminal action against Illarramendi.
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2010 |
- Richard Dalton - SEC charged the operator of a diamond-themed Ponzi scheme that raised approximately $17 million from 130 investors who were promised returns between 60 percent and 120 percent per year. The U.S. Attorney's Office for the District of Colorado brought a parallel criminal action against Dalton.
- Joseph Paul Zada - SEC charged a Michigan resident and his company for conducting a Ponzi scheme that raised at least $27.5 million from at least 60 investors through the offer and sale of promissory notes involving oil-related investments.
- David Harrold and Bruce Prevost - SEC charged two Florida-based hedge fund managers and their firms with fraudulently funneling more than a billion dollars of investor money into a Ponzi scheme operated by Minnesota businessman Thomas Petters. The U.S. Attorney's Office for the District of Minnesota brought parallel criminal actions against Harrold, Prevost, and others.
- Robert Anderson - SEC charged the owner of a Chicago-area company for perpetrating a Ponzi scheme that raised approximately $12 million from at least 77 investors based on misrepresentations of extraordinary returns from a purportedly successful real estate business. The U.S. Attorney's Office for the Northern District of Illinois brought a parallel criminal action against Anderson.
- Robert Stinson Jr. - SEC obtained an emergency asset freeze to halt a Philadelphia-based Ponzi scheme that raised at least $16 million from more than 140 investors for the purported purpose of investing in the sale of foreclosure and investment properties. The U.S. Attorney's Office for the Eastern District of Pennsylvania brought a parallel criminal action against Stinson.
- Daniel Spitzer - SEC obtained an emergency asset freeze against a Virgin Islands-based fund manager who perpetrated a $105 million Ponzi scheme involving alleged investments in foreign currencies. The U.S. Attorney's Office for the Northern District of Illinois brought a parallel criminal action against Spitzer.
- Trade-LLC - SEC charged an investment adviser and two of its managing members for a Ponzi scheme that raised more than $28 million from at least 800 members of three private investment clubs by promising to trade securities on behalf of those investors through a proprietary software trading program.
- Matthew Jennings - SEC obtained an emergency asset freeze against an Orange County, Calif. man and four companies in a $53 million Ponzi scheme that promised investors exorbitant short-term returns as high as 130 percent annually.
- Chimay Capital Management Inc. - SEC obtained an emergency asset freeze to halt a fraudulent bridge loan scheme by an investment firm and its chairman that raised at least $6 million based on bogus claims that investor funds would be pooled with money from a Belgian royal family. The New York County District Attorney's Office brought a parallel criminal action against Guy Albert de Chimay.
- Merendon Mining Inc. - SEC charged six individuals and four companies with perpetrating a $300 million Ponzi scheme on investors in a purportedly successful gold mining operation who were promised annual returns of between 18 and 36 percent.
- Matthew Gagnon - SEC obtained an emergency asset freeze to halt a Ponzi scheme that raised approximately $72 million from more than 3,000 investors by promising monthly returns of upwards of 15 percent in purported investments in a West Indies-registered company.
- Nevin Shapiro - SEC charged the CEO of a Florida-based grocery diverter for conducting a Ponzi scheme that raised $900 million from more than 60 investors who were offered promissory notes claiming annual returns of 10 to 26 percent from purchase orders and receivables allegedly generated by the company's food brokerage business. The U.S. Attorney's Office for the District of New Jersey brought a parallel criminal action against Shapiro.
- McGinn, Smith & Co. - SEC charged two individuals and their broker-dealer and investment adviser entities with fraudulently raising more than $136 million from approximately 900 investors in more than 20 unregistered debt offerings in which investor funds were diverted for unauthorized purposes.
- Douglas Vaughan - SEC obtained an emergency asset freeze to halt an $80 million Ponzi scheme perpetrated by a New Mexico realtor who raised investor funds for certain types of real estate-related investments. The U.S. Attorney's Office for the District of New Mexico brought a parallel criminal action against Vaughan.
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2009 |
- Canopy Financial - SEC obtained an emergency asset freeze to halt a $75 million Ponzi scheme that defrauded investors in a private placement offering. The U.S. Attorney's Office for the Northern District of Illinois brought parallel criminal actions against Canopy Financial's founders.
- Trevor Cook - SEC obtained an emergency asset freeze to halt a Ponzi scheme that raised $190 million from 1,000 investors through the unregistered sale of investments in a purported foreign currency trading venture. A judge later ordered Cook to be jailed for failing to comply with the asset freeze . The U.S. Attorney's Office for the District of Minnesota brought a parallel criminal action against Cook.
- Mantria Corporation - SEC obtained an emergency asset freeze against four individuals and two companies for perpetrating a $30 million Ponzi scheme that persuaded more than 300 investors nationwide to participate in purported environmentally-friendly investment opportunities.
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Source : http://www.sec.gov/spotlight/enf-actions-ponzi.shtml
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