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Articles Posted in Ponzi Scheme

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The United States Securities and Exchange Commission(“SEC”) has accused a Georgia investment adviser of operating a Ponzi scheme that the SEC alleges in its legal Complaint (accessible here SEC Complaint) filed in federal court has defrauded over 400 investors nationwide.   The SEC Complaint alleges that investment advisers at a company called Livingston Group Asset Management Company, which does business as Southport Capital, persuaded investors to lend money to a company known as Horizon Private Equity, III, LLC (“Horizon PE”).   The SEC alleges that investors in Horizon PE collectively are allegedly owed over $110 million in principal.

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“Investors trusted Woods and the Southport investment advisers working at his direction, and they stand to lose significant portions of their retirement savings when the Ponzi scheme inevitably collapses.  The longer the scheme continues, the larger the losses will be for those left holding the bag,” the SEC Complaint states.

According to the SEC Complaint, advisers soliciting investments in Horizon PE allegedly told clients that they would receive returns of 6% to 7% interest, guaranteed for two to three years, and that their money would be used for nonspecific investments such as government bonds, stocks, or small real estate projects.  According to the SEC Complaint, clients were not told that their money would be used to pay returns to earlier investors.  The SEC also alleges that investors were told they could receive their principal investment back without penalty subject to a 30-day or 90-day waiting period.  The SEC alleges that because Horizon did not follow any traditional record-keeping practices, millions of dollars’ worth of investor funds are currently unaccounted for.

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Customers of Ronald J. Roach (“Roach”), formerly of Securities America, may be able to recover investment losses if Roach solicited their investments in a company known as DC Solar or otherwise provided unsuitable investment advice.

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The Securities and Exchange Commission (SEC) has barred Roach for his role in promoting DC Solar, which this SEC alleges operated as a Ponzi scheme that defrauded investors of about $1 billion.  The SEC bar order is accessible here. roach barred

In October, Mr. Roach also reportedly pleaded guilty to fraud and securities violations stemming from the sale and leaseback of mobile solar electrical generators.  Roach awaits sentencing and reportedly facts as much as 10 years in prison.

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James T. Booth, a former LPL Financial broker, has been arrested and charged by U.S. authorities with securities and wire fraud in connection with his alleged operation of a Ponzi scheme.  The scheme allegedly defrauded more than three dozen retail investors, including senior citizens saving for retirement, of nearly $4 million in assets.

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According to the indictment, accessible here u.s._v._james_booth_indictment,  Booth, 74,  solicited money from over 40 clients of his wealth management business known as Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts.  The indictment alleges that, rather than investing the funds as represented,  Booth instead misappropriated nearly $5 million to pay his own personal and business expenses.  According to the indictment, from 2013 through 2019, Booth purportedly directed some of his clients to write checks or wire money to an entity named “Insurance Trends, Inc.”   Booth then allegedly used the funds to pay personal and business expenses.

Under the federal indictment, Booth, of Norwalk, Connecticut, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of investment adviser fraud, which carries a maximum sentence of five years in prison, according to the Department of Justice press announcement.

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Robert Shapiro, the former chief executive officer of Woodbridge Group of Companies, has reportedly agreed to pay $120 million to the Securities and Exchange Commission to settle allegations he defrauded investors in an alleged $1.2 billion Ponzi scheme.  Shapiro and his subordinates reportedly promised investors returns of as high as 10% from  purported “hard money” loans to third parties.  In reality, most of the “loans” were in fact extended to shell companies controlled by Shapiro that had no cash flows to repay the loans, and investors’ funds were instead commingled and used for other purposes.

Woodbridge, which is the subject on ongoing proceedings in Delaware bankruptcy court, received approval on October 29, 2018 for its plan of liquidation.  Investors in Woodbridge securities reportedly will receive a refund of between 40-70% of their sums invested, depending on the type of investment and other factors.

Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of their losses through securities litigation or arbitration.  Although so-called First Position Commercial Mortgages (“FPCMs”) and Woodbridge units are securities according to state and federal regulators, Woodbridge FPCMs were not registered as securities with government regulators as required by law, and in many instances were sold by unregistered, unlicensed persons.

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As recently reported, on August 15, 2018, the SEC initiated formal charges against Defendants Jerome Cohen, Shaun Cohen, and their companies — Equitybuild, Inc. (“Equitybuild”) and Equitybuild Finance, LLC (“Equitybuild Finance”) — in connection with the SEC’s efforts to halt a purported Ponzi scheme.  As alleged in the SEC’s Complaint, “Since at least 2010, Defendants … have raised $135 million from more than 900 investors.  Defendants raised these funds by falsely promising investors safe investments, secured by income-producing real estate, that generated returns of 12% to 20%.”

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According to the SEC, investors were allegedly defrauded in several ways.  For example, the Defendants’ purportedly failed to disclose sizable up-front fees of 15-30% taken off the top of investor equity.  In addition, the Defendants allegedly misrepresented the returns earned on various real estate deals, touting their “impressive returns” when, in actuality according to the SEC, investors sustained heavy losses on investments in predominantly South Side Chicago real estate deals.  The SEC has further alleged that rather than inform investors of financial distress, father and son Defendants Jerome and Shaun Cohen, respectively, elected instead to continue “[t]o solicit investors with offers of safe investments and outsized returns.”

Equitybuild is structured as a Florida corporation.  Since at least 2010, the company has solicited investments, promising returns that were to be generated through the purchase, renovation and development of Chicago real estate.  Equitybuild Finance, f/k/a Hard Money Company, LLC, is structured as a Delaware limited liability company.  Both companies were founded by Defendant Jerome Cohen, 63 years of age, and currently a resident of Naples, Florida.  Defendant Shaun Cohen is a resident of New York, New York, and serves as the President and sole officer of Equitybuild Finance.

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An issuer of purported secured notes backed by real estate has been sued by the Securities and Exchange Commission alleging that amid losses, it “devolved into a Ponzi scheme.”  The group of companies, known as EquityBuild, solicited investors via Internet advertising, social media, and other methods, the SEC alleges.  According to the SEC suit, EquityBuild and its leaders  defrauded investors that invested in notes backed by South Side of Chicago real estate and other assets.   EquityBuild affiliates “sustained heavy losses and the properties they pitched to investors failed to earn anywhere near enough to pay the promised double-digit returns,” the SEC complaint says. “As a result, (the EquityBuild) investment program devolved into a Ponzi scheme: Defendants could only pay earlier investors by raising funds from unwitting new investors.”

Jerome and Shaun Cohen, father and son, run EquityBuild and a subsidiary, EquityBuild Finance.  EquityBuild allegedly  has raised at least $135 million from more than 900 investors since 2010, according to the SEC suit, filed in federal court in Chicago.  EquityBuild allegedly solicited investors to invest in debt used to finance properties.  EquityBuild allegedly touted outsize returns of 12 to 20 percent with minimal risk of loss of principal. and downplayed the risks, according to the SEC complaint.  The SEC alleges that EquityBuild, based in Marco Island, Florida,  skimmed 15 to 30 percent off each investment through fees that the company and the Cohens didn’t disclose.  EquityBuild also allegedly paid returns to older investors with the proceeds of newer investments, paying investors about $14.5 million in interest payments  between January 2015 through February 2017 although income and fees from EquityBuild properties totaled only $3.8 million, according to the SEC suit.
It is unclear from publicly available information whether EquityBuild investments were sold by FINRA or SEC-registered financial advisors.  Investors in EquityBuild may wish to consider claims against professionals such as stockbrokers, financial advisors, or insurance agents who sold them the investments, or any professional services firms (law firms, accounting firms, etc.) that may have materially participated in EquityBuild’s unregistered securities offering.  As the SEC has alleged that the EquityBuild investments were securities that were not registered or exempt from registration, investors may be able to pursue claims against various third-parties that materially participated in these transactions.

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Money in WastebasketOn July 27, 2018, two affiliated small business lenders — 1 Global Capital (a/k/a 1st Global Capital, and 1 West Capital (collectively, “1GC”) — filed for Chapter 11 protection in Bankruptcy Court in the Southern District of Florida.  Based in Hallandale Beach, FL, the two affiliated lenders are under the same common ownership and are in the business of purportedly providing small business loans known as “direct merchant cash advances,” to various clientele.  In connection with the bankruptcy filing, 1GC’s two primary executives, Messrs. Carl Ruderman and Steven A. Schwartz, relinquished their control over the company and tendered their resignations.

As reported, 1GC had around 1,000 individual unsecured creditors prior to filing for bankruptcy.  These creditors had loaned 1GC money with the understanding that these funds would then be invested in direct merchant cash advances.  Creditors received monthly statements which demonstrated how their investments had supposedly been allocated, in addition to being provided with an online portal to track their investments.

In total, 1GC has reported more than $283 million in unsecured lender claims.  Of the 20 largest creditors, all of them are individuals or retirement accounts.  Prior to the bankruptcy filing, the SEC had opened an investigation into whether 1GC was engaging in “[p]ossible securities laws violations, including the alleged offer and sale of unregistered securities by unregistered brokers, and by the alleged commission of fraud in connection with the offer, purchase and sale of securities.”  At this stage, both the SEC and the U.S. Attorney’s Office for the Southern District of Florida, which recently commenced a parallel criminal investigation, are investigating allegations of possible wrongdoing or malfeasance at 1GC.

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Piggybank In A CageThe Securities and Exchange Commission (“SEC”) has filed a fraud lawsuit in federal court in Colorado against a group of companies known as “Financial Visions” and their principal, Daniel B. Rudden (“Rudden”), who allegedly bilked at least 150 investors in a $55 million alleged Ponzi scheme.

The SEC’s complaint charges that Rudden, operating under the name Financial Visions and through a group of companies, issued promissory notes to fund a line of business involving providing financing for funeral services and related expenses to consumers.  The SEC alleges that Rudden/Financial Vision defrauded as many as 150 investors after promising them annual returns of 12% or more.  Since 2010 or 2011, Rudden allegedly used new investor funds to pay interest and redemptions to existing investors and concealed the Financial Visions companies’ true financial performance and condition.

The SEC Complaint is accessible here.

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money whirlpoolAs recently reported, former financial advisor Hector Anthony May (CRD# 323779) was recently discharged from employment by Securities America, Inc. (“Securities America”) (CRD# 10205) on or about March 9, 2018.  Mr. May’s termination by Securities America, which is Ladenburg Thalman’s largest subsidiary and the tenth largest independent broker-dealer in the nation, occurred the day after the U.S. Department of Justice disclosed an investigation into a suspected felony concerning Mr. May’s business activities as a New City, New York financial advisor.  Specifically, allegations have been raised suggesting that Mr. May bilked his clients out of millions of dollars through the use of phony account statements and purported offers to invest in “tax-free corporate bonds.”

Hector May, 77 years of age, is a well-known figure in Rockland County, New York, having been politically active and engaged in the local business community for the past several decades.  Following the 2009 arrest of a Peral River hedge-fund operator charged with running a $150 million Ponzi scheme, Mr. May issued the following warning to investors: “I have a lot of empathy for the people who got hurt, but before you invest a million dollars, do your due diligence.  Otherwise, it’s like going to get a heart operation and you don’t even know if he’s a doctor.”

According to publicly available information through FINRA BrokerCheck, Mr. May was a long-time financial advisor, having first entered the securities industry in 1973.  Most recently, Mr. May worked as an independent advisor on behalf of Securities America, from 1994 until his March 2018 termination.  Mr. May’s financial planning business was conducted through his own Registered Investment Advisory (RIA) firm called Executive Compensation Planners, Inc. (“ECPI”).  Upon information and belief, Mr. May’s ECPI clientele included investors in the following states: New York, New Jersey, Connecticut, Pennsylvania, Maryland, Virginia, North Carolina, and Florida.  Mr. May’s firm, ECPI, was formed as a New York corporation on December 27, 1982.

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Money in WastebasketOn June 19, 2018, the Securities and Exchange Commission (“SEC”) filed a Complaint against various individuals and entities — including former financial advisor John Charles Piccarreto, Jr. (CRD# 6276418) of San Antonio, TX — in furtherance of the SEC’s efforts to “stop an ongoing fraudulent scheme in which the Defendants have raised more than $102 million from at least 637 investors across the United States since 2011.”  As alleged by the SEC, Defendants Perry Santillo and Christopher Parris of Rochester, NY purportedly orchestrated a fraudulent Ponzi-like scheme predicated upon first buying or taking over books of business from retiring investment professionals from around the country.

According to the Complaint, after acquiring new investors and assets, Messrs. Santillo and Parris (each formerly registered with FINRA) would coordinate their sales efforts with Defendants, including John Piccarreto, Jr., in order to allegedly persuade victims into withdrawing savings from traditional investments, in order to transfer the capital into issuers controlled by Messrs. Santillo, Parris, or certain of their associates.  The SEC has alleged that the Defendants would “falsely claim that their investors’ money [would] be used to operate businesses in fields such as financial services, insurance, real estate development, and medical laboratories.”  In actuality, however, the SEC has alleged that Defendants would transfer funds received into “multiple accounts held in the names of different entities” controlled by Defendants.  While some of the funds were purportedly used to repay investors in typical Ponzi-fashion, the SEC has alleged that the bulk of the monies were misappropriated by the Defendants.

With regard to Mr. Piccarreto, the SEC has alleged that, in one instance, he met with an elderly investor from Austin, TX in February 2015.  As alleged, Mr. Piccarreto convinced the 80 year old investor, who suffered from dementia, into putting $250,000 into an entity controlled by Defendants: Percipience.  Mr. Piccarreto later emailed the investor’s daughter, in response to her concerns with the Percipience investment, that “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to any of the money.”  In total, the SEC has alleged that Mr. Piccarreto misappropriated approximately $1.3 million in investor money.

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