Financial and Investment Fraud

October 30, 2019

Outcome Health, the trade name for ContextMedia LLC, will pay $70 million and enter into a Non-Prosecution Agreement with the U.S. to resolve allegations that the company, which sells digital advertising to be displayed in medical offices -- its primary customers are pharmaceutical companies -- fraudulently sold advertising inventory that it did not have.  To conceal this, Outcome and its executives falsified reports to customers, claiming to have delivered advertising to the contracted number of screens, and inflated patient engagement metrics.  This fraudulent activity resulted in an overstatement of Outcome's reported revenue, and Outcome used those fraudulent financial statements to obtain almost $1 billion in debt and equity financing in 2015 and 2016.   DOJ

October 30, 2019

The U.S. has reached a settlement in asset forfeiture proceedings involving assets fraudulently acquired by Low Taek Jho, also known as Jho Low, and his family, from Malaysia's international development fund, 1MDB, and held at institutions in the U.S., U.K., and Switzerland.  The settlement secures assets estimated to be worth $700 million, bringing the total recovery of assets associated with the 1MDB bribery and money laundering schemes to more than $1 billion. The assets subject to the settlement agreement include high-end real estate in Beverly Hills, New York and London; a luxury boutique hotel in Beverly Hills; and tens of millions of dollars in business investments that Low allegedly made with funds traceable to misappropriated 1MDB monies. DOJ

October 29, 2019

The co-defendant of a man recently sentenced for orchestrating the largest Ponzi scheme ever charged in Maryland has been sentenced to 14 years in prison and ordered to pay at least $189 million in restitution.  To facilitate the scheme to sell fake consumer debt portfolios, Jay Ledford create fake sales agreements, tax returns, and other documents to co-defendant Kevin Merrill, knowing they would be used to defraud investors.  When the two were arrested in 2018 with fellow co-conspirator Cameron Jezierski, the five-year scheme had already raked in over $396 million, with only 14% actually used to purchase consumer debt portfolios.  USAO MD

October 29, 2019

The orchestrator and four promoters of a pyramid and Ponzi scheme has been ordered to pay almost $11 million for defrauding at least 1,400 Spanish and Portuguese-speaking investors.  According to an earlier press release from the SEC, ringleader Daniel Fernandes Rojo Filho’s company, DFRF Enterprises, LLC, allegedly told investors that it operated more than 50 gold mines in Brazil and Africa.  In reality, the company did not actually mine gold and its $15 million in revenues came solely from recruiting new members as investors, with earlier investors paid commissions in a Ponzi-like fashion.  Filho alone will pay over $10 million of the monetary judgment; his four associates will each pay between $100,00 and $266,000.  SEC

October 23, 2019

Gary Frank was sentenced to 17.5 years in prison following a guilty plea on charges related to his fraudulent business scheme.  Frank claimed to run a multi-million dollar company, Legal Coverage, Ltd., through which employers could offer legal services as part of their employee benefits package.  Based on these misrepresentations -- in fact, the company had very little revenue -- Frank obtained over $30 million in loans from financial institutions, which he used to fund his own extravagant lifestyle.  Frank was also ordered to pay restitution of $33.7 million.  USAO EDPA

October 21, 2019

Devumi, LLC and owner German Calas, Jr., have agreed to a $2.5 million judgment to settle the FTC’s first ever charges against the sale of fake indicators of social media influence, such as followers, subscribers, views, and likes.  The defendants allegedly enabled customers to deceive potential clients about their social media clout by filling tens of thousands of orders for fake LinkedIn followers, Twitter followers, YouTube subscribers, and YouTube views.  Due to the defendants’ inability to pay, upon payment of $250,000, the remaining monetary judgment will be suspended.  FTC

October 10, 2019

A Maryland-based man has been sentenced to 22 years in prison for his role in a $396 million Ponzi scheme, the largest ever charged in Maryland.  Unbeknownst to hundreds of victim investors, the consumer debt portfolios they invested in through Kevin Merrill and co-conspirators Jay Ledford and Cameron Jezierski were fake, with Merrill, Ledford, and Jezierski going to great lengths to keep up the illusion.  The trio created imposter companies and bank accounts, fake documents, and invited would-be investors to tours of their Texas “office.”  By the time they were arrested in 2018, the scheme had raked in over $396 million, with another $260 million pending.  As part of his sentence, Merrill has also been ordered to pay restitution of at least $189 million.  USAO MD; SEC

October 2, 2019

Multi-level marketing company Advocare International, L.P., together with its former CEO Brian Connolly and several former Advocare distributors, have entered into a $150 million settlement with the FTC, which charged Advocare with being an unlawful pyramid scheme that pushed distributors to focus on recruiting new distributors rather than retail sales to customers.  Defendants made deceptive earnings claims, and provided others with the means and instrumentalities to do the same.  Defendants are ordered to return monies to distributors and are banned from all future multi-level marketing.  FTC