Financial and Investment Fraud

February 2, 2018

The Securities and Exchange Commission today announced that the Miami-based businessman behind an alleged scheme involving investments in a Vermont-based ski resort has agreed to pay back more than $81 million of investor money that he used illegally. According to an SEC complaint filed in 2016 in federal court in Miami, Ariel Quiros allegedly misused more than $50 million in investor funds to purchase a different ski resort and to fund personal expenses such as income taxes and two luxury New York City condominium purchases. Investors were told their money would specifically be used for construction projects at the Jay Peak Resort and a nearby proposed biomedical research facility. Companies owned by Quiros also allegedly failed to contribute approximately $30 million in investor funds toward Jay Peak construction, with two projects going uncompleted. This jeopardized investors' investments as well as their participation in the EB-5 Immigrant Investor Program under which Quiros and his businesses solicited the money. SEC

January 30, 2018

The Securities and Exchange Commission obtained a court order halting an allegedly fraudulent initial coin offering (ICO) that targeted retail investors to fund what it claimed to be the world’s first “decentralized bank.” According to the SEC's complaint, filed in federal district court in Dallas on Jan. 25 and unsealed late yesterday, Dallas-based AriseBank used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months. AriseBank and its co-founders Jared Rice Sr. and Stanley Ford allegedly offered and sold unregistered investments in their purported "AriseCoin" cryptocurrency by depicting AriseBank as a first-of-its-kind decentralized bank offering a variety of consumer-facing banking products and services using more than 700 different virtual currencies.  AriseBank’s sales pitch claimed that it developed an algorithmic trading application that automatically trades in various cryptocurrencies. SEC

January 10, 2018

New Jersey announced that a lawyer from Ocean County who formerly practiced in Jersey City was convicted at trial on charges that he stole approximately $1.5 million from five clients over a period of more than a decade. Joseph J. Talafous Jr., 55, of Toms River, N.J., was found guilty by a Hudson County jury of three counts of theft by unlawful taking (2nd degree), three counts of theft by failure to make required disposition of property received (2nd degree), five counts of misapplication of entrusted property (four 2nd degree and one 3rd degree), two counts of theft by deception (2nd degree and 3rd degree), and four counts of filing fraudulent state income tax returns (3rd degree). The verdict followed a six-week trial before Superior Court Judge Mirtha Ospina in Jersey City. The second-degree charges carry a sentence of five to 10 years in state prison. Talafous is scheduled to be sentenced on Feb. 16. NJ

November 14, 2017

Ohio-based Progressive Casualty Insurance Co. and New Jersey-based Progressive Garden State Insurance Co., part of the Progressive Group of Insurance Companies, one of the nation’s largest auto insurance providers, agreed to pay more than $2 million to resolve allegations they violated the False Claims Act by causing Medicare and Medicaid to pay for claims for which the companies were responsible. The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. The whistleblower will receive an award of more than $600,000 from the proceeds of the government's recovery. DOJ (DNJ)

October 23, 2017

Mark Johnson, former head of global foreign exchange cash trading at HSBC Bank, was found guilty for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”  DOJ

September 22, 2017

SolarCity Corporation agreed to pay $29.5 million to resolve allegations it violated the False Claims Act by submitting inflated claims on behalf of itself and affiliated investment funds to the U.S. Department of the Treasury under Section 1603 of the American Recovery and Reinvestment Act of 2009 (Section 1603).  As part of the settlement, SolarCity and its affiliates will also release all pending and future claims against the United States for additional Section 1603 payments.  SolarCity was purchased by Tesla Motors Inc. in November of 2016 after the alleged conduct at issue in this case.  According to the government, SolarCity submitted thousands of Section 1603 claims on behalf of itself and affiliated investment funds in which it overstated the cost bases of its solar energy properties to obtain inflated grant payments from the Treasury. DOJ

September 7, 2017

CEO of New York-based Global Metallurgy, LLC Erdal Kuyumcu was sentenced to 57 months in prison following his guilty plea to conspiracy to violate the International Emergency Economic Powers Act by exporting specialty metals from the U.S. to Iran. DOJ

August 8, 2017

PHH Corp., PHH Mortgage Corp. and PHH Home Loans agreed to pay roughly $75 million to resolve charges they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that did not meet applicable requirements.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former PHH employee Mary Bozzelli.  She will receive a whistleblower award of roughly $9 million from the proceeds of the government's recovery.  DOJ