Ponzi Schemes

October 17, 2018

An investment advisor who owned and operated an investment firm called CM Capital Management LLC has plead guilty to running a Ponzi scheme that defrauded 53 investors of $6.1 million over the course of 13 years. In at least 13 of those cases, the investors with Edward Lee Moody, Jr.'s firm were elderly people who had entrusted him with their life savings. Instead of investing the funds on his clients' behalf, Moody used them to buy securities for himself, as well as buy a home, make car payments, and travel. To cover his tracks, he paid earlier investors using funds obtained from newer investors and created falsified statements that showed earned returns. Yet the reality was that in most of those cases, Moody hadn't even opened brokerage accounts for his clients, let alone buy securities on their behalf. He now faces a sentence of decades in prison at his sentencing in February. USAO EDVA

September 19, 2018

Three men from three states have been indicted for allegedly conspiring to defraud more than 230 investors of more than $364 million in a classic Ponzi scheme, and in one of the largest ever charged in Maryland. Kevin B. Merrill, Jay B. Ledford, and Cameron Jezeierski of Maryland, Nevada, and Texas, respectively, allegedly persuaded investors across the country that they could make a profit by purchasing consumer debt portfolios that would either have their debt collected upon or be sold to other debt buyers. Instead, the defendants used the money to purchase expensive homes, boats, jewelry, and at least 25 cars, as well as lead a generally lavish lifestyle. To conceal the fraud, the defendants allegedly created fake debt selling companies, bank accounts, and brokers, and generated false contracts, records, and reports. They face both criminal charges from the DOJ and civil charges from the SEC, and if convicted, face both financial penalties as well as decades in prison for the combined charges. USAO MD; SEC

July 3, 2018

A New York attorney was sentenced to seven years in prison for defrauding investors in a Ponzi-style scheme he created.  He was also required to pay just over $2 million in restitution to his investors.  Like the namesake scheme, this one relied on using new investors to pay out the supposed returns of the initial investors.  USAO WDNY

June 19, 2018

The SEC has filed charges to shut down a $102M Ponzi scheme that affected investors throughout the US. According to the complaint, the scheme defrauded over 600 investors though sales of securities that the issuers controlled. The complaint charges five individuals and three companies with wrongdoing; it was filed in federal court in New York. SEC

June 14, 2018

Philadelphia investment adviser Carl Frederic Sealy pleaded guilty to fraud charges in connection with a $1.6 million Ponzi scheme he operated. Sealy told investors their funds would be used to finance real estate deals, but the deals were non-existent. Instead, Sealy used his clients’ investments to fund lavish personal expenditures, including spa services, hotels, and restaurants.  USAO EDPA

May 30, 2018

The SEC charged a former registered representative with defrauding long-standing brokerage customers in an $8 million investment scam. According to the SEC’s complaint, Steven Pagartanis, who was affiliated with a registered broker-dealer, told some investors – including retirees who had been Pagartanis’s customers for many years – that he would invest their funds in either a publicly-traded or private land development company. He promised that the funds would be safe and also promised guaranteed monthly interest payments on the investments. At Pagartanis’s direction, his investors wrote checks payable to a similarly-named entity that was secretly controlled by Pagartanis. In all, the customers invested approximately $8 million, which Pagartanis used to pay personal expenses and make the guaranteed “interest” payments to his customers. To conceal the scam, which unraveled earlier this year when Pagartanis stopped making the so-called interest payments to customers, Pagartanis created fictitious account statements reflecting ownership interests in the land development companies. SEC

May 1, 2018

The SEC announced the unsealing of fraud charges against a Mississippi company and its principal who allegedly bilked at least 150 investors in an $85 million Ponzi scheme. The defendants agreed to permanent injunctions, an asset freeze, and expedited discovery. The SEC’s complaint alleges that Arthur Lamar Adams lied to investors by telling them that their money would be used by his company, Madison Timber Properties, LLC, to secure and harvest timber from various land owners located in Alabama, Florida, and Mississippi, and promised annual returns of 12-15%. But Madison Timber never obtained any harvesting rights. Instead, Adams allegedly forged deeds and cutting agreements as well as documents purportedly reflecting the value of the timber on the land. Adams also allegedly paid early investors with later investors’ funds and convinced investors to roll over their investments. According to the complaint, Adams used investors’ money for personal expenses and to develop an unrelated real estate project. SEC

April 9, 2018

The SEC charged two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, $1.4 million offering fraud targeting retirees. The SEC's complaint alleges that, from 2010 to 2017, Clifton E. Stanley ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group, LLC. Stanley is alleged to have lured at least 30 elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns. He kept the scheme afloat for years by paying early investors with later investors' funds and by convincing investors to roll over their investments.  The SEC further alleges that Stanley pilfered from the estate of an elderly woman's family trust, diverting nearly $100,000 to fund the Lifepay Ponzi scheme. In addition, the SEC's complaint alleges that, beginning in 2015, Stanley and Michael E. Watts orchestrated a second offering fraud through a company they controlled, SMDRE, LLC. Stanley and Watts allegedly used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE. SEC

March 23, 2018

The SEC announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident who stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested. Based on investor complaints, the SEC moved quickly to investigate and charge Shah. According to the SEC's complaint, unsealed on March 22, 2018, in federal court in Brooklyn, New York, Shah used Spark Trading Group, LLC to defraud more than 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. Shah obtained investments for the funds by lying about his success as a trader, Spark Trading's returns, and how he intended to use investors' money, including altering financial statements to make the funds appear profitable when they were actually losing money. For instance the complaint alleges that Shah promised investors he would pay them monthly returns and guaranteed against losses. According to the complaint, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. When investors sought their money back, he lied and said the money had been frozen by government agencies, including the Commission. SEC

December 21, 2017

The Securities and Exchange Commission today announced charges and an asset freeze against a group of unregistered funds and their owner who allegedly bilked thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme. SEC investigators filed this action to prevent further dissipation of investor assets after obtaining court orders in September and November in subpoena enforcement actions that forced the unregistered companies to open their books. According to the SEC’s complaint, unsealed today in federal court in Miami, Florida, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds. SEC