Ponzi Schemes

December 4, 2017

The Securities and Exchange Commission charged Digi Outdoor Media Inc. and two of its senior executives, former CEO Donald MacCord Jr. and CFO Shannon Doyle with stealing more than $2 million from retail investors.  According to the SEC’s complaint filed in U.S. District Court in Seattle, MacCord Jr., and Doyle raised nearly $4.5 million in promissory notes by claiming they would use investor money to construct and install digital signs for commercial advertising around Washington, D.C.  Instead, the complaint alleges that MacCord and Doyle secretly diverted millions of dollars of investor money for their own personal use, including MacCord’s luxury cars, $20,000 per month rent on a Southern California mansion, nanny and housekeeping services, and private school tuition for his children, while Doyle diverted several hundred thousand dollars to his other unrelated businesses. SEC

October 5, 2017

The Securities and Exchange Commission today charged Michael Scronic with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme. The SEC alleges that, starting in approximately 2010, Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his suburban community, in order to invest in a risky options trading strategy. He allegedly lured investors by informing them that he had a long and impressive track record of proven returns. He also allegedly lied to investors about the liquidity of investments, telling one investor that "what's cool about my fund is that i'm [sic] only in publicly traded options and cash so any redemptions are met within 2 business days so if you do need to withdraw for your business needs it will be quick and painless." However, the SEC alleges that Scronic was actually hemorrhaging investor money through massive trading losses, with at least $15 million in investment losses since April 2010. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475 while the balance in his brokerage account on June 30, 2017 was just under $27,500. SEC

September 29, 2017

The Commodity Futures Trading Commission (CFTC) on September 28, 2017, filed a civil enforcement action in the U.S. District Court for the Southern District of New York against Defendants Hasan Sarwar a/k/a Alexander Sarwar (d/b/a Profit Management Int) of Rancho Cucamonga, California, and his spouse Rachida Elfrimi (d/b/a Profit Management). The CFTC Complaint charges the Defendants with defrauding commodity pool participants, making Ponzi-style payments to pool participants from other participants’ funds, comingling of pool funds, and failing to register with the CFTC as Commodity Pool Operators, as required. CFTC

September 21, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal civil enforcement action in the U.S. District Court for the Southern District of New York against Defendants Nicholas Gelfman, of Brooklyn, New York, and Gelfman Blueprint, Inc. (GBI), a New York corporation, charging them with fraud, misappropriation, and issuing false account statements in connection with solicited investments in Bitcoin, a virtual currency. The CFTC Complaint alleges that from approximately January 2014 through approximately January 2016, GBI and Gelfman, company Chief Executive Officer and Head Trader, operated a Bitcoin Ponzi scheme in which they fraudulently solicited more than $600,000 from approximately 80 persons, supposedly for placement in a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy, executed by Defendants’ computer trading program called “Jigsaw.” In fact, as charged in the CFTC Complaint, the strategy was fake, the purported performance reports were false, and — as in all Ponzi schemes — payouts of supposed profits to GBI Customers in actuality consisted of other customers’ misappropriated funds. CFTC

July 19, 2017

New Jersey announced that a man who stole approximately $298,000 from customers of his two debt relief businesses was sentenced to prison today. Germaine Theodore promised customers of TGC Movement in Maplewood and Save My Future in Jersey City big reductions in their monthly bills, but he instead stole their money through Ponzi schemes. Theodore, 37, of Maplewood, N.J., was sentenced today to five years in state prison by Superior Court Judge John Zunic in Essex County. He pleaded guilty before Judge Zunic on April 24 to a charge of second-degree theft by failure to make required disposition of property received in connection with TGC Movement. Under the plea agreement, the state recommended a sentence of seven years in prison, but the judge imposed a sentence of five years. NJ

May 4, 2017

The Securities and Exchange Commission today announced that Verto Capital Management and William Schantz III have agreed to pay more than $4 million to settle charges that they used new investor money to repay earlier investors in Ponzi-like fashion and tapped investor funds for the CEO’s personal use. According to the SEC’s complaint, Verto Capital Management and Schantz  raised approximately $12.5 million selling promissory notes to purportedly fund Verto Capital’s purchase and sale of life settlements, which are life insurance policies sold in the secondary market.  The SEC alleges that they misrepresented to investors that Verto Capital was a profitable company and investor funds would be used for general working capital purposes.  Verto Capital and other Schantz businesses had been unprofitable for several years, according to the SEC’s complaint, and Schantz resorted to taking disproportionately large distributions of investor funds for himself and using new investor money to repay earlier investors.  Verto Capital and Schantz also allegedly made misrepresentations to investors about the safety of the notes and collateral underlying them.  The SEC alleges that the promissory notes were primarily sold through a group of insurance brokers in Texas, and religious investors were targeted. “As alleged in our complaint, investors were told that the life settlement-backed notes were short-term investments with an unlikely event of default.  Schantz and Verto misled investors about the company’s past performance and the value of the collateral, and they diverted significant investor funds for Schantz’s personal use,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. SEC