Ponzi Schemes

January 27, 2017

The SEC announced fraud charges against Joseph Meli and Matthew Harriton, two New York City men accused of running a Ponzi scheme with money raised from investors to fund businesses purportedly created to purchase and resell tickets to high-demand shows such as Adele concerts and the Broadway musical Hamilton.  The SEC alleges that Meli and Harriton misrepresented to investors that all of their money would be pooled to buy large blocks of tickets that would be resold at a profit to produce high returns for investors.  The bulk of investor funds were allegedly used for other undisclosed purposes, namely making Ponzi payments to prior investors using money from new investors.  Meli and Harriton also allegedly diverted almost $2 million for such personal expenses as jewelry, private school, camp tuition, and casino payments.  According to the SEC’s complaint, the scheme went so far as to misrepresent that an agreement was in place with the producer of Hamilton to purchase 35,000 tickets to the musical.  Investor money was supposedly paying part of that cost with the return on the investment promised within eight months.  The SEC alleges no such agreement or purchase ever happened.  Meli and Harriton allegedly raised more than $81 million from at least 125 investors in 13 states.  The SEC brough charges against Meli and Harriton along with their four purported ticket reselling businesses: Advance Entertainment, Advance Entertainment II, 875 Holdings, and 127 Holdings.  SEC

January 30, 2017

Scott Rookus was sentenced by Judge Jon Hulsing of the 20th Circuit Court in Ottawa County to 7 to 20 years for racketeering and 57 months to 10 years for fraudulent sales of securities. Judge Hulsing is also requiring Rookus pay $4,393,420 in restitution to the victims of his million dollar Ponzi scheme that ran from 2010 to 2015. Between 2010 and 2013, Rookus solicited and obtained investments of approximately $1.5 million for his holdings company, New Haven Holdings. His customers, many of whom were senior citizens, were told that earnings from their investments would come from the profits of Rookus’ enterprises, when in fact the money he took resulted in a Ponzi-scheme from which he was the primary beneficiary. To cover his tracks, Rookus issued fraudulent returns to some investors using money from newer investors. He used the investor funds to pay personal expenses such as his children’s private school education and to pay off tax liens against him. The scheme was uncovered after Rookus filed for personal bankruptcy in March 2015 and his investors found out that they had lost everything they invested. MI

December 21, 2016

The SEC brought charges against Noris Chamroonrat of Bangkok, Thailand and Adam L. Plumer of Las Vegas for running a phony day-trading firm and pocketing more than $1.4 million in deposits from hundreds of investors in over 30 countries.  The SEC alleges that Chamroonrat recruited Plumer to help him lure investors to day-trade through an unregistered brokerage firm called Nonko Trading with promises of generous leverage, low trading commissions, and low minimum deposit requirements.  According to the SEC’s complaint, rather than using a live securities trading platform, Nonko Trading provided certain investors with training accounts that merely simulated the placement and execution of trade orders.  When these investors sent funds to Nonko Trading and proceeded to place trade orders, the orders were never actually routed to the markets.  The SEC alleges that investor money was instead used to fund Chamroonrat’s personal expenses, pay Plumer and other associates, and make Ponzi-like payments to investors who asked to close out their accounts.  The SEC alleges that the scheme deliberately targeted investors who were inexperienced and more likely to place unprofitable trades, making them less likely to ask to withdraw funds from their accounts.  SEC

December 1, 2016

The SEC announced fraud charges and an asset freeze against Miami Beach-based asset management company Onix Capital LLC and its owner Alberto Chang-Rajii, a Chilean national who fled the U.S. after reports of his fraud began to surface in March 2016.  The SEC alleges that Chang and Onix Capital defrauded investors in Onix promissory notes that “guaranteed” annual returns of 12 to 19 percent and bilked others who were told their funds would be invested in promising start-ups.  According to the SEC’s complaint, Chang and Onix Capital sold more than $5.7 million in Onix promissory notes that they falsely claimed were guaranteed by Chang, and raised more than $1.7 million that Chang promised to invest in companies such as Uber, Snapchat, and Square.  Instead, the SEC alleges that investor funds were diverted to Chang and used to pay other investors.  SEC

November 17, 2016

The SEC filed fraud charges against California-based renewable energy company 808 Renewable Energy Corp., its founder and CEO Patrick Carter, Chief Operating Officer Peter Kirkbride, sales representatives Martin Kinchloe and Thomas Flowers, and affiliated companies 808 Investments LLC, West Coast Commodities LLC, and T.A. Flowers LLC.  The SEC’s complaint alleges that from at least 2009 through 2013, the defendants fraudulently raised more than $30 million from hundreds of investors.  The SEC alleges that the defendants misled investors by falsely claiming that their investment funds would be used to acquire new equipment and expand 808 Renewable.  Instead, Carter paid millions in “consulting fees” to 808 Investments, a company he owned and controlled, and diverted millions more to support his lavish lifestyle, to pay commissions to sales representatives, and to make Ponzi-like payments to investors.  Flowers and T.A. Flowers have offered to pay over $1.5 million to settle the SEC’s action.  SEC

December 14, 2016

Michigan announced that Scott Rookus, of Jenison, pled no contest to two felony charges, one count of Racketeering and one count of Fraudulent Sale of Securities in relation to his role in running a million dollar Ponzi scheme between 2010 and 2015. Rookus was originally charged with more than 30 crimes regarding the alleged Ponzi scheme in June 2016. Between 2010 and 2013, Rookus allegedly solicited and obtained investments of approximately $1.5 million for his holdings company, New Haven Holdings. His customers many of whom were senior citizens, were told that earnings from their investments would come from the profits of Rookus’ enterprises, when in fact the money he took resulted in an alleged Ponzi-scheme from which he was the primary beneficiary. MI

October 28, 2016

California announced a $15 million settlement securing restitution for Californians who invested money with Beverly Hills-based investment adviser Stanley Chais, money that he then funneled into Bernard Madoff’s notorious Ponzi scheme. Chais was responsible for one of the largest operations channeling money directly to Bernard Madoff, violating California’s consumer protection and corporate securities laws. He deceived his clients, many of whom were elderly, into paying him substantial fees, claiming he was actively managing their money while in actuality turning their investments over to Madoff. As a result, many lost their life savings when Madoff’s fraudulent scheme was ultimately exposed in late 2008. CA

August 9, 2016

Michigan announced that James Mulholland, of St. Petersburg, Florida and Thomas Mulholland, of Midland, both 59, have been found guilty by a jury on 8 felonies each for the Ponzi Scheme they ran through their Lansing-based business Mulholland Financial. Starting in 2009 until they filed for bankruptcy in 2010, the brothers raised almost $2 million from investors. They made no mention that their business was in trouble and promised a 7% rate of return from the real estate profits and that the principal and interest were guaranteed and could be liquid within 30 days of making a written request. In reality almost every month from January 2009 to February 2010, Mulholland Financial lost money and new investor money began being used to pay off earlier investors. Mulholland Financial was forced to file for bankruptcy in February of 2010 due to overwhelming debt. By this time there were multiple investigations being conducted into the business practices. The case sat dormant with another agency until spring of 2016 until Schuette’s office picked up the case. Over 250 investors lost $18.3 million. MI