Ponzi Schemes

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

June 21, 2016

The SEC has filed charges and obtained an asset freeze against investment adviser Ash Narayan for allegedly siphoning millions of dollars from accounts he managed for professional athletes and investing them in The Ticket Reserve, a struggling online sports and entertainment ticket business on whose board he served.  The SEC’s complaint alleges that Narayan transferred $33 million from clients’ accounts to The Ticket Reserve, typically without their knowledge or consent and often using forged or unauthorized signatures.  Narayan received nearly $2 million in hidden compensation from the company, most of it directly traceable to funds stolen from his clients.  According to the SEC’s complaint, The Ticket Reserve also made Ponzi-like payments to existing investors using money from the new investors.  The SEC also charged The Ticket Reserve CEO Richard Harmon and COO John Kaptrosky with participating in the scheme by making undisclosed finder’s fee to payments to Narayan out of his clients’ funds and approving and executing Ponzi-like payments.  SEC

July 5, 2016

The U.S. District Court for the Middle District of Florida ordered Dorian Garcia and his companies, DG Wealth Management, Macroquantum Capital LLC, UKUSA Currency Fund, and Quanttra LP, all of Naples, Florida, to pay nearly $17.5 million in restitution, disgorgement, and penalties for fraud, misappropriation, and operating a Ponzi scheme.  CFTC

June 6, 2016

Michigan filed 33 felony charges against Scott Rookus, 45 of Jenison, for his role in running an alleged Ponzi scheme between 2010 and 2015. 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 allegedly 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. To cover his tracks, Rookus allegedly issued fraudulent returns to some investors using money from newer investors. He allegedly used the investor funds to pay personal expenses such as his children’s private school education and to pay of tax liens against him. The alleged 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

May 31, 2016

The SEC charged two California men, Jaswant “Jason” Gill and Javier Rios, along with their investment firm, JSG Capital Investments, with operating a Ponzi scheme as they purported to specialize in serving middle-class investors and securing exorbitant returns by investing in hot pre-IPO stocks.  The SEC alleges that instead of using the firm’s purported proprietary trading models and investing in pre-IPO shares of well-known tech companies, as promised to investors, Gill and Rios personally pocketed at least $2.8 million in investor funds.  They never actually invested in any pre-IPO shares and used money from new investors to pay supposed returns to earlier investors.  They raised approximately $10 million by catering to average retail investors and promising them exclusive investment opportunities “previously only available to the one-percenters.”  The SEC also obtained a court ordered asset-freeze against the defendants.  SEC

May 6, 2016

Liberty Reserve founder Arthur Budovsky was sentenced to 20 years imprisonment and to pay a $500,000 fine for running a massive money laundering enterprise through his company's virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.  According to the indictment, Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system” and allowed people all over the world to send and receive payments using virtual currency.  But Liberty Reserve grew into a financial hub for cybercriminals around the world, trafficking the criminal proceeds of Ponzi schemes, credit card trafficking, stolen identity information and computer hacking.  DOJ

April 14, 2016

The SEC announced fraud charges and an asset freeze against Vermont-based ski resort Jay Peak, Inc. and related businesses for allegedly misusing millions of dollars raised through investments solicited under the EB-5 immigrant investor program.  The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vermont, and their companies, made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.  Investors were told their money would be used to finance a specific project connected to Jay Peak.  Instead, in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects.  More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros’ personal expenses and in other undisclosed ways.  SEC

April 29, 2016

Michigan announced that a judge has ordered Shawn Dicken, of Bay City, to pay $663, 531.48 in restitution for her role in an extensive multi-county Ponzi scheme. Dicken was convicted in 2014 after an Attorney General investigation and sentenced to 140 months to 20 years in prison. Beginning in 2011, Dicken was employed as the lead salesperson for The Diversified Group Advisory Firm LLC, an investment company. During her tenure with Diversified, Dicken misrepresented the investments she marketed to investors, saying investments offered by Diversified were without risk, completely liquid, featuring a guaranteed rate of return of between 9.5% and 10.44%. Dicken failed to disclose the risks associated with the actual investment in question – a highly leveraged real estate investment that could result in the loss of all of the investors’ money. Many investors, including senior citizens, risked their life savings. Dicken swindled investors out of more than two million dollars and investigation revealed she took an eight percent commission, pocketing approximately $160,000 for herself. MI

March 15, 2016

The SEC charged former Boston resident Mark A. Jones with operating a $10 million Ponzi scheme that claimed to generate profits from “bridge loans” to businesses in Jamaica.  Jones was arrested by the FBI and the U.S. Attorney for the District of Massachusetts has filed related criminal charges against him.  SEC