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$179 Million Dollar Securities Fraud Scam May 3, 2012

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Central Islip, NY-Four co defendants are charged with securities fraud, that led to a massive Ponzi scheme.  The scheme ended up defrauding investors of $179 million.  In addition, the co-defendant also where able to defraud investors out of insurance policies on their investments to the tune of $865,000+.

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Wide Spread Corruption and Fraud Epidemic May 3, 2012

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Regulators in the US, Asia and Europe are uncovering a unpresidented amount of fraud schemes from: money laundering, mortgage fraud, Ponzi schemes, insider trading, hedge fund fraud, bribery and boiler room scams.  In a boom economy, many of these crimes remain hidden until the economy has a down turn and then these crimes start to surface.

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Attorney Chareged With Five Counts Of Mail Fraud May 3, 2012

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A Wilkes Barre, PA attorney, Anthony J. Lupas Jr., Esq. has been charged with five counts of mail fraud an alledge that he stole up to $246,080 from a client who believed they where investing money in a tax-free trust account.  The attorney als allegedly operated a Ponzi scheme that defrauded 80 investors of approximately $5 million dollars.

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Massachusetts man charged in $9.6M fraud December 27, 2010

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A Massachusetts man is accused defrauding more than 50 people by  running a Ponzi-style scheme with their $9.6 million.  Randy M. Cho allegedly told investors he was a self-employed securities trader who had a special relationship with Goldman Sachs and could buy discounted shares of well-known companies such as Google, Facebook and Rosetta Stone before their initial public offerings.  In one case, Cho allegedly told an investor he could buy 20,000 shares of Google at $1 each, when shares were publicly trading at $425 or more each.  Shouldn’t that raise a red flag there?

From 2001 to 2009, Cho allegedly collected more than $9.6 million from domestic and foreign investors. To keep his scheme going, Cho used more than $1.5 million from new investors to make payments to existing investors.  All together, investors lost nearly $8 million.  He was charged with one count of wire fraud and one count of filing a false federal income tax return for 2005, when he reported a total income of $118,475 but received nearly $1.2 million.

Like most of these cases, a civil lawsuit was filed.  In that case, Cho was order to repay the nearly $8 million he took from investors, plus $289,320 in interest, and was fined $150,000.

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Cho’s lawyer, Jim Marcus, said he’ll review the charges before deciding what to do.

Lakewood NJ developer Eliyahu Weinstein arrested in alleged Ponzi scheme August 12, 2010

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Real estate developer Eliyahu Weinstein, arrested today at his Lakewood home on charges of defrauding investors of tens of millions of dollars as part of a Ponzi scheme.  At just 34 years old, the Feds claim that he was able to bilk investors on two continents out of nearly $300 million.  While he is well short of Madoff, he will be in rare company if those numbers hold up.  However, Madoff was an elderly man.  For someone so young to rack up these numbers is quite impressive.

The criminal complaint filed against Weinstein also charges a co-defendant, Vladimir Siforov of Manalapan.  Like many ponzi schemes,  Weinstein is alleged to have used his connections to his religious community; in this case, the Orthodox Jewish community.  Weinstein’s New York City-based attorney, Ephraim Savitt, argued for Weinstein’s release, did not have time to put together a bail package.  That could be a real moot point given the amount of time he is facing (just about the rest of his life) and the fact that he frequently flies overseas so he is a huge flight risk.

Right now, there doesn’t seem to be a clear pictures as to where all the money went.  However, some of the money funded a huge collection that included manuscripts and antique Judaica items valued at about $6.2 million; a jewelry and clock collection that cost about $7.6 million; and jewelry and watches valued at $6.2 million, including items from Bulgari, Cartier, Omega and Harry Winston.  That still leaves about $280 million unaccounted for.   

Developing…

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Owner of Investment Firm Charged with Running Multi-Million-Dollar Ponzi Scheme April 1, 2010

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Donald Anthony Young was charged today by indictment with one count of mail fraud and one count of money laundering. The charges relate to Young’s execution of a Ponzi scheme in which his investors lost more than $25 million. Young operated an investment advisory business in Kennett Square, Pennsylvania, which was known by various names including Acorn Capital Management II LP, Acorn Capital Management LLC, and Acorn II LP. According to the indictment, Young solicited individuals to invest with him, claiming that he would invest their funds in the stock of large stable companies. Ultimately, Young obtained more than $95 million from his investors. Instead of investing all of these funds as promised, Young allegedly diverted more than $25 million of investor funds for his own use, purchasing, among other things, luxury homes for himself in Palm Beach, Florida; Coatesville, Pennsylvania; and Northeast Harbor, Maine.

 “According to the indictment, this defendant helped himself to others’ fortunes, living a life of luxury, with little or no regard for the damage to our financial markets, our economy, and the reputation of the investment advisors who follow the rules.”

Because Young was allegedly stealing millions of dollars from his investors and using that money to pay his own personal and business expenses, he was unable to pay investors when they requested redemptions and he was forced to liquidate other investors’ funds to pay these redemptions. The indictment further alleges that when the United States Securities and Exchange Commission opened an investigation into Young’s business, Young attempted to obstruct the investigation by providing false and misleading information to the SEC and by refusing to provide the SEC documents, to which it was legally entitled.

According to the indictment, Young laundered the proceeds of his fraud by, among other things, stealing approximately $1.9 million of an investors’ funds and using these funds to purchase his luxury home in Palm Beach, Florida.

Annapolis Mortgage Broker Charged in Fraud Scheme February 2, 2010

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Mortgage broker David Wehrs, Sr. of Annapolis, Maryland, has been charged with wire fraud in connection with a scheme to defraud investors and financial institutions of approximately $2.3 million.  According to the information and court documents, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs allegedly induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85 percent. Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs allegedly deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs then wire transferred a large portion of these investor funds to a brokerage account in the name of his title company at Terra Nova Financial LLC located in Chicago, Illinois.

The Government also alleges that Wehrs then used the money he obtained to “day trade.” During the scheme, Wehrs is alleged to have conducted millions of dollars of stock trades per month.  In addition to day trading, Wehrs allegedly used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.

The Government further alleges that when Wehrs had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing a loss of such amount to a title insurance company. He also allegedly used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual’s home to pay interest to investors, causing a loss of $100,000 to the home buyer.

As a result of the scheme, Wehrs is alleged to have caused a total loss of $2,371,06 to investors and the title insurance company. The worst part for Wehrs is that it seems like he doesn’t have a ton of money to pay back to make this go away.

I made the NY Times! January 14, 2010

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Yesterday, I was interviewed by NY Times columnist Peter Applebome about a Ponzi schemes.  His column was published today and you check out it here.  Besides being interviewed, I had a great conversation with Peter.  He’s got a great column that is published on Monday and Thursday.  You can read his column from other days here.  Based upon the traffic that it has sent to this blog in just a few hours, it is clearly a rather popular colum.

Bernard Madoff “arrest net” widens with more arrests November 13, 2009

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Thought the Bernie Madoff saga was over?  Think again.  The Government will not pack up shop with Madoff’s plea and sentencing.  They will continue to arrest and prosecute just about anyone who can be connected to Madoff’s ponzi scheme. 

The latest arrests are for two former computer programmers for Bernard Madoff’s investment firm on charges they helped cover up his massive fraud for more than 15 years.  Jerome O’Hara and George Perez are charged with  conspiracy, falsifying books and records of a broker-dealer, and falsifying books and records of an investment adviser.  The Securities and Exchange Commission has alleged that they provided technical support to produce false documents and trading records.

Of course, the Government will have to prove that these men shared Madoff’s intent which may be very difficult.  However, the fact that these men are even associated with Madoff will make it very difficult for the defense.  In my opinion, this case turns on whether or not these men are just associated with Madoff or if there is some actual evidence such as cooperating witnesses, documents or emails that show the conspiracy. 

The amount they were paid may impact the case as well since if they were over paid, then the extra compensation will make it more likely that they were in on it.  If their salary was normal, then it will be less likely that they risked criminal prosecution with no “skin in the game”. 

Story is here.

Millstone man gets off easy for ponzi scheme November 9, 2009

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I’d like to know more about this case.  Michael D’Angelo was sentenced to three years in prison 10 months after pleading guilty to a second-degree charge of theft by deception in connection with securities fraud committed by his company, CMR Mngt. Group, LLC.   He has agreed to pay a total of $670,177 in restitution and penalties and his ability to do so probably got him the deal.

He was charged by the state Divison of Criminal Justice in March 2008. An investigation revealed he convinced 26 investors to contribute more than $3.2 million to his company over the course of two years beginning in January 2004.  Instead of making good on promises of 5 percent monthly returns generated by foreign currency trading and bank note trading, he used the new investments to pay off the original fund members.  Like Madoff and all the others, this scheme works as long as you bring in new people.  When the economy tanks and everyone wants their money, you get found out pretty quickly.

He also diverted large sums of money into the bank account of his wife, Diana D’Angelo and then used the funds to cover personal expenses that included their Monmouth County home and payments for high-end cars.  Again, this is a classic example of what separates a bad investor and a crooked one.  A bad investor suffers with everyone, a crooked one lives the high life.

Michael will be out of prison in about 6 to 9 months.  After his home and other assets are sold, he’ll probably still have a nice chunk of change to pay back to his victims.  The State could have probably hammered him with more charges but it seems like he had a good attorney that worked this out for him.

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