Articles Posted in Ponzi Scheme

shutterstock_143448874The securities lawyers of Gana LLP are investigating the regulatory and criminal investigations concerning the Platinum Partners LP Funds.  The hedge funds include the Platinum Partners Value Arbitrage Funds and the Platinum Partners Credit Opportunities Fund.

In June, news sources began reporting that the New York-based hedge fund began liquidating its funds, after the firm’s longtime associate Murray Huberfeld (Huberfeld) was accused of arranging for a $60,000 bribe and kickback, in a Salvatore Ferragamo bag, to a correctional officers’ union official.  The alleged bribe was a reward to Norman Seabrook, president of the New York City Correction Officers Benevolent Association, for directing the union’s retirement funds to investment with Platinum.  The union official allegedly directed $20 million in union investments into the Platinum Partners Value Arbitrage Fund.  In addition, Platinum and its chief investment officer, Mark Nordlicht, are also implicated in the probe.  Both Seabrook and Huberfeld pleaded not guilty to the charges.

However, it is uncertain at this time if the bribe charges are the end of the story.  Federal agents raided Platinum’s office in late June after the charges were announced for reasons reportedly separate from the bribery case.  This has caused news sources to speculate as to a potentially wider fallout including the potential that the purported $1.35 billion funds may be involved in a scheme to defraud investors.

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shutterstock_94632238The attorneys with the offices of Gana LLP are investigating customer complaints and The Securities and Exchange Commission (SEC) recently filed complaint alleging that Oregon-based investment firm Aequitas Management, LLC (Aequitas Management) and its subsidiaries operated a Ponzi-like scheme that defrauded its 1,500 customers of approximately $350 million.

Upon information and belief, the following firms sold Aequitas notes to clients: CONCERT Wealth Management, Summit Advisor Solutions, LLC, Private Advisory Group, Elite Wealth Management, Integrity Bank & Trust, CliftonLarsonAllen Wealth Advisors (CLA Wealth Advisors), and Innovator Management LLC.

The SEC also alleged that the top three executives of Aequitas Management – CEO Robert Jesenik (Jesenik), executive vice president Brian Oliver (Oliver) and chief operating officer N. Scott Gillis (Gillis) were aware as early as 2014 that constraints in the company’s cash flow would make it difficult to meet existing obligations but continued to raise money anyway based on false premises in order to prop up the company.

According to the SEC, an investor would be issued a note promising that their principal plus interest ranging anywhere from 5 to 15 percent annually would be paid.  Jesenik and Oliver raised funds primarily by issuing promissory notes through Aequitas Commercial Finance, LLC (ACF), an entity wholly owned by Aequitas Holdings, LLC (Aequitas Holdings).  Other promissory notes were issued by a series of Aequitas-affiliated investment funds (the Aequitas Funds – See list below).  The manager of ACF is Aequitas Capital Management, Inc. (ACM) and the manager of the Aequitas Funds is Aequitas Investment Management, LLC (AIM).

According to the complaint, when the executives learned of large discrepancies between their assets and obligations they declined to cut expenses and raised hundreds of millions of dollars from new investors.  The SEC found that since 2014, Aequitas defrauded investors into thinking that they were investing in a portfolio of trade receivables in healthcare, education, transportation, or consumer credit while in reality the vast majority of investor funds to repay prior investors and to pay the operating expenses of the Aequitas enterprise.  In addition, the company used funds to support the lavish salaries and lifestyles of the owners.

At the heart of the company’s troubles is its outsized investment in Corinthian College, a Canadian for-profit college that was effectively shuttered after the province of Ontario suspended its operating license in early 2015.  Corinthian College then declared Chapter 11 bankruptcy in May 2015, crushing Aequitas finances since 75 percent of its trade-receivables portfolio was tied to the college.

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shutterstock_185913422The securities attorneys of Gana LLP are investigating potential recovery options for investors of Christopher Brogdon’s (Brogdon) nursing home investment scheme who suffered losses as a result of the fraud. Recently, the Securities and Exchange Commission (SEC) filed a complaint against Brogdon and affiliated entities alleging that Brogdon amassed nearly $190 million through dozens of municipal bond and private placement offerings to investors who would earn interest from revenues generated by nursing homes, assisted living facilities, or other retirement community projects. Instead, the SEC found that Brogdon secretly commingled investor funds in typical Ponzi scheme like fashion and diverted investor money to other business ventures and personal expenses.

Investors should be asking how Brogdon could have possibly been allowed to conduct this scheme. The Federal Industry Regulatory Authority (FINRA) has noted in a related action (FINRA No. 2013035130101) against brokerage firm Cantone Research and its majority owner Anthony Cantone that Brogdon had twice been barred from the securities industry. FINRA describes the two Brogdon actions – once for “egregious misconduct” involving unauthorized transactions and the second for a “scheme” involving financial misconduct. In addition, Brogdon had also been indicted for racketeering, theft, and Medicaid fraud, and had been found liable for breaching a stock repurchase guarantee agreement. Furthermore several entities Brogdon controlled had filed for bankruptcy.

These complaints against Brogdon enablers like Cantone are just starting to be filed. The Bank of Oklahoma Financial has also been alleged to be the trustee for many of the Brogdon deals and faces investor scrutiny. The bank has filed its own suit against Brogdon.

The SEC alleged that since 1992, Brogdon has raised over $190 million for these projects through 54 conduit municipal bond and private placement offerings. See below list of entities. The SEC alleged that Brogdon conducted his fraud through at least 43 entities he controls. According to the SEC, for 40 conduit municipal bond offerings Brogdon stated that the trustee bank would set aside a portion of the investment proceeds in a debt service reserve fund to be used only if needed to satisfy debt service obligations. However, instead of using investor proceeds from a particular offering for the facility or project that was the subject of the offering, Brogdon secretly diverted a portion of the proceeds to either pay for his and his wife’s lavish lifestyles or to prop up his entire business enterprise, restaurants, and commercial real estate holdings.

The SEC also alleged that Brogdon consistently failed to file required financial statements and drew down on the trustee funds in order to make interest payments to investors without disclosure or replenishment of the fund as required by the conduit municipal bond offering documents. As a result, the SEC found that when payments of interest or principal came due on certain offerings, often neither facility revenues nor the trust accounts were available to make those payments. Brogdon then relied upon third parties to make loans to his companies in order to cover these payments to investors.

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shutterstock_173088497According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Frederick Monroe (Monroe) has been the subject of at least three customer complaints alleging that the broker misappropriated funds. In total the customers complaint that over $2 million has been taken by the broker. Subsequently, Monroe’s brokerage firm, Voya Financial Advisors (Voya Financial), terminated Monroe due to the allegations. Monroe had been associated with Voya Financial since 2006.

On June 10, 2015, Attorney General Eric T. Schneiderman announced the arrest of Monroe and charging him with stealing over $1 million from investors by fraudulently soliciting them to reinvest their retirement monies in what essentially was a Ponzi scheme. Monroe was accused of luring clients that he provided services to as a financial planner by diverting their monies for his own personal use and paying back earlier investors he had defrauded. Monroe faces up to 25 years in prison.

The New York Attorney General also stated that while the current charges pertain to three victims the investigation has identified at least a dozen individuals who Monroe allegedly defrauded. According to the Attorney General’s felony complaint, Monroe’s fraud was carried by instructing investors to write checks to him personally and then deposited them into his personal operating account. Monroe is alleged to have advertised his services on the Capital Financial Planning, LLC website to “clients who have amassed a significant level of assets and seek to take advantage of advance advisory programs.”

In order to conceal and further his fraudulent scheme, Monroe allegedly created false financial statements that he gave to clients and would allegedly tell them that their money was being invested in bonds.

The conduct alleged against Monroe are referred to in the industry as “selling away” or private securities transactions. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away often occurs in brokerage firm that either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

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shutterstock_176351714The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against ARI Financial Services, Inc. (ARI) and William Candler (Candler), the firm’s President and former Chief Compliance Officer (CCO) alleging that that he facilitated at least ten private placement offerings from September 1, 2009, to December 31, 2012. The complaint found that the respondents failed to implement reasonable supervisory procedures in connection with the sales of the private placements.

ARI has been a FINRA member firm since 2005 and derives most of its revenue as a wholesaler of private placements that it marketed to retail broker-dealers who then sold those interests to retail investors. ARI’s main office was located in Kansas and during certain times had registered up to five branch offices and over 30 registered representatives located in six different states. ARI is currently owned by Candler and two other individuals. Candler is ARI’s majority owner.

Candler entered the securities industry in 1996. From March 2011, until November 2012, Candler was associated with Connor Capital Investments, LLC. Since April 2014, in addition to ARI, Candler is associated with JCC Advisors, LLC.

FINRA alleged that ARI had at most two employees during the relevant time period and ARI registered full-time employees of the private placement issuers as independent contractors for the firm to conduct its wholesaling and marketing activities. Additionally, FINRA alleged that ARI registered the issuers’ headquarters supervisory branch offices and designated members of the issuers’ staff as persons with compliance responsibilities for these offices. FINRA alleged that ARI relied on these designated persons to carry out supervisory responsibilities for the firm. FINRA alleged that ARI effectively registered the private placement issuers’ employees to promote and sell their employers’ securities and were also designated by ARI to supervise wholesaling activities conducted at their offices.

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shutterstock_182357462According to news reports, broker George Montgomery (Montgomery) committed suicide but questions surrounding the death left many believing that foul play was involved. Montgomery, a former ASU running back, before injuries took him off the field.

Montgomery became a registered broker in 1998. From 2005 until October 2011, Montgomery was associated with United Planners’ Financial Services of America (United Planners). Thereafter, from January 2012 until July 2013, Montgomery was associated Fortune Financial Services, Inc. (Fortune Financial).

Montgomery was found July 31, 2014, submerged in Wet Beaver Creek by two hikers with a handgun next to the dead man. When police inspected the scene, investigators found that there were four gunshot wounds and two had penetrated the Montgomery’s chest while there were also a hand wound and one leg also wound.

Montgomery had missed a court examination that morning concerning an investigation by the Attorney General for Montgomery’s involvement in the Twin Peaks Ponzi scheme. Investors had lost almost $3 million investing in the mining scam located at the Yavapai County ghost town Stanton.

According to Montgomery’s BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), the broker has three customer complaints, two of which involve allegations Montgomery solicited an unregistered investment away from the firm and made misrepresentations.

Montgomery’s outside business activities are referred to as “selling away” in the industry. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away often occurs in brokerage firm that either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

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shutterstock_63635611The Securities and Exchange Commission (SEC) recently announced fraud charges against Rhode Island investment adviser ClearPath Wealth Management, LLC, (ClearPath) and its president, Patrick Churchville (Churchville), for operating a fraudulent investment scheme that resulted in at least $11 million investor losses.

According to the complaint, from December 2010 onward ClearPath and Churchville diverted deposits from new investors to pay prior investors, used proceeds from selling investments to pay unrelated investors, used investors’ funds as collateral for personal loans, used investors’ money to repay the loans, converted investor funds, and also outright stole $2.5 million of investor funds to purchase a waterfront home in Barrington, Rhode Island for Churchville. The SEC’s complaint alleges that Churchville performed deceptive acts and used misleading accounting tricks to conceal the fraud.

The SEC’s alleged that when ClearPath’s investors requested distributions of their investments in September 2013, Churchville lied to investors about the status, worth, and disposition of those investments. Four other entities: ClearPath Multi-Strategy Fund I, L.P., ClearPath Multi-Strategy Fund II, L.P., ClearPath Multi-Strategy Fund III, L.P., and HCR Value Fund, L.P. were named by the SEC as relief defendants.

From August 2009, through February 2011, Churchville was associated with the Spire Securities, LLC brokerage firm.

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shutterstock_161005310The Securities and Exchange Commission (SEC) brought charges against Veros Partners, Inc. (Veros), an Indianapolis investment adviser, Matthew Haab (Haab), and two associates, attorney Jeffrey Risinger (Risinger) and Tobin Senefeld (Senefeld), fraudulently raised at least $15 million from at least 80 investors, most of whom were Veros advisory clients for the purposes of engaging in two fraudulent farm loan offerings. The SEC alleged the defendants made ponzi scheme payments to investors in other offerings and paid themselves hundreds of thousands of dollars in undisclosed fees. The SEC obtained a temporary restraining order and an asset freeze in order to put a stop to the scheme.

According to the complaint in each offering the investors purchased securities issued in 2013, by Veros Farm Loan Holding LLC (VFLH) and in 2014, by FarmGrowCap LLC (FarmGrowCap). VFLH and FarmGrowCap are controlled and operated by Haab and two associates, Risinger and Senefeld. The investors in the two offerings were informed, orally and in writing by Haab, and in the written offering documents, that investor funds would be used to make short-term operating loans to farmers for the 2013 and 2014 growing seasons. However, the SEC found that contrary to these representations significant portions of the loan proceeds were not used for current farming operations but were used to cover the farms’ prior unpaid debt.

In addition, the SEC alleged that Haab, Risinger, and Senefeld used money from the offerings to make at least $7 million in payments to investors in other offerings and to pay themselves over $800,000 in undisclosed “success” and “interest rate spread” fees. The SEC also has complained that the defendants repeatedly misled investors about the risks, nature, and performance of the investments and underlying farm loans.

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shutterstock_143179897According to news sources Bryan Anderson (Anderson) has been charged with wire fraud, money laundering and securities fraud, according to the FBI and the Alabama Securities Commission  Anderson agreed to plead guilty to the charges under a plea agreement. Under the plea agreement Anderson will pay restitution of about $3.1 million to the victims of his Ponzi scheme.

According to the allegations, between January 2009 and January 2014, Anderson’s false investment promises caused 18 individuals to deliver more than $8.4 million to Anderson, which he deposited into an account held at BancorpSouth. When the scheme collapsed in May 2014, about 12 investors lost about $3.1 million.

It is alleged that Anderson solicited investors to invest in stock options that he said employed various trading strategies. However, the stock options he described were not registered securities. Anderson also offered investments in a company he owned called 360 Properties. Beginning in or about 2009, Anderson falsely represented to investors in 360 Properties that their returns would come from leased property income, when in fact there were no leased properties.

However, Anderson was allegedly operating a Ponzi scheme with investor funds by paying returns to previous investors with money from new investors and siphoning off funds to pay personal expenses. According to authorities, Anderson transferred investor money from his wife’s bank accounts to another account and made only a small percentage of the investments promised to investors.

Anderson was a registered broker associated with MetLife Securities, Inc. (MetLife) from October 1998 to February 2012. Thereafter, Anderson was associated with Pruco Securities, LLC (Pruco) from February 2012 to September 13, 2012, when Pruco terminated his employment.

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shutterstock_69882820The Securities and Exchange Commission (SEC) has filed a complaint against former FINRA registered broker Levi Lindemann (Lindemann) alleging that from about September 2009, to August 2013, Lindemann, a resident of Minnesota, fraudulently raised at least $976,000 from six investors located in Wisconsin including elderly individuals and a member of his own family among other allegations.

Previously, Lindemann was a FINRA registered broker with several brokerage firms beginning in 2001. From March 2008 until October 2009, Lindemann was associated with United Equity Securities, LLC. Then, from October 2009 until November 2010, Lindemann was a broker for Workman Securities Corporation. Thereafter, from November 2010 until March 2012, Lindemann was associated with J.P. Turner & Company, L.L.C. (JP Turner).

According to the SEC’s complaint Lindemann told investors that their money would be used to purchase a variety investments, including 1) secured notes in Home Path Financial LP (Home Path), a Wisconsin-based real estate investment company; 2) notes issued by GWG Life, LLC (GWG Life); and 3) interests in a unit investment trust through Lindemann’s sole proprietorship, Alternative Wealth Solutions (AWS). The SEC alleged that none of these investments were ever made.

According to the SEC, Home Path Financial LP is a real estate investment company incorporated in Wisconsin. Home Path’s business involves the purchasing of distressed properties and then later selling those properties for a profit. The SEC alleged that Lindemann fraudulently represented to investors that he was a broker raising funds on behalf of Home Path in connection with a secured note offering. According to the SEC, Lindemann never invested the solicited funds in Home Path.

The SEC alleged that GWG Life, LLC is a Delaware operating out of Minneapolis, Minnesota that offers services in the secondary market for life insurance. The SEC alleged that from mid-2009 through mid-June 2011, GWG offered investment products called LifeNotes that were secured by the assets of GWG Life in the form of life insurance policies. The SEC alleged that Lindemann fraudulently represented to at least one investor that he would use the investor’s funds to purchase LifeNotes and instead misappropriated the money.

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