Recent Ponzi Cases
2010 Ponzi Schemes
Excerpt from Justice Department report on "Operation Broken Trust:"
Operation Broken Trust: Case Examples
The following are examples of enforcement actions taken as a part of Operation Broken Trust:
$485 Million Investment Scam Defrauded Thousands
Joseph Blimline pleaded guilty in the Eastern District of Texas on Aug. 31, 2010, for his role in one of North Texas’ largest oil and gas investment Ponzi schemes defrauding 7,700 investors of more than $485 million. Blimline was a majority owner of Provident Royalties, an investment company. Beginning in 2006, Blimline and others involved at Provident Royalties made false representations and failed to disclose other material facts to their investors to induce the investors into providing payments to Provident. The investors were not told that Blimline had received millions of dollars of unsecured loans and had been previously charged with securities fraud. Blimline issued approximately 20 oil and gas offerings, and used a significant amount of the money raised in these offerings to purchase oil and gas assets from earlier offerings and to pay dividends to earlier investors in order to facilitate the scheme. Blimline also pleaded guilty to charges related to a separate, but similar oil and gas scheme based in Michigan that defrauded investors out of $50 million. The criminal case against Blimline was brought by the U.S. Attorney’s Office for the Eastern District of Texas and was investigated by the FBI, in coordination with the U.S. Securities and Exchange Commission (SEC), which previously had filed a civil action to freeze the assets of Blimline and others.
Chicago Ponzi Scheme Operator Victimized Elderly Italian Immigrants
Frank Castaldi was sentenced on Sept. 15, 2010, in the Northern District of Illinois to 23 years in prison for operating a Ponzi scheme that resulted in more than $30 million in losses to hundreds of victims, including many elderly Italian immigrants. As part of his scheme, Castaldi guaranteed investors that he would pay them annual returns between 10 and 15 percent. He made false representations to most investors about investing their principal in his various businesses, and about the source of the funds that he used to make their interest payments. Castaldi used new investors’ principal payments to make interest payments to other investors, without disclosing the true source of the interest payments. Castaldi also lost investors’ money by funding a failed banquet hall and other failing businesses, and by purchasing stocks. The case was prosecuted by the U.S. Attorney’s Office for the Northern District of Illinois and investigated by the FBI and Internal Revenue Service Criminal Investigation (IRS-CI).
Florida Man Stole Millions from Investors to Fund His Lavish Lifestyle
Nevin Shapiro, the former owner and chief executive officer of Capitol Investments USA Inc., pleaded guilty on Sept. 15, 2010, in the District of New Jersey, for his role in a multi-million-dollar Ponzi scheme. From January 2005 through November 2009, Shapiro solicited investors from New Jersey and throughout the United States through Capitol, telling them that he would use their money to fund his wholesale grocery distribution business. As a result of these solicitations, investors sent more than $880 million to Shapiro and Capitol during this time period. Capitol had virtually no income generating business at that time and Shapiro used new investor funds to make principal and interest payments to existing investors, as well as to fund his own lavish lifestyle. Shapiro used investor funds to pay illegal sports gambling debts, to purchase floor seats at Miami Heat basketball games and to make payments on his Riviera yacht and his residence in Miami Beach. Shapiro also used investor funds to make payments to student athletes attending a local university in the Miami area and to make donations to the university. The Ponzi scheme resulted in an estimated loss of $89 million to 75 victims. The case was prosecuted by the U.S. Attorney’s Office for the District of New Jersey and investigated by the FBI and IRS-CI, with coordination from the SEC, which previously had filed parallel civil charges.
Texas Man Allegedly Targeted Members of Christian Faith in Investment Scam
Eldon A. Gresham Jr. was indicted in the Northern District of Texas on Sept. 21, 2010, on 10 counts of mail fraud in connection with a foreign currency exchange (FOREX) trading scam. From January 2004 through June 2009, Gresham solicited at least 90 individuals to invest in his FOREX trading business, the Gresham Company. Gresham falsely represented to potential investors that he generated consistent returns on investments of up to 10 percent per month. In fact, Gresham was actually losing money on his FOREX trading. Gresham also concealed from investors that he used their investment funds for personal reasons or as payments to earlier investors. Over the life of the scheme, Gresham obtained nearly $15.8 million from unsuspecting victims. Gresham used contacts from the Texas area and beyond to locate investors and targeted members of the Christian faith, who were elderly and particularly vulnerable to Gresham’s inducements. Gresham often told potential investors that he believed his success in FOREX trading was a blessing and gift from God, and Gresham considered his investment business to be “his ministry.” Gresham also encouraged people to invest by telling them that investors could use their investment gains to “further God’s work.” The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of Texas and investigated by the U.S. Postal Inspection Service.
Ponzi Scheme Targeted Members of Four New York Churches
Bryant Ismail Rodriguez was sentenced on Sept. 24, 2010, in the Southern District of New York to nine years in prison for his role in a Ponzi scheme involving nearly $2 million in losses and more than 185 victims. Beginning in the spring of 2007, Rodriguez, a member of El Camino Church in the Washington Heights neighborhood of Manhattan, told members of that church, another church in Manhattan, and two churches in the Bronx, N.Y., that he was involved with an electronics distribution company named Communication and Electronics Group Inc. Rodriguez offered church members opportunities to invest in C&E, promising returns of between 30 to 40 percent every month, additional cash bonuses and even the opportunity to purchase homes in the Dominican Republic and New York City with their investment earnings. In reality, C&E was a shell company created by Rodriguez, which never sold any items to a major retailer and never purchased from an electronics manufacturer. The case was prosecuted by the U.S. Attorney’s Office for the Southern District of New York and investigated by the U.S. Postal Inspection Service.
Investment Scam Victimized 800 Individuals Throughout the United States
Three individuals were indicted and four individuals pleaded guilty in the fall of 2010 in the Eastern District of Virginia for their roles in A&O entities, a group of businesses that acquired and marketed life settlements to investors. The defendants defrauded investors by making misrepresentations about such things as A&O’s prior success, its size and office locations, its number of employees, the risks of its investment offerings, and its safekeeping and use of investor funds. Their fraud scheme involved more than 800 victims throughout the U.S. and Canada, many of whom were elderly. The cases are being prosecuted by the U.S. Attorney’s Office for the Eastern District of Virginia and the Criminal Division of the Department of Justice and investigated by the Virginia Financial and Securities Fraud Task Force, which includes the U.S. Postal Inspection Service, IRS-CI and the FBI. The SEC previously filed a parallel civil case.
Thomas Petters’ Coconspirators Assisted in Carrying Out Ponzi Scheme
Seven coconspirators of Thomas J. Petters were sentenced to prison in the District of Minnesota in September 2010: Robert White, Larry Reynolds, Michael Catain, James Wehmhoff, Greg Bell, Harold Katz, and Deanna Coleman. Petters used a successful corporation for over a decade to perpetrate a scheme that defrauded investors of $3.4 billion in the largest fraud case in Minnesota history. Through his company, Petters Group Worldwide LLC (PGW), Petters obtained loans from hedge funds and investment groups for the stated purpose of financing sales to well-known big box retailers, such as Costco and Sam’s Club. The investigation revealed that the purchase and subsequent sale of merchandise to the retailers were actually fabricated transactions supported by fictional documentation. Petters was convicted of mail and wire fraud, conspiracy and money laundering charges in 2009 and was sentenced in April 2010 to 50 years in prison. The cases were prosecuted by the U.S. Attorney’s Office for the District of Minnesota and investigated by the FBI and IRS-CI.
Internet-Based Fraud Targeted the Deaf Community
On Oct. 6, 2010, the SEC obtained a temporary restraining order and emergency order freezing the assets of Imperia Invest IBC. According to the SEC’s complaint, Imperia solicited investors through the Internet, claiming it would use the investor funds to purchase Traded Endowment Policies (TEPs), the British term for viatical settlements. Imperia falsely promised to pay investors—the majority of whom are members of the deaf community—a guaranteed return of 1.2 percent per day. The SEC also alleges that Imperia’s website said that investors could only access their profits by purchasing a Visa debit card from Imperia, but Imperia has no relationship with Visa and was using the Visa name without authorization. Through its website and a series of offshore PayPal style bank accounts, Imperia raised in excess of $7 million from at least 14,000 investors worldwide, including 6,000 investors in the U.S. who have invested in excess of $4 million with Imperia.
Chicago Man Operated Ponzi Scheme
On Oct. 7, 2010, the SEC charged a Chicago-area company and its owner for perpetrating a Ponzi scheme in which they promised investors extraordinary returns generated from a purportedly successful real estate business. The SEC alleges that Robert R. Anderson of Mt. Prospect, Ill., issued promissory notes through his company Rosand Enterprises that he claimed would generate investor returns ranging from 10 to 20 percent per month. Anderson misrepresented to investors that Rosand Enterprises purchased, constructed, rehabbed, and sold homes in the Chicago area and other locations. However, Anderson was not making any money in the real estate market and was instead conducting a Ponzi scheme to pay earlier investors with funds from new investors. He also helped himself to investor money to buy cars, make hefty credit card payments, and pay for his daughter's wedding. The SEC’s complaint, filed in U.S. District Court in Chicago, alleges that Anderson raised approximately $12 million from at least 77 investors between approximately December 2005 and May 2008.
Two Florida-Based Fund Managers Facilitated Petters Ponzi Scheme
On Oct.14, 2010, the SEC charged Bruce F. Prevost and David W. Harrold and their firms with fraudulently funneling more than a billion dollars of investor money into a Ponzi scheme operated by Minnesota businessman Thomas J. Petters. The SEC alleges that Prevost and Harrold falsely assured their investors and potential investors that the flow of their money would be safeguarded by collateral accounts and described a phony process for protecting their assets. When Petters was unable to make payments on investments held by the funds they managed, Prevost, Harrold, and their firms concealed it from investors by concocting sham note exchange transactions with Petters, who the SEC charged last year along with an Illinois-based hedge fund manager who also facilitated the scheme. The SEC’s complaint alleges that Prevost, Harrold, and their firms invested more than $1 billion in hedge fund assets with Petters while pocketing more than $58 million in fees.
Florida Man Victimized Haitian-Americans in $14 Million Scam
Ronnie E. Bass Jr. was convicted in the Southern District of Florida on Oct. 25, 2010, for his participation in a Ponzi scheme operated from February 2008 through January 2009. Bass and his coconspirators engaged in a classic affinity fraud which sought to exploit the common interests and trusts of a certain group of individuals. Bass and others solicited and targeted members of the Haitian community to invest in Homepals LLC. Homepals offered investments in “unsecured notes” sold by the defendants that promised to double investor funds in 90 days. By November 2008, Homepals could not generate enough investor funds to pay off the existing investors. The scam led to an estimated loss of $14.3 million to 500 victims. The case was prosecuted by the U.S. Attorney’s Office for the Southern District of Florida and investigated by the FBI, with cooperation from the SEC, which previously had filed a civil action to enjoin the scheme.
Ponzi Scheme Operator Used Spanish-Language Media to Solicit Investors
Juan Rangel pleaded guilty on Oct. 27, 2010, for his role in operating a Ponzi scheme. Rangel and his company, the Commerce-based Financial Plus Investments, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60 percent each year out of the profits from Financial Plus’ real estate investments and lending business. However, Rangel admitted that Financial Plus did not make any actual profits from real estate or lending. Rangel instead used the new investors’ money to make payments to other investors and for his own personal use, including the monthly mortgage payments on his $3 million home and monthly payments for his Lamborghini sports car. Rangel also admitted that he and others operated a separate mortgage fraud scheme that targeted Latino homeowners at risk of losing their homes by offering them help to avoid foreclosure. The U.S. Attorney’s Office for the Central District of California is prosecuting the case and the FBI, U.S. Postal Inspection Service and IRS-CI are investigating the case.
Owners of Trading Company Allegedly Defrauded Investors
Craig Karlis and Ahmet Devrim Akyil were indicted on Oct. 28, 2010, in the District of Massachusetts. Karlis was charged with nine counts of wire fraud and two tax crimes and Akyil was charged with 10 counts of wire fraud. The indictment alleges that Karlis and Akyil founded Boston Trading and Research (BTR) and recruited customers to open accounts with BTR to trade in the foreign currency exchange market. Karlis and Akyil allegedly made a series of misrepresentations to customers about how BTR operated and about what they did with customer money. They allegedly diverted millions of dollars from BTR customer accounts to pay BTR’s business expenses and their personal expenses, such as houses, cars and jewelry. Karlis and Akyil told customers that BTR employed strategies to reduce risk, when in fact they did not. By July 2008, BTR had approximately 1,200 customers and more than $35 million under management. On the same day as the indictment was filed, the SEC filed a civil complaint against Karlis, Akyil, and BTR for the same conduct, alleging that Karlis, Akyil, and BTR sent misleading account statements to investors while stealing their funds and incurring major trading losses. The criminal case is being prosecuted by the U.S. Attorney’s Office for the District of Massachusetts, with cooperation from the SEC and the Commodity Futures Trading Commission (CFTC), and investigated by the FBI and IRS-CI. The civil case against Karlis, Akyil, and BTR is being handled by the SEC.
Michigan Man Operated an Oil-Related Ponzi Scheme
On Nov. 10, 2010, the SEC filed civil charges against a Grosse Point, Mich., man and his company, Zada Enterprises LLC, for allegedly conducting a $27.5 million Ponzi scheme in which investors were told that their money would be put in oil-related investments—earning as much as 48 percent. In a court filing seeking to shut down the scheme, the SEC alleged that the company owner, Joseph Paul Zada, also claimed he had exclusive access to certain oil investments, had business contacts in the Middle East and had earned substantial returns from prior oil-related investments. Instead, according to the SEC, Zada was using the money from approximately 60 investors to buy a home in Grosse Point Shores, an equestrian facility in Palm Beach County, jewelry, and cars.
Investment Manager Operated $40 Million Ponzi Scheme
Investment manager Philip Barry was convicted on Nov. 17, 2010, of one count of securities fraud and 33 counts of mail fraud in the Eastern District of New York. Barry operated a long-standing and large-scale Ponzi scheme. Approximately 800 individuals invested a total of more than $40 million in Barry’s business, the Leverage Group. To induce investments and discourage withdrawals, Barry, among other things, guaranteed specified positive rates of return, issued account statements that showed growing account balances, represented that investing in the Leverage Group was safe and promised that withdrawals could be made easily. The evidence at trial established that Barry actually was running a Ponzi scheme, paying returns to Leverage Group investors not from any profits earned on investments, but rather from existing investors’ deposits or money paid by new investors. Barry never produced or earned the rates of return that he advertised and cited in clients’ account statements. Rather, the positive rates of return were simply pre-determined interest rates made up by Barry. In bankruptcy testimony given by Barry, he estimated that he owed his investors $60 million. In bankruptcy proceedings, the U.S. Trustee Program secured from Barry a waiver of Chapter 7 discharge. The criminal case was prosecuted by the U.S. Attorney’s Office for the Eastern District of New York and investigated by the FBI, in coordination with the SEC, which previously had filed a related civil action.Texas Man and Others Sold Fraudulent Oil and Gas Investments
The SEC filed a lawsuit in Dallas on Sept. 1, 2010, alleging that Jason A. Halek of Southlake, Texas, and two companies he owns and controls—Halek Energy LLC and CBO Energy Inc.—fraudulently sold investments in Texas oil and gas projects. The complaint alleges that, between June 2007 and September 2009, Halek, Halek Energy and CBO Energy raised approximately $22 million from at least 300 investors nationwide by making materially false and misleading statements about the risks of the oil and gas projects, the use of investor funds, and potential returns from the investments. On Nov. 30, 2010, the SEC also charged Priscilla Sabado, a broker-dealer and investment adviser representative at AXA Adisors, LLC, with fraudulently selling Halek Energy interests to her clients, including a financially unsophisticated 24-year old blind man.
Two Mexican Companies Allegedly Issued False Statements
On Dec. 1, 2010, the CFTC charged two Mexican companies, MXBK Group S.A. de C.V and its foreign currency (FOREX) trading division, MBFX S.A., with issuing false customer statements and misrepresenting trading results on their website in connection with their FOREX trading enterprise. The action was filed in the U.S. District Court in Salt Lake City. According to the complaint, the defendants have accepted at least $28 million from over 800 U.S. customers for the purpose of trading FOREX in pooled accounts on behalf of those customers. The complaint further alleges that during the period of October 2005 through April 2009, the MXBK entities lost approximately $29 million in customer funds during which time they falsely reported overall trading profits. In a related action, the SEC filed a civil injunctive action alleging that Clifton K. Oram, Don C. Winkler and William R. Michael engaged in fraud by offering and selling investments in MXBK Group’s FOREX trading program. The SEC’s complaint alleges that Oram, Winkler and Michael raised tens of millions of dollars and attracted investors by touting impressive monthly returns posted on MXBK Group’s website. In reality, neither Oram, Winkler nor Michael understood how the FOREX market or FOREX trading functioned, and they blindly accepted MXBK Group’s representations about its background and track record.
Other 2010 Cases
The S.E.C. charged Trade-LLC and two of its managing members, Philip W. Milton and William Center, with fraud that involved convincing three private investment clubs, with more than 800 national members, to entrust their money to Trade so that it could trade securities on the clubs' behalves. The clubs gave Trade more than $28 million after being promised substantial returns and, on a monthly basis, were shown fake documents claiming that the initial investment was earning 8% monthly interest. In reality, Trade was losing money from its investments as the two members were paying themselves over $3 million in salary and appropriating almost $5 million to three Florida businesses they also owned.
Everyone knows not to follow up on emails from African royalty asking for social security numbers, but few expect to meet a scheming prince in the real world. Enter con artist Guy de Chimay, a Manhattan financier who claimed that his company ran the investments for Belgium's de Chamay royal family and that his father had abdicated the thrown years ago. Guy used the family crest on his business card and claimed to have over $200 million in funds, when his bank account revealed a mere $135. He was captured while fleeing in the city and appeared in court on July 1.
Michael Derrick Peninger, president of the Cooper River Group Inc., CSA Trading Group Inc., and Daniel Island Builders LLC., was sentenced to 240 months for duping investors into thinking that he traded commodities futures and invested in real estate. Peninger obtained more than $7 million from forty investors and kept the fraud running through a classic Ponzi scheme. He is purported to have lost his customers $5 million.
The SEC charged a Jackson, Florida group with defrauding government employees and law-enforcement agencies through an alleged Ponzi scheme promising safe investment in long-term securities. The estate of Kenneth Wayne McLeod, his benefits consulting firm, Federal Employee Benefits Group Inc., and his investment advisor, F & S Asset Management Group Inc. were charged with soliciting government groups to invest in non-existent government-bond fund.
Michael Betzel from Kansas will spend 31 months in jail and pay $600,000 in restitution to investors for a Ponzi scheme involving his company, Guardian Knight Security. He told investors that the company was safe investment that sold security alarms to businesses.
Former South Florida lawyer Scott Rothstein was sentenced to 50 years in prison for using his law firm, Rothstein Rosenfeldt Adler PA, to run a $1.2 billion Ponzi scheme. The convicted Rothstein had sold discounted stakes in fraudulent settlements of sexual-harrassment and whistleblower claims then promised investors they could collect full proceeds once the case settled. The cases were invented through fake settlement papers, bank statements, court orders, and a forged judge's signature.
- Rothstein gets 50 years for biggest Ponzi scheme of 2010
- Official FBI press release on the Rothstein case
Patricia Morgan, founder and head of Chicago Development and Planning, was sentenced to over 15 years in prison on May 19, 2010, for both a Ponzi scheme and mortgage fraud that involved 400 victims, 20 fraudulently acquired properties, and millions of dollars. She had promised investors that their funds would go toward purchasing property to be rented or resold, and returns would come from the profits she earned in the transactions. The case was part of Obama's Financial Fraud Enforcement Task Force (FFETF) that was established to coordinate more efficient government efforts in tracking and prosecuting financial crimes.
The chairman of Pinupito, Inc., and his girlfriend were arrested in California on March 9, 2010, for allegedly running a Ponzi scheme that stole $8 million from over 60 Korean-Americans throughout California. Euirang Hwang and Sang Yi promised investors high return through claims that his firm purchased startups in Korea, grew them, and sold them off for a profit. They specifically targeted Korean-America communities, even giving presentations and speeches at Korean churches, in order to fund a lavish lifestyle and repay old investors with new money.
After news of the Madoff scandal broke, two business associates of Arthur Geoffrey Nadel's hedge fund Scoop Management Co. pressed Nadel for an audit of his funds, who promised it then promptly disappeared. The hedge fund manager was arrested in Florida in 2009 and pleaded guilty on February 24, 2010 to charges that he had run a Ponzi scheme that had cost investors almost $162 million in losses, mostly from the collapse of the real-estate market.
Antoinette Hodgson, from Montclair, NJ, recently surrendered to the FBI on charges of running a $45 million Ponzi Scheme. Hundreds of thousands went towards a rampant gambling addiction and one Dunkin Donuts organization. She is expected to appear in court at the end of June 2010.
Gregg T. Rennie, the former host of "Your Money" on Boston's WBIX-AM (1060), and a former Quincy, MA financial advisor, received a seven-year sentencing for his role in perpetrating a Ponzi scheme worth at least $3 million dollars. Rennie promised investors high returns from federal housing certificates and annuities. His long list of victims included a congregation in Providence that had raised funds to build a new church and listeners of his show.
Gedrey Thompson, together with his firm GTF Enterprises, allegedly stole over $800,000 by targeting Caribbean and African-American communities in Brooklyn. Thompson is purported to have used his Caribbean background to build a bond of trust with investors while stealing from them at the same time.
The story of Marcia Sladich is a particularly frightening case and is testament to how deep the cheating culture has penetrated our society. She is everything a stereotypical fraudster is not - a woman, a ticket collector at Giants stadium, and highly unprofessional and sloppy in her planning. Yet, from 2004 to 2007, Sladich successfully swindled friends, fellow churchgoers, and innocent investors of over $15 million with a simple and, in many aspects, a poorly run Ponzi scheme.
Wayne D. Puff was sentenced to 18 years for running a massive Ponzi scheme costing 1,200 clients almost $55 million in stolen funds. Piggy-backing of the subprime mortgage era, Puff inflated real-estate values and flipped them amongst investors at artificially high prices.
Prominent New Mexico realtor Douglas F. Vaughn was charged by S.E.C. on March 24, 2010 for allegedly running an $80 million dollar Ponzi scheme. Vaughn, through his two businesses, the Vaughn Company Realtors and Vaughn Capital LLC, used his prominence in the New Mexico business community to convince approximately 600 investors to place funds in various real estate-related investments.
Jeffrey L. Mowen promised returns of 33 percent, and used the collected funds to purchase a fleet of 200 vintage and rare vehicles.
Prominent Miami-based business Gaston E. Cantens and his wife, Teresita Cantens, founders and co-owners of real estate development company Royal West Properties, Inc., were charged by the S.E.C. for allegedly running a massive Ponzi scheme. The S.E.C. claims that the couple began to fraud investors after their real estate business failed when property owners began to default on their mortgages. Maybe their clients should have done a little more homework - the Cantens were never registered with the S.E.C., which means they were never legally allowed to make securities offerings to investors.
Bus drivers beware: Thomas Mitchell and his firm Mitchell, Porter & Williams, Inc were charged by the S.E.C. on March 4, 2010 for allegedly running a $14.7 miilion Ponzi scheme that also targeted retired LA-area bus drivers. Mitchell convinced the retirees to take their retirement as a lump-sum, instead of monthly payments, and promised to invest the funds wisely in stocks, bonds, or real estate. The S.E.C alleges that Mitchell, instead of making the investments, merely payed out old interest payments with the funds coming in from new investors.
Cathy M. Gieseker received 108 months in prison for defrauding 180 farmers out of a least $27 million. She marketed grain on behalf of the farmers, quoting above-marketed prices but selling almost all of it at "spot price" (local cash price for immediate settlement and delivery) to Archer Daniels Midland Company. She used the profits to pay back to the above-market prices to her earliest costumers. Unsurprisingly, the scheme self-collapsed after scores of farmers were left with no grain and no payments.
2009 Ponzi Schemes
When investor demands for strong returns becomes unbearable, Wall Street executives often feel pressured into taking greater risk or, if investments fail to pain out, simply take to stealing and creating false numbers. Hernán E. Arbizu, a private banker at UBS and JP Morgan Chase, claims that he did not profit off of the missing funds, but rather moved them amongst clients in order to keep them content and reel in new investors.
Philip Barry's case is classic - $40 million from 800 investors with promises of 12 percent returns. He promised his clients that they could withdraw their money at any time, yet when too many did just that in 2007, the operation collapsed upon itself as Barry was forced to offer excuses or issue bad checks. Some of Barry's first investors came from the same tight-knit Irish Catholic community.
The S.E.C. charged Luis Felipe Perez on June 2, 2010 for conducting a $40 million Ponzi scheme by promising investors 18 to 120 percent on their annual returns. Perez targeted members of the Miami hispanic community in order to support a ring of jewelry stores and pawn shops.
Nevin K. Shapiro, Chief Executive Officer and sole shareholder of Capital Investments USA, a Miami Beach grocery-diverter, was recently charged with running a $900 million Ponzi scheme. Grocery diverters purchase low-priced groceries in one area and re-sell them for a higher price in another area. When Shapiro's business hit the red in 2004, he lied to investors and began to recycle funds from his newest clients to his oldest.
Yale and Harvard graduate Marc S. Dreier stole more than $46 million from his clients to finance a lavish lifestyle that included an apartment on the Upper East Side, a large art collection, and an $18 million yacht. When the prosecution asked for a life sentence, Mr. Dreier's lawyer responded that 10 to 12 years were necessary because, even though it was a fraud of massive proportions, it was not "the worst" of human behavior. When pressed about why he turned to the Ponzi scheme, Mr. Dreier claimed that he felt a sense of underachievement at the fact that his colleagues were making more than his measly $400,000 a year.
Vance Moore II and Walter Netschi lied to investors about returns they could earn through withdrawal fees from a system of 4,000 ATM tellers around the country. Only 400 ATMs existed, and the man successfully built an $80 million scheme by creating phantom revenues from new investors.
Sharmon Wade promised investors returns of 50 to 100 percent in just two months!
Joseph Forte reported his portfolio at more than $150 million when it contained less than $147,000. Most of Forte's victims were his close friends and acquaintances.
Nicholas Cosmo, founder of Agape World Inc., is reported to have stolen almost $400 million from clients through a massive Ponzi scheme, yet is only being charged with one account of mail fraud which carries a maximum fine of $1 million. After having been released on bail then brought back to jail (the judge claimed he could not be trusted), Cosmo's trail is still pending.
2008 Ponzi Schemes
Close-knit ethnic communities often make the most susceptible targets. George Theodule specifically targeted Haitian-Americans, telling his unsuspecting victims that the profits from their investments would benefit Haitian-American communities across the United States. Through promises like doubling investments in 90 days Theodule was able to steal over $23 million from his fellow Haitians.
Not all schemes involve millions and high-stakes financial players; all a Ponzi scheme needs is a group of trusting investors and one cheating swindler. Bryant Rodriguez infiltrated a church in Washington Heights and convinced his fellow churchgoers to invest in his company by claiming that he wanted to give his fellow believers the first pick at the profits. When he was finally arrested, Mr. Rodriguez had successfully stolen $600,000, though prosecutors fear he may have penetrated more churches.