Category Archives: Ponzi Schemes

Fleecing the Flock: The Big Business of Swindling People Who Trust You

Posted on by Mark Pugsley

This a repost of a great article on affinity fraud that appeared in this week’s Economist Magazine.

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Fleecing the flock

The big business of swindling people who trust you

Jan 28th 2012 | SALT LAKE CITY | from the print edition

WITH a nudge from their pastor, the 25,000 members of the New Birth Missionary Baptist Church near Atlanta opened their hearts, and their wallets, to Ephren Taylor. And why not, given his glittering credentials? Mr Taylor billed himself as the youngest black chief executive of a publicly traded company in American history. He had appeared on NPR and CNN. He had given a talk on socially conscious investing at the Democratic National Convention. Snoop Dogg, a rapper, had tapped him to manage a charitable endowment.

So when Mr Taylor’s “Wealth Tour Live” seminars came to town, faithful ears opened wide. Eddie Long, the mega-church’s leader, introduced Mr Taylor at one event with the words: “[God] wants you to be a mover and shaker…to finance you well to do His will.” Mr Taylor offered “low-risk investment with high performances”, chosen with guidance from God. Continue reading →

How Investors Used Social Media to Sniff Out a Scam — Before it Started

Posted on by Mark Pugsley

On January 4, 2012 the SEC charged Anthony Fields, Anthony Fields & Associates and Platinum Securities Brokers, with selling $500 billion of fraudulent securities through LinkedIn and other social media websites.  For example, according to the SEC he used LinkedIn discussions to promote fictitious “bank guarantees” and “medium-term notes.” The postings resulted in interest from multiple purported potential buyers.

One of the interesting things about this case is that nobody actually purchased the stock and nobody lost any money.  The SEC shut this one down before it even got started, which is unusually proactive in my experience. Continue reading →

Ponzi Scheme and Investment Fraud Red Flags

Posted on by Mark Pugsley

This is repost of an article on her Fraud Files Blog.  This was written by Tracy Coenen, CPA, CFF who investigates cases of financial fraud and Ponzi Schemes.

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Ponzi Scheme and Investment Fraud Red Flags

Posted on January 20th, 2012

Charles Ponzi

How do you know if you’re considering investing in a Ponzi scheme? The promoters will never come out and tell you they are running a pyramid scheme, so the investors have to be smart enough to recognize them on their own. The good news is it is easy to spot a Ponzi scheme.

Now I don’t mean that it’s easy to prove in a court of law that something is a Ponzi scheme. In a civil or criminal case, there are certain standards of proof that need to be met. But you’re not a court. You’re simply an investor. Whether you have $10,000 to invest or $10 million to invest, your money is probably pretty important to you. Continue reading →

Robert Holloway is Arrested and Charged — Just Another Utah Fraud Scheme

Posted on by Mark Pugsley

Last week the Deseret News reported that Robert Holloway was arrested in San Diego for his alleged role in a $25 million investment fraud scheme.  He was charged with four counts of wire fraud and one count of making and subscribing a false income tax return, according to an indictment unsealed Thursday in the District of Utah. This is not a new case, US Ventures was sued by the CFTC and was placed into receivership in January of this year.  The receiver appointed by the Federal Court is Wayne Klein, and his receivership website can be found here.  The only new development here was Mr. Holloway’s arrest, and its unclear to me why it took so long.

According to the Deseret News article, Holloway falsely claimed that US Ventures used proprietary trading software that was consistently profitable; that it had more than $32 million under management and generated returns of 0.8 percent per trading day; and that it would retain a 30 percent share of investors’ profits as a management fee. The indictment states that Holloway raised more than $25 million from investors and generated and distributed reports to investors containing false daily returns on their investments.   The Salt Lake Tribune also wrote a story on this arrest.

Holloway is scheduled to appear in court in Salt Lake City on December 16.

Seniors: Beware of Affinity Fraud

Posted on by Mark Pugsley

This is a repost of an excellent article by Christine Benz that was published in Morningstar entitled Seniors: Beware of Affinity Fraud:

In hindsight, a scam like the one Bernie Madoff perpetrated on his victims looks like it should’ve been a cinch to detect. Madoff’s clients were promised steady returns of 10%-12% per year; that should’ve looked impossible even to novice investors, particularly given the extreme market volatility that marked the first decade of the 21st century. Financial analyst and Madoff whistle-blower Harry Markopolos said he knew that Madoff had faked his clients’ returns within five minutes of seeing them.

Much ink has been spilled over how Madoff managed such a swindle–a court-appointed trustee estimated client losses in the $18 billion range–but one of his methods was clear: Using a technique called affinity fraud, Madoff presented himself as a trusted member of communities at the same time he was trying to separate them from their money. Various Jewish organizations and institutions, as well as Jewish individuals planning for their own financial goals, were hit particularly hard: In addition to losing millions, several charitable entities were forced to lay off staff or close altogether. Continue reading →

New Criminal Charges Filed Against Rick Koerber

Posted on by Mark Pugsley

The U.S. Attorneys has office filed a new indictment against Rick Koerber, who is alleged to have run a Ponzi scheme that took in more than $100 million from Utah investors.  Last week a federal grand jury returned a new 20-count indictment alleging that Koerber engaged in widespread investment and tax fraud.

According to an article in the Salt Lake Tribune last week, this new indictment follows a federal judge’s decision in July to throw out a key piece of evidence in Koerber’s case.  ”Assistant U.S. Attorney Stewart Walz previously said the ruling by U.S. District Judge Clark Waddoups affected a “significant” part of an existing 22-count indictment alleging fraud, money laundering and tax evasion by Koerber in his operation of FranklinSquires Cos. and related real-estate investment businesses.”  This ruling meant that prosecutors had to file a new indictment containing small changes to a section of the indictment describing the alleged scheme and artifice to defraud. Continue reading →

Great Advice for Seniors on How to Avoid Affinity Fraud

Posted on by Mark Pugsley
This is a repost of a terrific article that appeared in Morningstar this week:
Seniors: Beware of Affinity Fraud By Christine Benz 
In hindsight, a scam like the one Bernie Madoff perpetrated on his victims looks like it should’ve been a cinch to detect. Madoff’s clients were promised steady returns of 10%-12% per year; that should’ve looked impossible even to novice investors, particularly given the extreme market volatility that marked the first decade of the 21st century. Financial analyst and Madoff whistle-blower Harry Markopolos said he knew that Madoff had faked his clients’ returns within five minutes of seeing them. Continue reading →

UPDATE: Would you Invest in the Candwich?

Posted on by Mark Pugsley

Update #3: Today Judge Clark Waddoups rejected the plea bargain that Wright had negotiated with prosecutors concluding that the deal appeared too light given the magnitude of how Wright had “intentionally deceived and misled people.”  The defendant will now be forced to negotiate a new plea bargain with the U.S. Attorney’s office — or go to trial.  The judge’s decision appears to be based primarily upon the letters he received from angry investors.

UPDATE #2: Last week Travis Wright pleaded guilty to one count of fraud, admitting he operated a massive Ponzi scheme that owed investors at least $44 million when it went bust in 2009.  He will be sentenced after the judge hears testimony from the victims.

UPDATE:  My friend Tom Harvey reported yesterday in the Salt Lake Tribune that Travis Wright, who ran Waterford Funding, entered a plea of not guilty before U.S. Magistrate Paul Warner to the charge of mail fraud.  The article can be found here.

On July 7, 2010 the New York Times ran a story about the SEC’s recent lawsuit against Travis Wright and Waterford Funding.  The SEC’s press release about the case can be found here.   Among other things, the SEC’s lawsuit alleges that Wright lied to his investors saying he was investing their money in hard money loans secured by real estate, when really he was funneling most of their money to the inventor of the “Candwich” (who also planned to offer Pepperoni Pizza Pockets and French toast in a can).  Yum.

This is the part that is really baffling to me about this case.  Did he really think the Candwich would be more profitable than real estate?  Given the current state of the real estate market it may be the case — but not between 2001 and 2007 when the fund was really going strong.  The SEC also alleges that he used $15 million of investor funds for personal use, including the purchase of a $5 million home on Walker Lane from former Jazz legend Jeff Hornacek, which he completely renovated and imported cobblestones from France for the driveway.   But it was probably pretty trashy after Hornacek moved out.

Continue reading →

Yet Another Local Ponzi Scheme Indictment – Newport Financial

Posted on by Mark Pugsley

Michael Smith and his son Quintin Smith have each been charged with six counts of securities fraud and one count of pattern of unlawful activity, all second-degree felonies, in connection with a furniture loan company they owned called Newport Financial.  According to a Salt Lake Tribune article published today they have been accused of “bilking investors of hundreds of thousands of dollars — one while serving as counselor to an LDS stake presidency — in a fraudulent furniture-financing scheme that targeted, among others, a prominent University of Utah football coach.”

The indictment alleges that the Smiths promised a return of 18 percent to gain investments of at least $1.8 million from 18 victims.  Their biggest investor was Norm Chow, the offensive coordinator for the University of Utah’s football team, who invested $500,000. Continue reading →

VesCorp – The Largest Ponzi Case in Utah History – Nears Conclusion

Posted on by Mark Pugsley

As reported on the website Law360, A Utah federal judge on Wednesday approved a $125.6 million final judgment that settled the U.S. Securities and Exchange Commission’s case against Vescor Capital Corp.  This judgment apparently relates to the company, not Val Southwick who pled guilty to nine counts of securities fraud in 2008 and was sentenced to serve nine consecutive 1 to 15-year prison terms.

But if you are an investor hoping to get you money back, don’t hold your breath.   According to the article Vescor’s receiver, Robert G. Wing of Prince Yeates & Geldzahler, has stated publicly that the money may never materialize.  “They did not get $125 million, they got a judgment,” he said.  Mr. Wings expects to be able to recover only a small fraction of the money Vescor allegedly took from investors.  In his most recent report to the court, Wing said he had recovered just over $5 million, and the legal and accounting fees continue to mount, the Receiver’s lawsuits to recover money from third parties will continue.

Bottom line:  nobody wins in a Ponzi Scheme — except maybe the lawyers.