Most Recent
AdSurfDaily Agape agent American Integrity Aronson asset sales Attorney av bar reg baker bank bank of america Bankruptcy baumann bermudez black diamond blackwell bridge loan bull cattle CD celebrity cftc charity china China Voice church cityfund claims claims process clawback commission commodities commodity pool computer program congress Crown Forex currency death sentence denver diamond bar disgorgement Distribution Dodd-Frank donnan Dreier dunhill e-bullion elderly E-M Management SEC england Fairfield family FBI FDIC Fees female ponzi scheme financial advisor fine FINRA football forex fraud fufta fugitive Full Tilt gift card guilty plea GunnAllen hawaii Heckscher HSBC india invers forex janvey John Morgan JP Morgan kansas ken bell kenzie las vegas lawsuit lawyer libya Lifland machado Madoff Marian Morgan metro dream homes mets milberg millers a game Morgan European Holdings mortgage multiple schemes NCAA Net Winner new jersey notes objection Oxford Patrick Kiley paul burks PermaPave Pettengill Petters Picard poker Ponzi ponzi scheme ponzi scheme database ponzi scheme list Prime Rate profitable sunrise prosun pta puerto rico Rakoff real estate receiver receivership regulation relief defendants religion remission repeat offender restitution Rothstein RRA sec sentencing simmons sipa sipc snelling standing stanford stettin subpoena td bank telexfree treasury bonds treasury strip Tremont Trevor Cook UBS UFTA uga utah venture advisors Wachovia wilpon wire fraud woman zeek zeek rewards zeekler zeekrewards
Recent SEC Releases

Convicted Ponzi Schemer Tried Buying Prayers, Casting Spells On SEC Attorneys 

The federal trial of a Maryland woman accused of a $20 million trial not only ended this week with a jury taking five hours to convict her of all charges but came after revelations that the woman had spent hundreds of thousands of dollars to buy prayers and allegedly cast "hoodoo spells" on government attorneys investigating the scheme.  Dawn Bennett, 56, was convicted of seventeen charges including conspiracy, securities fraud, wire fraud, and bank fraud.  She will face potentially dozens of years in federal prison at sentencing.

Bennett, a former financial advisor who once hosted a radio show called "Financial Myth Busting with Dawn Bennett," was the owner of DJB Holdings LLC ("DJB").  DJB was a retail sports apparel business that had never turned a profit since its inception in 2010 and by December 2014 had incurred millions of dollars in expenses and outstanding liabilities.  As her financial advisory income significantly dropped, Bennett began soliciting former and current clients to invest in DJB in exchange for a 36-month convertible note promising a 15% interest rate.  Bennett later switched to selling short-term promissory notes following regulatory scrutiny, and ultimately raised over $20 million from dozens of affluent investors - many who were customers of her broker dealer. 

However, the representations regarding DJB's financial status and viability were significantly overstated.  According to an August 2017 action filed against Bennett by the SEC, the year end 2015 financial information provided to investors contained the folllwing misrepresentations:

  • Overstated sales by over $3.8 million, or 424%;
  • Overstated gross profit by nearly $2.5 million, or 3,382%;
  • Understated expenses by over $3.6 million, or 73%; and 
  • Overstated net income by over $6.1 million, or 124%, and again inaccurately reflected a profit of $1.1 million rather than the actual net loss of nearly $5 million.

Investors were also not told that Bennett used factoring arrangements in which she sold future company revenues to non-bank lenders who had direct and priority access to DJB bank accounts and made significant withdrawals to repay their advances.  According to the SEC, Bennett used over $10 million of the $20 million raised from investors for improper and undisclosed purposes including over $3 million in payments to earlier investors, $2.1 million for unrelated legal expenses, and nearly $1.5 million to the Dallas Cowboys for back rent on a luxury suite Bennett personally leased.  

After learning she was under investigation, Bennett used investor funds to finance a highly untraditional response.  According to testimony at her recent trial, Bennett paid a man in Washington over $700,000 to arrange for Hindu priests to perform religious ceremonies aimed at easing her troubles - including a "yagya" ritual costing over $7,000 in which five priests purportedly prayed for her for 29 consecutive days.  The trial featured an email Bennett wrote to the Washington man in which she indicated:

I am in a very very tough fight going against my enemies and I need all the help I can get.

 That purveyor of Hindu religious ceremonies was an unlikely witness at Bennett's trial, defending his practices and testifying that "we don't necessarily pray with a guaranteed outcome."

FBI agents executing a search warrant at Bennett's Maryland home last year also made an unlikely discovery when they found instructions for placing people under a "Beef Tongue Shut Up Hoodoo Spell" along with personal information of several SEC attorneys working on Bennett's case.  Those agents also found lids of Mason jars in Bennett's freezer that contained the initials of those SEC attorneys, as evidenced by a picture taken from the affidavit provided by one of the FBI agents.  That affidavit also stated that handwritten notes on "Dawn J. Bennett-styled stationary" contained directions "such as slitting open animal tongue, the instructions called on the spell-caster to state the name of the individual on whom to cast the spell followed by "I cross and cover you[,] come under my command[.] I command you to hold your tongue."

Bennett will be sentenced at a future date after the U.S. Probation Office prepares a Presentence Investigation Report containing a recommended (but not binding) sentencing range.


Three Men Charged With $345 Million Ponzi Scheme

Authorities filed civil and criminal fraud charges against three men on allegations that they masterminded "one of the largest Ponzi schemes ever charged in Maryland" that raised at least $345 million from hundreds of investors nationwide.  Kevin B. Merrill, 53, Jay B. Ledford, 54,  and Cameron Jezierski, 27, were the subject of an emergency enforcement action filed by the Securities and Exchange Commission that included a request for an asset freeze and appointment of a receiver.  The trio also face fourteen criminal charges, including mail fraud, wire fraud, money laundering, conspiracy, and identity theft charges.  If convicted of all charges, each could face dozens of years in prison.

According to authorities, the trio operated a number of entities including Defendants Global Credit Recovery, LLC; Delmarva Capital, LLC; Rhino Capital Holdings, LLC; Rhino Capital Group, LLC; DeVille Asset Management LTD; and Riverwalk Financial Corporation (the "GCR Entities").  The GCR Entities solicited investors through promises of steady returns from the deeply-discounted purchase of consumer debt portfolios.  Consumer debt, including automobile, credit card, and student loan debt, is often bundled into portfolios and sold in bulk to investors, which the GCR Entities told investors they were purchasing for their benefit.  While the scheme involved the actual purchase of some debt portfolios, authorities allege that the vast majority of purported debt purchases were fraudulent and that the actual purchases of debt portfolios were used as part of the scheme to solicit more investors. 

Using a dizzying array of interwoven entities and bank accounts, the trio solicited investors across the nation including both individual and institutional investors. Potential investors were often provided with documentation describing the investment structure and also viewed presentations offering projections about the anticipated investment returns.  These promises included offering some investors 100% of collections of up to 25% of their principal investment annually - meaning those investors were offered annual returns of up to 25% along with the option for even higher returns.  Potential investors also received "due diligence" documents prepared by Ledford or Jezierski providing a supposed analysis of the portfolio(s) they were purchasing as well as the anticipated purchase price. In total, the GCR Entities are believed to have raised over $345 million from at least 230 investors. 

But authorities allege that the GCR Entities had not been in the business of buying consumer debt since 2014, and that the purported investment opportunity was a giant Ponzi scheme that used new investor funds to pay returns to existing investors.  Approximately $197 million was paid out as purported remittances, collections, or profits, meaning that investors are facing total losses of roughly $150 million.  Unfortunately, authorities believe that a significant portion of those losses were diverted to sustain the trio's extravagant lifestyles.  The indictment alleged that investor funds were used to buy over 20 high-end automobiles, at least nine houses, and over $8 million in jewelry, as well as at least $25 million in casino gambling. 

The sheer amount of real estate, automobiles, and jewelry sought to be forfeited from Defendant Kevin Merrill alone is staggering.  Among other things, the indictment seeks to forfeit the following assets from him that were allegedly purchased with proceeds of the fraud:

  • 6 properties, including a 7,700 square foot mansion in Naples, Florida that Merrill purchased earlier this year for $10.5 million;
  • A 2018 35' Formula Boat;
  • An interest in a Gulfstream Aircraft G200;
  • A 9+ carat diamond ring; and
  • 7 Richard Mille watches.

The list of automobiles is truly a who's who of luxury automobiles.  The list includes 25 (yes, 25) high-end automobiles including:

  • 2014 Lamborghini Aventador Roadster
  • 2016 Ferrari 488
  • 2017 Audi R8 5.2 Plus
  • 2017 Lamborghini Huracán convertible
  • 2018 Rolls-Royce Dawn
  • 2017 Rolls-Royce Wraith
  • 2018 McLaren 720S
  • 2008 Bugatti Veyron
  • 2013 Ferrari California
  • 2014 BMW M6 Gran Coupe
  • 2014 Ferrari F12 Berlinetta
  • 2014 Pagani Huayra
  • 2017 Lamborghini Aventador
  • 2018 Ferrari 488 Spider
  • 2018 Lamborghini Huracán 

The Court overseeing the SEC's enforcement action granted the SEC's request to appoint Gregory Milligan as Receiver over the GCR Entities.  

A link to the SEC's Complaint is here.

A link to the Indictment is here.


Receiver Awarded $2.4 Million Bonus For 110% Recovery

There has never been a case like this one in all the years and in all the cases over which this Court has presided...In what appears to the Court to be the first of its kind, the investors have received not only all the monies they invested in the Ponzi scheme but have received substantial monies above and beyond their initial investments. All due largely to the extraordinary achievements of the Receiver that many of them now seek to vilify.

-U.S. District Judge Christopher A. Boyko
Receiver Mark DottoreIn a fitting end to an SEC enforcement action filed back in 2006, a federal judge agreed that a court-appointed receiver was entitled to a $2.4 million bonus for his "singularly remarkable and unheard of accomplishment" in recovering enough funds to pay victims over 110% of their losses - a feat that is likely unparalleled and especially extraordinary considering the average Ponzi scheme recovery has been estimated at pennies on the dollar.  Over the objection of those same investors, United States District Judge Christopher Boyko entered the Order approving the bonus in July 2018, remarking that "no party was able to find another Ponzi scheme resulting in 100% recovery of losses let alone an additional 10% recovery for investors on top to date, with more to come. Therefore, the recovery in this matter by the Receiver for the investors can truly be said to be without precedent." 

The Scheme

Dadante, a former casino host who touted his alleged ties to Donald Trump, was charged by the Securities and Exchange Commission in April 2006 on allegations that he was running a $50 million Ponzi scheme that touted outsized returns through supposedly low-risk trading strategies with his investment company. Investors were told that Dadante had a connection with a Goldman Sachs executive who provided him with exclusive access to initial public offerings - supposedly resulting in guaranteed annual returns ranging from 10% to 20%. In total, Dadante raised approximately $50 million from over 100 investors.  The Court subsequently appointed Mark Dottore as Receiver.

However, Dadante's exclusive Goldman Sachs connection was a complete fabrication. Instead, the promised above-average returns were possibly only by paying existing investors through incoming investor funds - the classic hallmark of a Ponzi scheme. After criminal charges were filed in 2007, Dadante was sentenced to a 13-year prison term.

The Receivership and Recovery

While Dadante took in approximately $50 million from investors, the fact that his scheme lasted for several years while paying out 10% to 20% interest resulted in a corresponding decrease in the net losses suffered by investors. In fact, after adjusting for interest payments to investors, Dottore estimated that the total losses due to Dadante's fraud were $28 million.

Dottore, who is not a lawyer, embarked on a campaign spanning nearly a decade to recover funds for Dadante's victims. This included assisting investors in filing tax refunds for taxes paid on illusory profits as well as recovering more than $8 million through a settlement with Dadante.  The cornerstone of this campaign, however, was litigation filed against Ferris Baker Watts ("Ferris"), the former brokerage house where Dadante was a prominent client. There, Dadante enlisted the services of a broker to purchase and illegally manipulate the shares of Innotrac Corp., a lightly traded technology company. Even though Dadante's purchases raised eyebrows among Ferris employees, the brokerage ultimately extended him nearly $19 million to finance the trading. Dadante eventually accumulated several million shares of Innotrac - making him a 34% owner of the company.

After the scheme was exposed, Dottore seized the 4.3 million Innotrac shares as part of the receivership estate.  However, Dadante had also accrued a significant margin balance to purchase those shares which remained after the receivership and led to threats to redeem the debt and thus trigger a sale of the Innotrac shares.  After the Receiver was able to ward off a margin call, he sued Ferris based on its relationship with Dadante and ultimately reached a settlement in which Ferris agreed to pay $7.2 million in cash and extinguish Dadante's multi-million dollar margin debt and thus retain the Innotrac shares.  But the jubilation of that settlement would be short-lived.

By the time of that settlement, Dottore had already faced the ire of victims who argued that the Ferris lawsuit was ill-advised and simply an attempt to inflate already-inflated bills.  As Judge Boyko recounted in his Order, investors moved to terminate the receivership in 2007 citing outsized expenses and dismal recoveries.  After a court-ordered accounting, investors moved to liquidate the receivership based on, among other things, the argument that the Innotrac stock "lacked any real value."  This included, among other things, the following motions filed in 2007:

  • Regalbuto Plaintiffs’ Motion to Show Cause Why Receiver Mark Dottore Should Not Be Held in Contempt (Sep. 11, 2007);
  • Regalbuto Plaintiffs’ Motion to Remove Receiver for Cause and Show Cause Why Receiver Should Not Be Held In Contempt (Aug. 1, 2007);
  • Regalbuto Plaintiffs’ Motion for Further Accounting (July 11, 2007); 
  • Regalbuto Plaintiffs’ Motion for Accounting, (May 3, 2007); and
  • Motion to Terminate Receivership, (Jan. 26, 2007).

As Judge Boyko observed, a 2007 liquidation "would have resulted in a loss to all investors of most of their initial investments."

This crusade continued outside the courtroom and in local newspapers, with one 2008 news article featuring an investor comment that "the judge and Dottore have it all screwed up." Another investor apparently created a website with "letters and harsh opinions on..Dottore."  

One main source of investors' ire following the Ferris settlement? That Dottore refused to immediately liquidate the Innotrac holdings at the then-prevailing prices that would have equaled a sizeable recovery. Around 2009, the price of those shares ranged from $2 to $4 per share - meaning that the Innotrac position fluctuated from $8 million to $17 million.  Instead, Dottore believed that Innotrac's valuation had been unfairly depressed as a result of the Ferris litigation and its Dadante ties.  The settlement also came at the onset of the economic downturn beginning in 2008 which also contributed to its lower valuation.  Dottore resisted attempts to liquidate the Innotrac shares until 2013 when he sold for $8.20 a share for total proceeds of $35.4 million.  

A "Success Fee?"

Dottore's lawyers disclosed at a 2014 hearing that he had recovered $47 million in cash in addition to securing forgiveness of $12 million in Dadante's debts, which would allow investors to recover their cumulative allowed losses of approximately $28 million as well as at least an additional 10%.  After Dottore's lawyers were directed by Judge Boyko to research whether a "success fee" was warranted , the matter was taken under advisement. 

In light of the "unprecedented recovery," the Court asked the Magistrate Judge for a Report and Recommendation as to whether the Receiver was entitled to any additional compensation.  In that R&R, the Magistrate Judge weighed multiple factors including the "complexity of problems faced, the benefits to the receivership estate, the quality of work performed, and the time records presented."  Finding that each of the factors weighed in favor of additional compensation, the Magistrate Judge used a 30% increase in the Receiver's "low hourly rate" to arrive at an additional compensation award of $1.2 million.  

Some investors objected to the Magistriate Judge's R&R, claiming that the Receiver was not entitled to any additional compensation and that any compensation should be paid to those investors.  Judge Boyko concluded that those objections were without merit, finding both that the Receiver's extraordinary result as well as relevant caselaw supported an award of additional compensation.  Notably, the Court discerned that a substantial portion of the Innotrac stock had been purchased with margin debt - not investor funds - and thus could not be classified as profits realized from returns on investor funds.  The Court further noted that:

This receivership faced serious obstacles from the beginning which the Receiver moved to counter, including the attempts by the various brokerage firms to call in the margin debt and force the sale of Innotrac stock while its value was low. Many of the investors brought suit against the Receiver and other investors, while some investors demanded he sell the stock early in the case when its value was minimal. Furthermore, and perhaps more damaging, were the efforts of some investors advocating that the Court find the IPOF Fund was not a limited partnership and to end the Receivership. This potentially would have exposed individual investors to liability for margin debts owed to the various brokerage firms. The Receivers efforts directly thwarted these ill-conceived efforts of some investors. It is not unusual for investors to disagree with a Receiver's strategy in receiverships, but it is wholly a different matter for the Receiver to save many investors from themselves.

Furthermore, there are accounts of contentious hearings, physical confrontations and conduct aimed at thwarting the Receiver's efforts to maximize the value of the Receivership by some of the same investors on whose behalf the Receiver was working.

The Court ultimately adopted the Magistrate Judge's R&R in part, finding that the Receiver was entitled to additional compensation but determining that the amount should be based on the upper end of comparable fees according to a report previously commissioned by the Court.  In recalculating the Receiver's fees for the entire receivership based on that increased rate, the Court calculated an award of $2.424 million to the Receiver.  

Under Appeal

For now, Dottore's bonus will have to wait as multiple groups of investors appealed the Order.  Whether or not the additional award is upheld, it will not change the extraordinary outcome that Dottore and his team were able to achieve.  Ponzitracker has already recognized that the recovery is likely the highest in known Ponzi cases, even among esteemed company such as the Madoff and Rothstein cases.

A copy of Judge Boyko's Order is below:

Dottore Order by jmaglich1 on Scribd



SEC Busts $102 Million Ponzi Scheme Targeting Financial Advisor Books Of Business

At the same time he was misappropriating investor funds, Santillo threw himself a party at a nightclub in Las Vegas for which he commissioned a song about himself to be played. The lyrics to that song refer to (Perry) Santillo as "King Perry" and describe his typical attire: "ten-thousand-dollar suit everywhere he rides." The song also depicts his lifestyle as follows: "pop the champagne in L.A., New York to Florida; buy another bottle just to spray it all over ya."

- SEC Complaint

The Securities and Exchange Commission filed an emergency enforcement action in a New York federal court, alleging that five men and their associated companies raised more than $100 million from hundreds of victims with promises of guaranteed returns.  Perry Santillo, Christopher Parris, Paul LaRocco, John Piccarretto, and Thomas Brenner, along with First Nationle Solution LLC ("First Nationle"), United RL Capital Services ("United"), and Percipience Global Corp. ("Percipience"), were charged with violating the antifraud provisions of the federal securities laws.  The Manhattan district court also granted the SEC's request for an asset freeze and temporary restraining order against the defendants, based partly on allegations of Defendants' significant misappropriation of funds for their personal use.

According to the Commission's Complaint, Santillo and Parris sought out retiring investment professionals nationwide with the goal of purchasing those professionals' "books of business" consisting of the clients they had serviced and advised during their career.  The scheme's victims appear to be concentrated in several states, with over $25 million raised from 147 Florida investors, $21 million raised from at least 80 California investors, and over $8 million raised from nearly 75 Ohio investors.  After purchasing or taking over those books of business, the Defendants or other sales people would then contact those clients and seek to persuade them to withdraw their funds from traditional investments and invest in companies controlled by various Defendants including First Nationle, Percipience, and United RL. 

First Nationle was touted to investors as a holding company for several companies with insurance and risk products managing over $145 million in assets that offered investors three-year promissory notes with annual interest payments ranging from 3.3% - 6% as well as "bonuses" rnaging from 10% - 19% that were credited after the investment was made.  Percipience claimed to be in the business of funding loans for the purchase of single-family homes, offering preferred stock to potential investors carrying one- or three-year "lock periods" and annual returns ranging from 7% - 8% also with bonuses upon investment.  Finally, United RL purported to offer financing to physician and medical practices for the purposes of owning toxicology laboratories and offered promissory notes to potential investors with maturity dates of 1-3 years and offering annual returns of 7% along with 7% "bonus" payments.  In total, the Defendants raised more than $102 million from at least 637 investors.  

The Commission alleges that each of those offerings was a sham, noting that it was unable to find any evidence showing more than minimal business functions for the companies.  Instead, the Commission claims that each company operated as a Ponzi scheme in which new investor funds were used to pay returns to existing investors.  Of the $102 million raised from investors, more than $38.5 million was allegedly paid out as Ponzi payments to existing investors while at least $20 million was misappropriated by the Defendants for unrelated personal expenditures including sustaining luxury lifestyles.  For example, the Commission alleges that Santillo used stolen investor funds to pay for housing in multiple states, lease cars, and spending at a Las Vegas resort and casino.  Santillo is accused of using investor funds to have a song written about him, including lyrics referring to him as "King Perry" who wore "ten-thousand-dollar suites everywhere he rides" and would "pop the champagne in L.A., New York to Florida; buy another bottle just to spray it all over ya."

The SEC's Complaint also underscores the critical role that due diligence must play in investment decisions, as there appear to be a number of red flags that were easily discoverable that might have caused a prudent investor to at a minimum ask more questions.  For example. each of the five Defendants was previously registered with the Financial Industry Regulatory Authority ("FINRA"), which oversees registration and regulation of investment professionals.  A review of each of those Defendants' BrokerCheck, which is a publicly-available resource offered by FINRA, shows that each had been suspended or barred from associating with FINRA members.  For example, Defendant Piccarreto was registered with FINRA from 2014-2015 but was suspended for 23 months in July 2017 for participating in the unregistered offering of securities and for making misleading statements to FINRA.  

A copy of the SEC's Complaint is here.


Feds Allege Mississippi Man Ran $85 Million Timber Ponzi Scheme

"Greed is not good. Greed drove this individual to lie, cheat and steal from fellow Mississippians, and led him to prey upon others outside our state, simply to personally benefit himself."

- U.S. Attorney D. Michael Hurst, Jr. 

In what may be the largest Ponzi scheme in Mississippi history, civil and criminal authorities charged a 58-year old man with raising at least $85 million from investors who thought they were profiting from the harvesting of timber.  Arthur Lamar Adams, 58, made his first appearance today after being arrested earlier in the day on two counts of wire fraud and one count of bank fraud.  Each of the wire fraud counts carries a maximum twenty-year prison sentence while the bank fraud charge carries a maximum thirty-year term.  The type of charging instrument used, a criminal information, suggests that Adams and prosecutors have reached a plea agreement.  According to the New York Times, Adams' lawyer has confirmed that his client is cooperating with prosecutors.  

Adams founded Madison Timber Properties, LLC ("Madison"), which held itself out as a timber harvesting company.  The company began soliciting potential investors in 2004, offering annual returns ranging from 12% to 15% through the harvest of timber from plots of lands owned by third parties.  In many cases, investors were told that they had sole rights to timber harvested from specific plots of lands.  Investments were typically memorialized by a one-year promissory note that could be rolled over, a timber deed and cutting agreement, a security agreement, a tract summary with the purported timber value, and a title search certificate.  Adams and Madison raised at least $85 million from 150 investors throughout the southeastern United States that would purportedly be used to purchase additional timber tracts.  

Many of these promises, however, were false according to authorities.  For example, Adams is accused of never having obtained the requisite harvesting rights to the land as he had claimed.  Many of the investment documents were allegedly forged by Adams, including the timber deed and cutting agreements as well as the tract summary showing the purported timber value.  In many cases, Adams is accused of pledging the same plots of land (to which he had no rights) to multiple parties.  Adams also allegedly misappropriated investor funds for unauthorized purposes, including for his own personal benefit and the development of unrelated construction projects in Oxford and Starkville, Mississippi.  New investor funds were also used to pay returns to existing investors - a classic hallmark of a Ponzi scheme.  

In parallel civil proceedings, the Securities and Exchange Commission filed an enforcement action accusing Adams and Madison of violations of federal securities laws.  Adams and Madison agreed to the entry of an asset freeze and permanent injunction.  

A copy of the SEC's Complaint is here.