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Recent SEC Releases

Toronto Pastor, Wife Accused of $8.6 Million Ponzi Scheme

Toronto police have accused a local pastor and his wife of defrauding more than 200 parishioners out of nearly $9 million in a massive Ponzi scheme.  Marlon Gary Hibbert, 49, and Verna Hibbert, 48, were charged with thirty-eight counts of fraud are facing thirty-eight counts of fraud.  In addition, Lorraine Bahlmann, an administrative clerk, was also charged with fraud in connection with her role in sending falsified account statements to victims.  The Hibberts could face decades in prison if convicted of the fraud charges.

According to authorities, the fraud occurred between 2005 and 2010, when Marlon Hibbert served as pastor at the Masonic Church of God.  Parishioners were solicited to invest with Hibbert, who claimed that he could deliver annual returns of 8.5% by engaging in foreign exchange ("forex") trading.  Based on these promises, at least parishioners are thought to have invested nearly $9 million.

However, Hibbert did not engage in forex trading, but instead ran an elaborate Ponzi scheme that used investor funds to sustain a luxurious lifestyle that included expensive cars and high-end homes.  Victims who thought they were receiving their promised interest payments were instead being paid with funds from incoming investors.  

The news comes several years after Hibbert was the subject of an inquiry by the Ontario Securities Commission after he ran a similar fraud while operating the Dominion World Outreach Ministries.  Hibbert did not appear for the hearing, and was later found to have committed fraud in what one of the OSC commissions called one of the worst frauds he had ever seen.

Toronto police believe many more victims remain unaccounted for, and are urging them to come forward.


Prison For Illinois Men Who Hatched Comic Book Ponzi Scheme From Prison 

Three Illinois men are headed back to federal prison for masterminding a Ponzi scheme they concocted in prison that promised lucrative returns through the distribution of comic book rights.  Daniel Parrilli, 62, John Lauer, 48, and Christopher Anderson, 57, received 70-month, 31-month, and 95-month prison sentences, respectively, after previously pleading guilty to fraud charges.  The scheme raised more than $7 million from over 150 investors.

After meeting in prison, the trio formed Sundown Entertainment Inc. ("Sundown"), which purported to specialize in the distribution of film and comic-book rights.  Beginning as early as 2006, the trio solicited investors for Sundown, telling them that their funds would be used to purchase the rights to old film footage in order to produce and distribute movies and documentaries.  Investors were told that the venture was extremely profitable, and that they could expect interest rates on short-term investments of up to 150%.  Based on these representations, over 150 investors eventually entrusted more than $7 million to the trio.

However, while at one point Sundown actually did engage in comic book and film production, the realized revenues were, not surprisingly, insufficient to sustain the exorbitant returns promised to investors.  For example, over a 2-month period from November 1, 2007 to December 31, 2007, less than $8,000 of deposits to Sundown's bank account came from the sale of movies, while nearly $1.7 million came from new investors.  This was not disclosed to investors, and the men continued to promise high returns in a classic Ponzi scheme that avoided collapse by paying existing investors with funds raised from new investors.  

The men concocted the scheme after they met while serving time in a Wisconsin prison, where each had been convicted of fraud-related charges.  Indeed, a background check would have raised a number of red flags, as Andersen had been convicted of selling fraudulent investments, Parrilli had been convicted of bank fraud, and Lauer had been engaged in an investment scheme that caused losses of more than $20 million.  

Each of the men was also ordered to pay restitution to scheme victims.


Charlotte Man Charged With $4.7 Million Forex Ponzi Scheme

Federal authorities charged a North Carolina man with operating a foreign currency Ponzi scheme that duped at least 500 investors out of nearly $5 million.  James H. Mason, 66, was charged with a single count of securities fraud, which carries up to a twenty-year prison term as well as a $5 million fine.  

According to the indictment, Mason operated JHM Forex Only Pool ("JHM Forex") and Forex Trading at Home Association ("Forex Trading"), which purported to engage in trading in over-the-counter foreign currency exchange ("forex").  Mason told potential investors that he had over 35 years of experience investing in commodity futures and options trading, and promised substantial returns.  Based on these representations, at least 500 investors were induced to invest nearly $5 million with Mason and his entities.

However, Mason did not have 35 years of experience in forex trading.  Instead of achieving significant gains trading forex, Mason is alleged to have operated a classic Ponzi scheme, using new investor funds to pay purported returns to existing investors.  Mason also misappropriated investor funds for his personal use, including the payment of personal and business expenses, and the purchase of real estate and cars. 

Of the nearly $5 million raised from victims, Mason used only a small percentage of funds for actual forex trading, which resulted in nearly total losses.  Investors were not told of these losses; rather, they were provided with falsified statements showing that their accounts were profitable.  Investors were also provided with an online account portal where they could track their account's progress and see their growing balances.  According to authorities, this was all false, and in many cases the investor accounts were empty.

Mason has been in federal custody since April 15, 2013.


Orchestra Tuba Player Gets 17-Year Sentence in Rare Coin Ponzi Scheme

A Massachusetts man who plays the tuba for the Quincy Symphony Orchestra was sentenced to serve a 17-year prison term for defrauding investors out of millions of dollars in a Ponzi scheme that purported to deal in gold and rare coins  Arnett Waters, 63, received the sentence from United States District Judge Denise L. Casper after pleading guilty in November 2012 to seven counts of securities fraud, six counts of mail fraud, two counts of money laundering and one count of obstruction of justice.  Judge Casper also imposed restitution and forfeiture obligations in the amount of over $9 million.  

According to authorities, Waters operated A.L. Waters Capital, LLC ("AWC"), which was a registered broker-dealer and a member of the Financial Industry Regulatory Authority ("FINRA").  Waters also operated Moneta Management, LLC ("Moneta") with his wife, Janet, who also served as AWC's chief compliance officer.  Beginning in 2009, Waters began pitching two investment funds, Port Huron Partners, LP ("PHP") and Port Huron Partners II, LP ("PHP II"), advertising the funds on AWC's website as specializing in  trading in rare coins and gold.  Based on these representations, AWC raised nearly $1 million from investors, including $500,000 from his own church.  Additionally, Waters operated two rare coin dealerships, Moneta and Windsor Park Corp., that sold coins to investors at grossly inflated prices.  

However, Waters did little to no investing, but instead used investor funds to make a variety of unauthorized purchases, including  luxury travel, hunting club dues, medical appointments and even classical sheet music for Arnett's hobby as a longtime tuba player for the Quincy Symphony Orchestra.

When SEC officials began an investigation in April 2012, the Waters made a variety of misrepresentations designed to conceal their scheme from regulators, including statements that they were not engaged in securities-related activities, and that no one had invested in either the PHP or PHP II funds.  

When the SEC initiated a civil enforcement action in May 2012, Waters failed to disclose the existence of a hidden bank account that he used to launder nearly $200,000 until the SEC caught wind of the account. Waters was later charged with obstruction of justice as a result.  

After Waters pled guilty to criminal charges, the plea agreement contained covenants by the SEC not to appeal any sentence of at least 97 months as well as Waters' agreement not to appeal any sentence less than 188 months.  Because a 17-year sentence equates to a 204-month sentence, Waters technically has the opportunity to appeal.    

A copy of the SEC's complaint is here.


Massive $3.6 Billion Ponzi Scheme Uncovered in India

Financial shockwaves are rippling throughout India as authorities announced they have uncovered a massive Ponzi scheme that appears to have taken in over $3 billion from thousands of investors.  Authorities announced they had detained Sudipta Sen, the man behind a conglomerate of companies operating under the Saradha Group name, who is to remain in custody for at least the next 14 days.  If true, the scheme would be not only one of the largest schemes in India, but would rank as one of the largest in history.  The effects of the scheme are expected to be widespread due to the large number of victims, many of whom rank among India's lower class.  Indeed, two individuals have already committed suicide, and a third that willfully ingested poison is believed to be in critical condition. 

According to authorities, Sen's Saradha Group operated a series of companies that dabbled in real estate, motor vehicles, and even bio gas.  Investors were solicited to make varying short-term investments that promised above-average returns.  One company, Saradha Realty, offered investors the ability to invest for a varying range of time, with the option to receive an allotment of land or a refund at the maturity of that investment along with the promised interest.  Depending on the amount invested, each investor was promised returns ranging from 12% to 24%.

Investors were solicited through a series of advertising, including a heavy presence in television and print media.  The editor and chief executive of the Saradha Group's media business also had significant ties to one of the leading Indian political parties, which also served to lend an air of legitimacy to the venture. In addition, an extensive network of agents was also used to solicit investors in return for commissions. Based on these efforts, it is believed that over $3 billion was raised from a large amount of investors - many of which were poor investors who entrusted their savings to the scheme. 

The mastermind, Sen, was arrested earlier this week after a brief stint on the lam.  However, authorities were able to locate him after Sen reportedly took little effort to conceal himself, staying at expensive hotels in highly-populated areas.  

According to one source, the Saradha Group is said to have been under investigation by the Securities and Exchange Board of India ("SEBI") since June 2010.  However, the Saradha Group is said to have buried SEBI with a flood of documents in order to stymie the investigation, which included the submission of 240 cartons of documents in 2012 alone.  After this strategy was successful in delaying the investigation, SEBI ordered the production of information in excel spreadsheets, which soon lead to the production of beneficial information.  However, by this time the Saradha Group had collapsed.  

Authorities have instituted an action in the Calcutta High Court asking for the appointment of a receiver to preserve assets and begin the process of returning funds to investors.