Former Currency Trader Charged in $21 Million Ponzi Scheme

The Securities and Exchange Commission charged a San Diego man with operating a Ponzi scheme under the guise of a foreign currency trading firm.  Jeffrey Alan Lowrance, arrested earlier this year in Peru,was charged in his operation of a specialized currency trading operation that authorities allege was in fact an elaborate Ponzi scheme.  Lowrance also entered a not guilty plea to federal charges of mail fraud, wire fraud, and money laundering, each of which carry a twenty-year maximum prison sentence.

Lowrance operated First Capital Savings & Loan, which promised huge profits from a sophisticated foreign currency trading strategy.   Investors were promised monthly returns up to 7.15%, assured their investments were guaranteed, and in some instances, given forged letters of credit.  At least $21 million was raised from investors in 26 states.  Lowrance also attracted investors through "USA Tomorrow," a start-up newspaper he created.  Yet, instead of a lucrative foreign currency trading operation, Lowrance orchestrated an elaborate Ponzi scheme that used new investor funds to pay returns to older investors. Even as the scheme began to unravel in late 2008 as the financial markets faced increasing turmoil, authorities allege Lowrance raised an additional $1 million through February 2009 by advertising the scheme's promise of high returns.

In addition to SEC and federal charges, Lowrance also faces charges from the Commodity Futures Trading Operation, filed on July 14, 2011.  A copy of the SEC complaint is here. 

Latest Setback for Madoff Trustee Illustrates Difficulty of Legal Strategy

A New York federal court today became the fourth court in recent weeks to agree to review claims brought by Irving Picard on behalf of victims of Bernard Madoff's massive Ponzi scheme.  Picard, the court-appointed trustee tasked with recovering funds for the benefit of defrauded Madoff investors, had previously filed suit against UBS accusing the Swiss bank and various "feeder funds" of profiting from directing investors to Madoff's fraud and ignoring red flags that should have alerted them of the ongoing fraud.  Picard sought at least $2.6 billion in that suit.  However, today Judge Colleen McMahon, a United States District Judge for the Southern District of New York, agreed with UBS that claims brought by the trustee were more appropriately decided in a New York federal court, which is better able to deal with the legal issues employed in Picard's strategy.  Picard had opposed the motion to transfer the case, arguing that a bankruptcy court was the appropriate forum.

UBS becomes the fourth target of Picard to successfully invoke the jurisdiction of the federal district court.  Judge McMahon earlier approved JP Morgan's request to have the New York district court review the validity of its lawsuit, under which Picard seeks at least $19.9 billion.  In another high profile case involving Picard's attempt to recover not only false profits but also the underlying principal investment from New York Mets team executives, United States District Judge Judge Jed S. Rakoff agreed that the legal issues were better addressed in a federal court rather than a bankruptcy court. Rakoff is also reviewing Picard's lawsuit against Austria's BankMedici and its founder Sonja Kohn where the amount of damages sought is nearly $60 billion.

Collectively, these several lawsuits alone represent over $90 billion of the amount Picard is seeking in the 1,050 lawsuits filed to date on behalf of defrauded investors.  While Picard has recovered nearly $10 billion to date, a victory on just one of these high-profile suits could easily enable Madoff victims to receive 100% of their investment in the failed scheme - an unprecedented accomplishment in the admittedly infant world of Ponzi scheme receiverships.  And until recently, Picard had been enjoying continued success in the United States Bankruptcy Court,  including the decision affirming Picard's view on who constituted a victim entitled to compensation.  Additionally, Picard may have be more at ease in a legal arena that places emphasis on enhancing the potential estate available to bankruptcy creditors.  Finally, a federal court also allows for jury trials, which are not available in bankruptcy courts.

While a decision has not yet been issued in any of the cases removed to federal court, a recent case brought on behalf of Madoff victims against JP Morgan sought damages based on the same federal RICO statute iinvoked by Picard.  Detailed in a recent Ponzitracker post, a New York appellate court agreed with JP Morgan that a federal ban on civil RICO claims also covers aiding and abetting claims.  While Picard has not yet commented on the repurcussions of that ruling, District Court Judges Rakoff and McMahon will surely be made aware of the Second Circuit's stance.  Efforts by similarly-situated targets of Picard's suits will also take heed, further threatening the possibility of a streamlined process.  

Judge Rakoff has promised to issue a ruling in Picard's case against HSBC by the end of July.

North Carolina Man Charged in Commodities Ponzi Scheme

The U.S. Commodity Futures Trading Commission ("CFTC") today announced the filing and resolution of charges against a North Carolina man alleged to have operated a Ponzi scheme involving commodity futures.  Robert S. Moss, of Charlotte, agreed to settle the charges by paying restitution of $1,501,151.29 to defrauded investors and a $500,000 civil monetary penalty.  Moss also agreed to the permanent ban of any future trading or activities involving commodities trading.

From 2001 to 2008, Moss is alleged to have solicited investments exceeding $3 million from twenty-two investors who were told that Moss was a sophisticated commodities trader.  Instead of operating a commodity pool, Moss diverted a majority of investor funds for personal use and to repay other participants.  Moss also sought to disguise his trading losses by providing investors with fictitious account statements.  

According to the CFTC, Moss never registered with the CFTC or as a Commodity Pool Operator.  Moss also failed to provide investors with required disclosure statements.

Mastermind of $20 Million Hawaii Ponzi Scheme Sentenced

A federal judge in Hawaii today sentenced a Maui accountant accused of operating a Ponzi scheme that cost investors at least $8 million in losses was sentenced to a nearly 12-year term in federal prison today. Lloyd Y. Kimura, 61, of Maui, was also ordered by United States District Judge David Ezra to pay restitution of $8 million to defrauded investors.  Kimura's sentence was nearly the maximum under federal sentencing guidelines, which recommended a term of ten to twelve-and-a-half years.

Kimura, who incidentally is the brother of the Hawaii County Prosecutor, was charged with mail fraud, bank fraud, and theft from an employee benefit plan in 2010.  He had faced a maximum of 135 years in federal prison, but pled guilty in January 2011 in which prosecutors agreed not to seek the maximum term.  Along with his twelve-year federal prison sentence, Kimura will also concurrently serve a twenty year sentence for convictions on state charges for the same scheme.  Judge Ezra, in handing down his sentence, noted the fact that the federal sentence may be more harsh due to the fact that the state sentence allowed for parole.

Authorities charged Kimura with operating Maui Industrial Loan & Finance Co. as a massive Ponzi scheme that spanned over a decade.  Starting in 1986, Kimura loaned out money at high interest rates ranging from eighteen to twenty-four percent.  Yet, instead of lending the money out, Kimura used funds from new investors to pay off old investors.  Authorities estimated that at least 50 victims suffered losses exceeding $8 million from Kimura's scheme.  Kimura subsequently filed bankruptcy in 2010 when the operation ran out of funds to sustain itself.

Following his release from prison, Judge Ezra ordered that at least 10% of Kimura's subsequent income be used to repay defrauded victims as part of the restitution order.  

Detroit Ponzi Schemer Sentenced to 10 Years in Prison

A man accused of operating a Ponzi scheme whose victims included a public school district was sentenced to ten years in federal prison today and ordered to pay restitution to defrauded investors.   Dante DeMiro, 44, of Milford, Michigan, pled guilty in April to five charges including bank and wire fraud that carried a maximum sentence of thirty years in prison, as well as admitting that his fraud exceeded $7 million.

DeMiro operated investment firms MuniVest Financial Group and MuniVest Services LLC in Southfield, Michigan.  From 2007 to 2010, DeMiro accepted investor funds falsely representing that low-risk certificates of deposit would be purchased.  Investors were later provided with screenshots purporting to represent their investments.  But instead of purchasing the certificates of deposit, DeMiro instead used investor funds to make payments to other investors, purchase luxury items, and gamble. Notable among the victims were several municipalities, a public school district, and a credit union serving church members.  One source pegged the total losses to victims at nearly $13 million.  

In addition to his prison sentence, DeMiro was also ordered to pay restitution of $12.9 million.  DeMiro's defrauded investors will also be able to share in proceeds of the nearly $1 million of assets seized by authorities following DeMiro's arrest and able to be sold following DeMiro's recent guilty plea.