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Recent SEC Releases
Wednesday
Jun122013

Thailand Ponzi Schemer Allegedly Murdered By Associates

In a bizarre developing story out of Thailand, the murder of a man accused of a decades-old Ponzi scheme has been linked to a pre-meditated murder plot by several of his associates.  Akeyuth Anchanbutr, 54, had been reported missing for nearly a week before authorities arrested his driver, Santiphap Pengduang, and several associates this week for his murder.  Pengduang led authorities to a shallow grave today, where a body was exhumed that is believed to be  Anchanbutr's.  Authorities believe that Anchanbutr's murder was motivated by money.

Anchanbutr was the former leader of Charter Investment Co. Ltd ("Charter"), a controversial pyramid scheme that gained popularity in the early 1980s.  After he was criminally charged in 1983, he fled the country to England, where he waited twenty years for the statute of limitations on his case to expire before returning to Thailand.  When he returned, he launched a crusade against Thailand authorities, including the Prime Minister, accusing them of political abuses in the stock market.  While Anchanbutr's assets were seized after he fled the country, he was rumored to have built a sizeable fortune 

Late last week, authorities were alerted to a possible abduction after it was reported that security cameras at Anchanbutr's house had been tampered with and a sizeable amount of cash was reported missing.  Authorities soon named Pengduang, Anchanbutr's driver, as a person of interest, noting that he had a criminal record and had recently been charged with extortion.  After Pengduang was located, he initially told police that Anchanbutr had planned his own disappearance.  However, after further questioning, Pengduang confessed to the killing, and implicated several associates - including his father.  According to Pengduang, the murder had been planned for several months to coincide with one of Anchanbutr's trips to the bank, where he regularly withdrew sizeable sums of money.  

Authorities flew Pengduang by helicopter to a supposed location where Anchanbutr had been buried.  Authorities located a naked body in a 'crude' grave that was pending forensic confirmation that it was Anchanbutr.  

Anchanbutr's lawyer maintains that the killing was politically motivated.

Wednesday
Jun122013

Jury Convicts Minnesota Man For Role in $3.65 Billion Ponzi Scheme

After three days of deliberations, a federal jury found a Minnesota man guilty on twelve fraud counts for his role in the massive Ponzi scheme masterminded by Thomas Petters.  James Fry, a former Minnesota businessman, was convicted of twelve counts of wire fraud and securities for his role as an investment manager who funneled hundreds of millions of dollars into Petters' scheme.  Fry, who will remain free on bail until his sentencing, faces up to a twenty-year term for each of the five wire fraud counts, and up to five years for each securities fraud count.  Petters is currently serving a 50-year term after he was convicted of twenty fraud counts in December 2009.

According to authorities, Fry was the CEO of Arrowhead Capital Management, LLC ("Arrowhead"), which served as an investment advisor to a number of hedge funds.  Beginning in 1999, Fry began working with Frank Vennes to raise funds to invest in promissory notes issued by Petters' company, Petters Company Inc. ("PCI").  PCI raised billions of dollars from investors who believed their funds were being used by PCI to purchase and resale consumer electronics to big-box retailers.  From 1999 to September 2008, Fry was accused of funnelling hundreds of millions of dollars he raised through Arrowhead to be invested in PCI.  While Fry told investors that a 'big-box' retailer would make payments directly to an Arrowhead bank account, the reality was that Arrowhead received all payments from PCI.  Authorities alleged that, despite knowing the falsity of these representations, Fry continued soliciting investors.  In total, Fry received more than $41 million in commissions from PCI.

While Fry's lawyers claimed that Fry believed Petters was conducting a legitimate business and was simply another of the victims duped by Petters, the jury was not convinced.  The trial lasted over three weeks, and the jury had reached the third day of deliberations before it was able to agree on a verdict.  

The Superseding Indictment charging Fry is here.

Tuesday
Jun112013

Seven Year Prison Sentence for New Jersey Man in $9 Million Health Care Ponzi Scheme

A 73-year old New Jersey man was sentenced to serve the next seven years in federal prison for masterminding a $9 million Ponzi scheme purporting to be an investment fund that made loans to nursing homes.  Maxwell B. Smith was sentenced by United States District Judge Mary L. Cooper, who also ordered him to serve three years of supervised release after completing his sentence.  Smith had pled guilty nearly four years ago to five counts of mail fraud, which carried a maximum sentence of twenty years per count, as well as a $250,000 fine.  Smith was also charged by state authorities, and also pled guilty in 2009 to one count of first-degree money laundering.  

According to authorities, Smith was employed as a financial advisor at various financial firms in New Jersey where he provided investment advice to individual clients.  In addition to providing investment advice, Smith also created Health Care Financial Partners ("HCFP"), which held itself out as an investment fund with hundreds of millions of dollars in assets.  In an investment prospectus provided to investors, HCFP advertised guaranteed annual returns ranging from 7.5% to 9% supposedly generated through lucrative loans to healthcare facilities such as nursing homes.  Investors were offered the opportunity to purchase bond offerings in amounts ranging from $25,000 to $300,000, and Smith touted the ability to treat any gains as tax-free.  In total, Smith raised over $9 million from investors.

However, rather than using these funds for a legitimate purpose, Smith instead misappropriated millions of dollars to live a life of luxury that included dining, gambling, entertainment, overseas travel, and renting a villa in France.  Smith paid out approximately $2 million in purported interest payments that were, in reality, simply principal belonging to other investors.

Ironically, Smith's scheme is said to have collapsed after the daughter of an elderly investor couple thought that the venture seemed very similar to Bernard Madoff's Ponzi scheme.  This led to a civil lawsuit, which later led to criminal charges.  While Smith's home was sold to benefit defrauded investors, this led to a shortfall of nearly $9 million.  

Monday
Jun102013

Colorado Couple Who Offered Up To 1,000% Annual Returns Sentenced to Prison in $17 Million Ponzi Scheme

A Colorado man and his wife have been sentenced to prison for operating a Ponzi scheme that defrauded investors in the United States and five foreign countries.  Richard Dalton, and his wife Marie, were given ten-year and five-year sentences, respectively, after each entered into a plea agreement with prosecutors.  Richard Dalton pled guilty to a single count of money laundering, while his wife pled guilty to a single count of conspiracy to commit mail fraud.  A hearing is scheduled for July 24 to determine the amount of restitution.

The Daltons owned and operated Universal Consulting Resources LLC ("UCR").  Beginning in March 2007, OCR promised potential investors lucrative returns through trading in diamonds and international note trading.  Investors were told that the investments were "extremely low risk," and that their money could be returned to them at any time.   These two investment ventures, known as the "Trading Program" and the "Diamond Program," were also pitched by "finders" or "brokers" who received commissions from UCR for each investor they successfully brought into the program.  

According to Richard Dalton, the Trading Program featured an unnamed European trader who would use investor funds to buy and sell investment notes, and this trading was so profitable that investors were guaranteed monthly returns ranging from 4% - 5%.  Some investors were promised even higher rates, including one investor who was promised 75% - 80% per month - an annual return of nearly 1,000%.  Similarly, the Diamond Program purported to trade in diamonds, and promised a 10% monthly return.  In total, the Daltons and UCR raised approximately $17 million from investors.  

Not surprisingly, the exorbitant returns promised by the Daltons had no basis in reality, and were instead part of an elaborate Ponzi scheme in which new investor funds were used to pay returns and principal to existing investors.  Over $5 million of investor funds were used to make 'Ponzi payments,' and over $1 million was used for a variety of personal expenses, including $35,000 in custom dental work, the Daltons' daughter's wedding, and a $1 million house.  

While the Daltons stopped making scheduled payments to investors in early 2010, they provided numerous written and verbal misrepresentations to investors concerning the status of their invested principal, including:

  • that the European trader had betrayed the Daltons;
  • that the Daltons were busy liquidating a cache of diamonds;
  • an airplane that made weekly trips to Africa to pick up diamonds had the 'number three engine go out'; and 
  • that the African government had mixed in 18,000 fake diamonds.

In late 2010, Richard Dalton even sought to reassure an impatient investor, telling him he had been in constant contact with the Securities and Exchange Commission, stating 

So they know that and know I’m not Bernie Madoff, you know, I didn’t go out there and get into a huge lifestyle off of your dough. So they’re backing off and letting me clean this thing up.

The Daltons were later indicted in September 2011, and were arrested after returning from South Africa.

A copy of the SEC Complaint is here.

Sunday
Jun092013

Former Youth Pastor Gets 51 Months in $3.4 Million Jewelry Ponzi Scheme

A former youth pastor was sentenced to serve 51 months in federal prison for masterminding a Ponzi scheme purporting to buy and sell precious jewels.  Matthew James Addy, 34, received the sentence from United States District Judge James C. Cacheris after previously pleading guilty to a single count of securities fraud back in February.  He was also ordered to pay approximately $2.74 million in restitution to defrauded investors.

According to authorities, Addy owned Edward J & Compant, which operated LaPorte Jewelers ("LaPorte"). Beginning in 2010, Addy began seeking investors for promissory notes in which the proceeds would be used for the purchase and resale of wholesale jewelry and loose precious stones.  In exchange for their investments, individuals were given promissory notes carrying above-average rates of interest that purportedly were linked to specific jewelry transactions entered into by Addy.  In seeking investors, Addy relied on his affiliations with various religious organizations, and a majority of the 40-plus total investors were recruited from these groups.  In all, Addy raised more than $3 million.

However, according to the FBI and as admitted by Addy, LaPorte was nothing more than a front for an elaborate Ponzi scheme that used investor funds to make Ponzi-style payments and for a variety of other unauthorized uses.  While approximately $665,000 was paid to investors, these payments came not from legitimate profits, but instead from the funds of new investors - the hallmark of a Ponzi scheme.  When LaPorte originally closed down in June 2012, Addy blamed the store's bad fortunes on mounting monthly losses due to declining revenues.