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Recent SEC Releases

'Billionaire Boys Club' Executives Convicted of Running $50 Million Ponzi Scheme

A federal jury convicted a Detroit father-and-son for their roles in a massive Ponzi scheme that raised more than $50 million from investors.  John Bravata, and his son Antonio, 25, were each convicted of a single charge of conspiracy to commit wire fraud, and John Bravata was also convicted of 15 counts of wire fraud.  Each count carries a maximum possible prison term of twenty years, as well as a criminal fine of up to $250,000.  

John Bravata operated BBC Equities, LLC ("BBC") and Bravata Financial Group, LLC ("Bravata Financial"), and according to Bravata, the 'BBC' is an acronym for 'Billionaire Boys Club.'  Along with the aid of his son, Antonio, who served as a sales associate, and Richard Trabulsy, who served as chief executive, BBC was touted as a successful real estate investment fund, raising more than $3 million from family and friends.  Later, BBC and Bravata Financial hosted free seminars where potential investors were provided with a free lunch and told that their investments would be used to purchase real estate that would provide a guaranteed annual return of 12%.  Investors were provided with offering materials, including private placement memoranda outlining the proposed use of investor funds.  BBC also used magazine advertisements, including a spread in Forbes magazine in December 2008, as well as a website extolling the benefits of an investment in BBC or Bravata Financial. In total, over 400 investors contributed approximately $50 million.  Neither the Bravatas nor their two funds were registered with the Securities and Exchange Commission.  

However, neither BBC nor Bravata Financial was a legitimate business, and instead were used by John Bravata to perpetrate a massive Ponzi scheme that survived only by constantly soliciting new investors. Of the $50 million raised from investors, approximately $20 million was spent on highly-leveraged real estate that, contrary to Bravata's representations, was not profitable and did not produce income.  Indeed, it is estimated that, at the time the fraud was uncovered, existing mortgages on these properties exceeded $128 million.  The remainder of investor funds were used to sustain an elaborate lifestyle for the Bravatas and Trabulsy, with purchases ranging from luxury vehicles to vacations to artwork.  

The Securities and Exchange Commission also filed a complaint against the defendants, BBC, and Bravata Financial in July 2009, alleging various violations of federal securities laws and seeking relief including permanent injunctions, disgorgement, and civil monetary penalties.  Trabulsy pled guilty in late 2011 and agreed to cooperate with authorities.

A receiver was appointed to recover funds for investors, but concluded that "there does not appear to be a reasonable prospect of any significant recovery for creditors and investors."

Sentencing has been scheduled for June 18, 2013.


29-Year Old New York Man Charged With $50 Million Ponzi Scheme

Authorities have arrested a New York man and charged him with operating a real estate Ponzi scheme that may have bilked investors out of $50 million.  Gershon Barkany, 29, was arrested by FBI agents earlier today and charged with wire fraud, which carries a maximum potential sentence of twenty years in prison.  Barkany was scheduled to make an initial appearance earlier this afternoon.

According to authorities, Barkany solicited at least five investors to entrust large sums of money with him, which he represented would be used to make real estate purchases in Manhattan, Queens, the Bronx, and Atlantic City, New Jersey.  Barkany assured potential investors that the real estate purchases would be "risk-free," since under the arrangement he had with the sellers of these properties, the purchases would only be made once Barkany had secured a buyer at a slightly-higher purchase price.  Based on these representations, Barkany was able to raise more than $50 million from at least five investors.

However, authorities allege that there were no such 'risk-free' real estate deals.  Rather, Barkany is accused of perpetrating the classic Ponzi scheme, using new investor funds to pay off older investors.  Additionally, Barkany misappropriated investor funds to support a lavish lifestyle that included gambling trips.  While further details have not yet emerged, it remains to be seen whether any investor funds remain.  

While criminal charges were just filed today, civil litigation appears to have been ongoing for nearly two years by several individuals/entities that claim to have invested substantial sums with Barkany, who are identified as Mr. San LLC, Jordan Most, Gerad Pinsky, Botnick Trust, Motti Hellmans, and Cortland Realty Investments.  Those plaintiffs originally filed suit against a law firm, Zucker & Kwestel LLP, alleging that the firm aided and abetted Barkany's fraud by accepting the investors' funds in a firm escrow account.  The law firm then added Barkany as a third-party defendant, and the lawsuit remains ongoing.  



Authorities Indict Two Men For 'Quick-Fix Scheme to Hide Assets' For Ponzi Scheme Suspect

Federal authorities indicted two Arizona brothers for their role in helping a South Carolina man implicated in a $60 million Ponzi scheme attempt to hide money from authorities.  Gordon and Benton Hall were charged with conspiracy to commit wire fraud, and are currently in route to South Carolina after being arrested in Arizona.  Authorities allege that the brothers agreed to provide monthly payments to Wallace Lindsey Howell, a South Carolina man charged in the $60 million silver bullion scheme masterminded by Ron Wilson, in exchange for hiding over $1.5 million in Howell's assets.  Wire fraud conspiracy carries a maximum prison sentence of twenty years, along with criminal fines of up to $250,000.

From 2001 to 2012, former Anderson County councilman Ron Wilson solicited investors for his company, Atlantic Bullion & Coin, Inc. ("ABC"), which purported to make healthy profits from trading in silver futures contracts.  Telling investors he would purchase silver bars that would be held in safe-keeping in a Delaware repository, Wilson raised approximately $90 million from 1,000 investors.  However, according to authorities, Wilson was not actually buying the quantity of silver he represented to investors, but rather was running a massive Ponzi scheme that bilked investors out of nearly $60 million.  After being arrested in April 2012, Wilson pled guilty in July and was later sentenced to serve 19 years in prison.  

However, Wilson was not alone in carrying out the scheme, and authorities later charged Wallace Howell with mail fraud conspiracy on the basis that he acted as a promoter for the scheme and touted it to investors as a lucrative opportunity.  Investors, however, were not told that Howell was paid handsomely for his efforts and received millions of dollars in commissions from Wilson.  Howell pled guilty earlier this year to wire fraud conspiracy.  

According to authorities, Howell contacted the Halls shortly after Wilson was arrested in an attempt to dispose of a portion of the illicit profits he had received from Wilson.  The men allegedly came to an agreement, in which the Halls agreed to pay Howell's legal bills and provide him a guaranteed monthly payment for life in exchange for at least $1.5 million Howell transferred to the pair that included real estate, a truck, 55 gold coins, and 1,000 ounces of silver.  The silver alone, based on a current market price of $28.50 per ounce, is worth nearly $300,000.  

A receiver has been appointed to gather assets for Wilson's victims, and any assets recovered from the Halls would likely go to the Receiver's efforts.  The receiver, Beattie Ashmore, has indicated that his investigation thus far "would paint a very dim picture" of a meaningful recovery of assets for distribution to victims.  

The Receiver's website is here.


2% Recovery Likely For Victims of $220 Million Ponzi Scheme

In a sobering reminder that Ponzi scheme victims rarely recover more than 5% of their losses, victims of a $220 million Ponzi scheme carried out by an Indiana couple learned that they can expect to recover less than 2% of their losses.  A court-appointed trustee overseeing the bankruptcy of Gary Wilder and his wife, Toni Jo Wilder, estimated that $5.2 million would be available for distribution to victims holding nearly $220 million in approved claims.  Both Gary and Toni Jo Wilder pled guilty to fraud and money laundering charges, and are currently serving prison sentences of 15 years and 7 years, respectively.  

The Wilders owned Wildwood Industries ("Wildwood"), which was based in Bloomington, Indiana, and once operated a thriving leaf and vacuum-bag manufacturing business.  Wildwood solicited investors to 'lend' funds that would be used to buy machinery, and in turn promised a healthy guaranteed annual return.  The company represented that it had healthy demand for its machines, obtaining numerous loans from creditors based on purported invoices.  In total, approximately 85 lenders loaned the company nearly $215 million.  

However, rather than manufacture leaf- and vacuum-bags, the Wilders masterminded an elaborate Ponzi scheme that caused devastating losses.  The severity of the scheme was aided by several Wildwood employees who admitted to playing a role in continuing the scheme, including one who altered serial numbers on existing machines to make it appear that new ones were being manufactured and another who approved invoices and documents that led to false financial statements.  In total, six people were convicted of various crimes related to their role in the fraud.  

Along with the lenders, also included in the victims were the nearly 700 employees who lost their jobs when Wildwood went out of business after news of the fraud broke.  Besides failing to make machines as promised, Wildwood also failed to contribute to employee 401(k) plans and various benefit plans including medical, dental and disability.  Following news of the fraud, Wildwood was placed into bankruptcy by its creditors, and was later sold for $2 million.

Gary Wilder pled guilty in July 2010 to one count of bank fraud and one count of money laundering, while his wife pled guilty to one count of conspiracy to commit money laundering.  

While creditors filed nearly $600 million in claims with the bankruptcy trustee overseeing the Wilders' personal bankruptcy, approximately $217 million in claims were approved.  A trustee is also overseeing the bankruptcy estate of Wildwood Industries, where asset recovery efforts remain ongoing nearly four years later.


New Jersey Man Receives 12-Year Sentence for $7.5 Million Mortgage Fraud Ponzi Scheme

A New Jersey man was sentenced to a 12-year term in state prison for a mortgage refinance Ponzi scheme that duped more than 40 victims out of more than $7 million.  Frederick Tropeano, 47, received the sentence from Monmouth County Superior Court Judge Ronald L. Reisner, who also ordered that Tropeano would be ineligible for parole until mid-2019.  Tropeano previously pled guilty in January to the equivalent of money laundering, which carries a maximum prison sentence of twenty years. In handing down the sentence, Judge Reisner made a downward departure from the 14-year sentence recommended by prosecutors as part of Tropeano's plea agreement.  

Tropeano, through his company Hawthorn Capital Corporation, solicited homeowners to refinance their existing mortgage at a much lower rate, with the understanding that proceeds from the new mortgage would be used to satisfy the original mortgage.  In total, Tropeano raised over $7 million from more than 40 homeowners who thought they were taking steps to reduce their mortgage payments.

However, according to authorities, Tropeano and his conspirators failed to use proceeds from the new mortgages to satisfy the homeowners' existing mortgages.  Instead, they operated the classic Ponzi scheme, using investor funds for unauthorized purposes that included paying personal expenses to support a lavish lifestyle.  Many homeowners were shocked to discovery that their existing mortgage had never been satisfied, often resulting in negative implications on their credit scores.  Additionally, several homeowners had their identity stolen by Tropeano and his associates, who in turn secured additional refinancings unbeknownst to the homeowners.  

Three of Tropeano's co-conspirators previously pled guilty to third-degree conspiracy charges, and are awaiting sentencing.  Tropeano was also ordered to pay nearly $7 million in restitution to his victims.