"Moss Adams’ failure to fully comply with the Subpoena hampered the Trustee both with regard to his duties to marshal the estates’ assets and his efforts to evaluate the estates’ claims against Moss Adams."

From 2001 to 2005, the Trio operated Unlimited Cash Inc. ("Unlimited Cash") and Douglas Network Enterprises Inc. ("DNE").  Potential investors were promised lucrative returns made possible through the placement of Ad Toppers - video monitors capable of displaying video advertisements - on vending machines and ATMs.  The Ad Toppers would show advertisements for popular companies such as Coca-Cola, Gold’s Gym, and Paramount Pictures, taking in a portion of ATM transaction fees and advertisement revenue.  Based on these promises, nearly 800 investors invested more than $40 million with the two companies.

However, contrary to their representations, the Trio did not use a majority of the funds raised to place ATMs and Ad Toppers.  Rather, investor funds were used for a multitude of unauthorized purposes, including personal salaries, sales commissions and payments to existing investors - a classic hallmark of a Ponzi scheme.  In addition to the prison sentences, the court also ordered a total of $27.4 million in restitution - the estimated amount of investor losses.

According to Chinese authorities, Lin began soliciting funds in 2007, telling friends, former classmates, and family members that she could deliver high returns with little risk.  While evidence suggests that her business began as a legitimate venture, she soon began to encounter heavy losses as a result of investing in multiple high-risk investments, including futures and speculative stocks.  Lin eventually collected approximately $70 million from investors. 

However, instead of disclosing her mounting losses to investors, Lin instead continued to solicit new investments.  In turn, Lin used funds from these newly-solicited investments to make payments to existing investors - a textbook example of a Ponzi scheme.  The scheme eventually collapsed in October 2011.

China differs from the United States in that it allows the imposition of the death penalty for nearly sixty offenses, including fraud and economic crimes.  By contrast, the United States allows only a handful of offenses to qualify for the death penalty.  This results in one of the highest amounts of executions annually, with it estimated that China executed approximately 4,000 prisoners in 2011.  This has also included death sentences for women accused of Ponzi schemes, including Wang Caiping, was sentenced to death last year after an investment fraud that racked up losses of nearly $20 million through risky futures and gold trading.  

However, Chinese courts allow the commutation of a death penalty to life in prison after serving two years of the sentence, which was recently seen in the case of Wu Ying.  Ying, who had been sentenced to death for a $60 million Ponzi scheme, had her sentence commuted to a life sentence in May 2012.  

Koenig ran Asset & Real Estate Investment Company ("AREI") along with fifty affiliated companies, telling potential investors that it specialized in senior housing centers.  Beginning in 1997, AREI controlled more than twenty senior housing and residential assisted-living centers, representing that they were suitable as a secure and profitable vehicle for tax-sheltered property exchanges.  After purchasing an assisted living facility, Koenig would then sell ownership shares in the property to investors.  Eventually, more than 1,000 victims would invest hundreds of millions of dollars with Koenig.

However, while Koenig represented that investor funds and facility revenues were reinvested back into the facilities, this was not the case.  Instead, Koenig used investor funds to to pay returns to existing investors, as well as finance a luxury lifestyle enjoyed by himself and two co-conspirators.  This lifestyle included an 80-acre castle estate, a Lear jet, luxury homes and fancy cars.  

While investigators charged that AREI was insolvent no later than May 2007, Koenig continued to bring in new investors based on promises of false profitability.  After an investigation, criminal authorities arrested Koenig in 2009 and charged him with 77 criminal charges - 40 counts of securities fraud and 37 counts of residential burglary that were predicated on Koenig's entry into investor homes to induce them to invest in his scheme.  Investor losses were estimated at over $200 million.

According to authorities, Koenig failed to disclose to investors that he had a previous 1986 conviction stemming from his role in a gold-selling scam.  He served two years in federal prison and was ordered to pay over $5 million in restitution to defrauded investors. 

Petters was arrested on October 3, 2008 after prosecutors alleged that his company, Petters Company, Inc., was not operating a successful and highly-profitable re-sale business as he claimed, but rather a massive Ponzi scheme that had taken in billions of dollars from investors.  According to Petters' motion, Petters' then-attorney, Jon Hopeman, spoke several days later with an assistant U.S. attorney, who allegedly informed Hopeman that the government would agree not to recommend a sentence of more than 30 years in exchange for Petters' guilty plea.   Petters was subsequently indicted on twenty charges, including wire fraud, mail fraud, money laundering, and conspiracy, which carried a possible term of hundreds of years in prison.  

Shortly after the indictment was unsealed, Petters met with Hopeman, who allegedly told Petters that he had not received any plea offer from the government.  The next week, Hopeman against met with the U.S. Attorney, who reiterated the 30-year sentence offer.  According to the motion, and as allegedly depicted in Hopeman's personal files, Hopeman informed the prosecutor that, "as a matter of personal pride," his "professional integrity would not allow" him to advise Petters to accept the offer.  In an affidavit filed with the Motion, Petters avers that he was never advised of this offer.  Petters then proceeded to trial, and on December 2, 2009, was convicted on all counts.  

Following Petters' conviction, Hopeman met with Shauna Kieffer to discuss possible issues that might arise during post-conviction proceedings.  In an affidavit, Kieffer claims that Hopeman told her of the Government's offer, and that he did not advise Petters of the offer because he felt "it was not a respectable offer."  The Motion concludes by stating that the sentence should be vacated or modified because of Hopeman's ineffective assistance of counsel and, in a claim likely disputed by Petters' victims, that the sentence was cruel and unusual because it was disproportionate to Petters' crimes.  

In the Motion, Petters' current counsel cites to Missouri v. Frye, a recent case decided by the U.S. Supreme Court involving the ramifications of the failure to disclose plea offers to an accused.  In Frye, the Court acknowledged the crucial role plea bargaining plays in the criminal justice system, stating that " Ours is for the most part a system of pleas, not a system of trials…To a large extent ...horse trading [between prosecutor and defense counsel] determines who goes to jail and for how long.  That is what plea bargaining is. It is not some adjunct to the criminal justice system; it is the criminal justice system."   Missouri v. Frye, 132 S. Ct. 1399, 1402 (2012).  Holding that there were certain responsibilities required of defense counsel in the plea bargain process to render adequate assistance of counsel under the Sixth Amendment, the Court ruled that, as a general rule, defense counsel had an affirmative duty to communicate formal offers for settlement from the prosecution to the accused defendant.  

While it is almost certain that the government will oppose the Motion, it will be interesting to see what position the response will tae.   Frye stands in contrast to the position that  an accused's guarantee to a fair and impartial trial is an adequate backstop that immunizes any errors in the pre-trial process. The government may also seek to distinguish its communications with Petters' former counsel from the "formal offers for settlement" addressed by the Court in Frye, noting that the lack of any written offer of settlement supports a position that the 30-year offer was merely part of an informal negotiating process that did not progress to any meaningful discussion.  

A copy of the Motion is here.

In his Order, Judge Mullen ruled that all claims must be received by the Receiver within 120 days, which would fall on September 5, 2013.  This date is known as the claims "bar date," which, by its name, means that any claim(s) not received on or before that date is forever barred from participating in the claims process.  This was also reiterated in Judge Mullen's Order.  The Order also approved the Receiver's request to establish a centralized claims website that would be the primary means by which a claimant could submit a Proof of Claim Form.  That website, which will be avaialble through the Receiver's website at www.zeekrewardsreceivership.com, will be functional within 14 days of the Order.

Because of the sheer number of potential claimants, which the Receiver estimated at nearly 1 million, extensive notice procedures were proposed to ensure that all potentially interested parties would receive notice that they had a limited period of time to submit a claim.  Additionally, the Receiver sought to utilize methods that would not result in exorbitant costs to the Receivership Estate, such as email and publication.  For example, the cost of postage alone for nearly 1 million pieces of mail would approach nearly $500,000.  The Receiver proposed several methods to provide notice to parties, which the Court approved in its Order.  These methods were:

1. Making the Claims Process publicly available on the Receiver's website at a soon-to-be-functional Claims Portal;
2. Emailing all known affiliates through email addresses obtained from Receivership records and collected at the Receiver's website; 
3. By U.S. Mail to trade creditors and other known, non-affiliate creditors; and
4. Publishing the Receiver's Notice on the Receiver's website, certain multilevel marketing sites, certain newspapers, and sending the Notice to certain trade groups in the financial industry.

In the event that an email was no longer found to be valid, the Receiver will attempt service of the notice by an alternative method, which includes a different email address or postcard to the last known address.  The Court approved the Claim Submission Form that will be utilized on the Claims Portal. 

Another issue worth noting is the Court's affirmation of the Receiver's determination that "Retail Profit Points" accumulated by affiliates could not serve as the basis for any claim and would not be included in any calculation of an approved loss amount.  These "VIP Points", as they were also known, were essentially interest payments that were disguised in the form of a daily 1.5% payout purportedly resulting from daily profits.  Courts have universally rejected attempts by victims to recover anything other than investors' principal balances, since allowing fictitious interest payments would serve only to reward investors that had been involved in the scheme longer at the expense of newer victims.

In the event that the Receiver determines that an investor's claim should be rejected, that victim will then have 30 days from that date to submit an objection to the Receiver.  

A copy of the Order is here.

Questions or Comments regarding the claims process?  Contact Ponzitracker here.

Special Thanks to ASDUpdates.

Perhaps owing to the short period of time in which Madoff had possession of the yacht before his scheme imploded, a key selling point lies in the fact that the yacht has barely been used.  With less than 500 engine hours, the yacht is being marketed as the best of its kind available.  Additionally, with two engines each producing over 2000 horsepower, the yacht is also hailed as "one of the fastest 27M motor yachts ever built."

As for accommodations, the yacht boasts three "sumptuous" cabins, including an owner's stateroom, a VIP cabin, and a guest cabin, as well as quarters for three crew members.  According to the yacht broker, the yacht is in "as new" condition, due to Madoff's strict prohibition on guests bringing any food aboard, as well as a penchant for "ordering carpet over carpet."  Additionally, the owner's stateroom features towels and bedsheets embroidered with Madoff and his wife, Ruth's initials. 

The yacht has been on the market for several years after several potential sales fell through - most recently a contingent of Russian buyers that pulled out of the transaction.

A link to the listing is here.

Shockwaves began emanating out of India in late April that Sudipta Sen, the man behind an Indian conglomerate known as the Saradha Group, was missing amid rumors of financial irregularities and increased scrutiny from India's Securities and Exchange Board of India ("SEBI").  Sen's Saradha Group operated a series of companies that offered 'depositors' the ability to invest in a wide range of ventures ranging from real estate to motor vehicles to even bio gas.  Investors were offered the ability to make short-term investments with promised returns based on the duration.  

Sen was able to promote his investments to the masses through a wide range of sources, including an extensive presence in television and newspapers and connections to members of one of the leading Indian political parties.  Sen also employed an extensive network of approximately 300,000 agents that were paid commissions to recruit new investors into the scheme. In total, it is estimated that hundreds of thousands of Indian investors may have entrusted billions of dollars to Sen's many ventures.  

However, as details have emerged from India, it is now becoming increasingly apparent that Sen's massive business empire may have been nothing more than a devastating Ponzi scheme.  As the Hindustan Times reports, Sen appears to have taken elaborate measures to attract investors to his scheme - even creating a full motorcycle factory spanning nearly 8 acres and manned by 150 employees who did little more than perform for busloads of potential investors.  As the article relates,

For two years since January 2011, employees at the Saradha group-owned Global Automobiles were forced to pose in front of the conveyor belt to give the impression that the plant was operating in full swing.

They pretended to work whenever truckloads and busloads of prospective depositors of Saradha Realty visited the plant for a first-hand check before investing.

Just before the depositors reached the factory, the workers would get dressed in their blue uniforms, rush to the shed where the assembling of motorbikes used to be done and pose in front of the conveyor belt as if they were really assembling the twowheelers.

They also used to turn on the fountains inside the campus. The prospective investors had no way of doubting that the plant had actually stopped production in January 2011.

There has also been an immense amount of scrutiny directed towards the ruling Trinamool Congress that has been linked to Sen.  Some politicians had extensive ties to Sen's businesses, including Kunal Goosh, a member of the Trinamool Congress Parliament who also served as head of Sen's media operations.  As the Hindu BusinessLine has reported, Sen filed an 18-page complaint letter wth the Central Bureau of Investigation shortly before he fled, accusing at least two members of Parliament for receiving bribes in return for protecting him from potential prosecution.  Additionally, Chief Minister Mamata Banerjee has made several comments that have been ill-received by investors, including admonishing victims that "what's gone is gone."

Minister Banerjee has since proposed the establishment of a relief fund that would provide $9.2 million for defrauded investors, that plan too has sparked a backlash - this time from Banerjee's announcement that 30% of the fund would be collected by increasing cigarette taxes.  Said Banerjee, 

"Smoke a little more to help the investors,"

Finally, in a grim reminder of the true devastation of Ponzi schemes, there have been multiple reports of suicides linked to the scheme.  Two victims are believed to have committed suicide in the immediate aftermath, with one woman setting herself on fire while another man hung himself.  Additionally, another deliberately drank poison and remains in critical condition. Recent news reports out of West Bengal suggest that two more individuals committed suicide within the past several days, including the father of an individual who served as a commission agent for the scheme who was being heckled by investors at his house.  According to the Hindustan Times, this brings the total number of deaths attributable to the scheme to ten - with seemingly no end in sight.  

Sen remains in police custody, and recent news reports have indicated he is cooperating with authorities.

Sykes operated Gemstar Capital Group ("Gemstar"), which solicited investors for what was billed as a U.S. Treasury Bill trading program.  In 2006, Sykes met an individual identified only as M.K. while at a golf tournament, telling him that Gemstar was looking to expand its operations by enlisting the services of a brokerage firm to buy and sell U.S. Treasury Bills.  M.K. agreed to assist Sykes, forming a limited liability company known as KCG in order to solicit investors.  Investors were provided with quarterly account statements purpritedly showing consistent account growth.  In total, M.K. and Sykes raised more than $45 million from dozens of investors.

However, unbeknownst to investors, there was no U.S. Treasury Bill trading program, and Sykes did not use investor funds as represented.  Instead, Sykes operated a Ponzi scheme, in which money from newer investors was used to pay older investors in the form of interest and principal redemptions.  Additionally, Sykes used a great deal of investor funds for personal expenses.  In a fortunate stroke of luck for investors, at the time Sykes was arrested there remained a great deal of investor funds in money market accounts that allowed investors to receive some of their funds back.

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.