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Recent SEC Releases

Entries in forex (15)

Tuesday
Aug212012

Another Day, Another Ponzi: SEC Busts $7 Million Puerto Rican Ponzi Scheme

Continuing its aggressive campaign to root out Ponzi schemes, the Securities and Exchange Commission ("SEC") announced the filing of civil fraud charges against a Puerto Rico man in what is alleged to be one of the largest Ponzi schemes to originate out of the U.S. territory.  Ricardo Bonilla Rojas ("Rojas") and his firm Shadai Yire ("SY") were charged with multiple violations of federal securities laws after taking in at least $7 million from investors primarily located in Puerto Rico.  The SEC is seeking disgorement of ill-gotten proceeds, injunctive relief, and civil monetary penalties.  Simultaneously with the SEC's announcement, the Department of Justice also announced the filing of criminal charges against Rojas.

Beginning no later than August 2005, the SEC alleged that Rojas and SY solicited investors, including Evangelical Christian groups and factory workers, for a "risk-free" investment that promised 15% to 50% annual returns derived from commodities trading.  Rojas told investors that he had a long history of successful returns in trading commodities, and touted SY as an international enterprise in the business of global private investments.  Besides personal solicitations, Rojas also engaged the services of sales agents who solicited potential investors on a commission basis.  From the beginning of the scheme until February 2009, Rojas and SY collected at least $7 million from investors based on these representations. 

In reality, the SEC claimed that Rojas began misappropriating investor funds as early as October 2005 - two months after the scheme started.  Additionally, Rojas alleged failed to invest any of the funds raised from investors, and instead sent out false account statements purporting to show continued growth in investor accounts.  Instead, at least $4 million was returned to investors in the form of fictitious trading profits and principal redemptions.  Additionally, Rojas used hundreds of thousands of dollars of investor funds for his personal use without the consent or knowledge of investors.  

It has been a busy week for the SEC.  In the past seven days, the SEC has (1) filed charges against a Utah man accusing him of operating a $27 million Ponzi scheme, (2) charged 2 Denver men with a $16 million Ponzi scheme, (3) charged a former college football coach with a $80 million Ponzi scheme, and (4) busted a $600 million multi-level marketing scheme called ZeekRewards.  Whether it represents a shift in department priorities remains to be known, but this recent enforcement spree is easily above average for the SEC.  

While the majority of victims are said to be located in Puerto Rico, investors were also located in the mainland U.S., including Florida, North Carolina, and New York.  

A copy of the SEC's complaint is here.

Tuesday
Jul312012

SEC Sues Pennsylvania Man Who Facilitated $100 Million Ponzi Scheme

The United States Securities and Exchange Commission ("SEC") initiated a civil enforcement action against a Pennsylvania man for his role in funneling at least $30 million in investor funds into a $100 million foreign currency Ponzi scheme.  Emanuel L. Sarris, and his company, Sarris Financial Group, Inc. ("Sarris Financial") were charged with multiple violations of federal securities laws in their solicitation of investors for the Kenzie Fund, which defrauded investors worldwide out of over $100 million.  The SEC is seeking injunctive relief, disgorgement of ill-gotten proceeds, and civil monetary penalties.  

According to the SEC, Sarris provided estate planning and insurance sales to investors through Sarris Financial.  By soliciting existing Sarris Financial clients and holding numerous seminars and "free dinners", Sarris convinced over 70 individuals to invest over $30 million with the Kenzie Funds, making a variety of misrepresentations designed to lend an air of legitimacy to the investment.  For instance, Sarris told investors that he was independent of the Kenzie Funds and that his advice was unbiased and objective.  Additionally, Sarris represented that he had performed due diligence on the Kenzie Funds, and that he had personally seen the Funds' trading and banking records.

However, each of these representations was false.  In reality, Sarris received hundreds of thousands of dollars in salary as an employee of the Kenzie Funds, and also was paid approximately $1.5 million in incentive fees based on the amount of assets under management attributable to Sarris.  Sarris also never saw any foreign currency trading records or communicated with Kenzie's bankers.  Instead, Sarris ignored numerous red flags about the safety and legitimacy of the Kenzie Funds, including that some clients often received different returns for the same time period, and that the telephone number for the Funds' outside auditor had been disconnected since 2006.  Additionally, on at least two occasions, Sarris proposed to Kenzie executives that investor redemption requests be funded by using investor funds. Nevertheless, Sarris continued to solicit new investors for the Kenzie Funds.

The SEC obtained an emergency restraining order and asset freeze against the Kenzie Funds in June 2010.  Shortly thereafter, the operator of the Kenzie Funds was ordered to pay $44 million in disgorgement, along with a $150,000 civil penalty.

A copy of the complaint is here.

Thursday
Oct202011

CFTC Obtains Consent Order in $14 Million Forex Ponzi Scheme

The U.S. Commodity Futures Trading Commission announced it had obtained a consent order imposing permanent trading and registration bans against a California man and two companies along with civil monetary penalties totalling nearly $7 million.  Scott Bottolfson and Spirit Investments, Inc. ("Spirit"), both of Encinitas, Calif., and Increase Investments, Inc. ('Increase") of Reno, Nev. were originally named in January 2011 in a CFTC enforcement action charging them with operating a $14 million commodity pool Ponzi scheme.  The consent order, signed by United States District Judge Anthony J. Battaglia, found Bottolfson and his two companies in violation of several provisions of the Commodity Exchange Act.

From 2002 until August 2010, Bottolfson solicited investors to trade commodity futures in two commodity pools, through his companies, Increase and Spirit.  Potential investors were provided with false and/or misleading statements to induce their investment, including the guaranty of a twenty percent return on their investment and that investments were risk-free.  In total, Bottolfson raised approximately $14 million from thirty investors.  Of that $14 million, less than $3 million was placed into commodity pool trading accounts.  $7 million was returned to investors in the form of purported interest payments, and investors suffered the loss of approximately $7 million in principal.  Bottolfson also misappropriated investor funds for his own use.  

The enforcement action is the latest in a record-breaking year for the CFTC, which recently stated that it had filed 99 enforcement actions during Fiscal year 2011, a 74% increase from the previous year.  During that period, the CFTC obtained orders imposing over $290 million in civil monetary penalties, and more than $160 million was ordered in restitution and disgorgement. Each of these sanctions was also more than double the previous year's amount.  

A copy of the Consent Order is here.

Sunday
Oct092011

Utah Man Sentenced to Prison for Operating Ponzi Scheme that Invested in Other Ponzi Schemes

A Utah man was sentenced to nearly four years in federal prison for swindling investors out of nearly $2 million in what investors thought was a sophisticated foreign currency trading operation.  Instead, Frederick H.K. Baker had come up with the idea that he could identify other Ponzi schemes and be one of the early investors who received high yields from such operations.  According to his attorney, Baker effectively ran a Ponzi scheme to invest in other Ponzi schemes.  Baker was sentenced to forty-one months in federal prison after previously pleading guilty to two counts of wire fraud and conspiracy earlier this summer.  Another defendant, Mark Akins, was named in a 49-count indictment charging him with marketing Baker's scheme to other investors.

From June 2006 to June 2008, Baker told potential investors that he could promise them monthly returns ranging from eight to twelve percent from a system he had developed that profited off fluctuations in world currency markets.  With the alleged help of Akins, he received nearly $2 million from approximately seventy investors.  Yet, instead of using the funds to make forex investments, Baker invested in several other Ponzi schemes with the intent to be one of the early investors in the schemes and in effect "scam the scammers."  Baker planned to invest, collect returns, and then withdraw his principal.  According to prosecutors, Baker utilized E-Bullion to make transfers of money.  E-Bullion is a California company that has also been referenced in the AdSurfDaily Ponzi scheme.  

Baker was also ordered to pay $776,000 in restitution to victims of his fraud.  His co-defendant, Akins, is currently scheduled to stand trial on January 3, 2011.

Sunday
Oct092011

Guilty Plea Expected in $40 Million Forex Ponzi Scheme

A North Carolina man is expected to plead guilty this week to charges that he participated in a $35 million foreign currency trading Ponzi scheme.  Court records indicated that a change of plea hearing is currently scheduled on October 12 for Bryan Keith Coats, of Clayton, North Carolina.  Coats and several companies he operated were named in a January 2011 complaint filed by the Commodity Futures Trading Commission ("CFTC"), a foreign currency regulator.  Criminal charges followed, and Coats faced charges of investment fraud and money laundering.  Money laundering carries a maximum prison sentence of twenty years in federal prison, along with a fine of the greater of (1) $500,000 or (2) twice the value of property involved in the transaction.

According to the complaint filed by the CFTC, the scheme started in April 2007, when Coats, along with defendants Keith Simmons and Deanna Salazar, solicited customers to invest in various entities operating as Black Diamond Capital Solutions, LLC and Black Diamond Holdings.  Potential customers were told that Black Diamond operated a sophisticated forex trading system, with three years of experience engaging in highly successful forex trading. Average monthly returns of up to four percent were promised, and investors were assured that trading stop mechanisms were in place and that no more of twenty percent of invested funds were at risk.  In June 2008, Coats established his own hedge fund, Genesis Wealth Management, LLC, through which he solicited customers for Black Diamond.  As a result, at least 240 individuals invested $35 million with Black Diamond.  However, in March 2009, Black Diamond began to refuse principal redemptions and interest payments, providing investors with several false excuses.  Following an investigation by the CFTC, a company principal admitted that Black Diamond "has never traded currency, held brokerage accounts, or advised anyone on currency trades," and utilized hypothetical trading results to calculate the gains customers were supposedly making.  

One of the company executives, Keith Simmons, was arrested in December 2010 and charged with conspiracy to commit money laundering, wire fraud, and securities fraud.  Another, Deanna Salazar, recently pled guilty to charges of investment fraud conspiracy and tax evasion.

A copy of the CFTC Complaint is here.