Search
Most Recent
AdSurfDaily Agape agent American Integrity Aronson asset sales Attorney av bar reg baker bank bank of america Bankruptcy baumann bermudez black diamond blackwell bridge loan bull cattle CD celebrity cftc charity china China Voice church cityfund claims claims process clawback commission commodities commodity pool computer program congress Crown Forex currency death sentence denver diamond bar disgorgement Distribution Dodd-Frank donnan Dreier dunhill e-bullion elderly E-M Management SEC england Fairfield family FBI FDIC Fees female ponzi scheme financial advisor fine FINRA football forex fraud fufta fugitive Full Tilt gift card guilty plea GunnAllen hawaii Heckscher HSBC india invers forex janvey John Morgan JP Morgan kansas ken bell kenzie las vegas lawsuit lawyer libya Lifland machado Madoff Marian Morgan metro dream homes mets milberg millers a game Morgan European Holdings mortgage multiple schemes NCAA Net Winner new jersey notes objection Oxford Patrick Kiley paul burks PermaPave Pettengill Petters Picard poker Ponzi ponzi scheme ponzi scheme database ponzi scheme list Prime Rate profitable sunrise prosun pta puerto rico Rakoff real estate receiver receivership regulation relief defendants religion remission repeat offender restitution Rothstein RRA sec sentencing simmons sipa sipc snelling standing stanford stettin subpoena td bank telexfree treasury bonds treasury strip Tremont Trevor Cook UBS UFTA uga utah venture advisors Wachovia wilpon wire fraud woman zeek zeek rewards zeekler zeekrewards
Social
Recent SEC Releases

Entries in ponzi scheme (3)

Monday
Nov172014

Madoff Recoveries Top $10 Billion After $497 Million Settlement

The court-appointed trustee tasked with recovering assets for victims of Bernard Madoff's massive Ponzi scheme announced a $497 million settlement with two Cayman Islands hedge funds that brings the total amount recovered to approximately $10.3 billion.  Irving Picard, the bankruptcy trustee for Madoff's now-defunct broker-dealer, filed a Motion to Approve Settlement (the "Motion") with Herald Fund SPC and Primeo Fund (the "Funds"), two "feeder" funds that had funnelled investor funds to Madoff.  With the settlement, Picard has now recovered approximately 59% of the estimated $17.5 billion in losses attributable to Madoff's fraud; with the inclusion of funds paid to victims from Madoff's membership in the Securities Investor Protection Corporation, all investors with losses of $925,000 or less have been fully paid back.

The Funds maintained various accounts with Madoff's firm, investing both directly and through other funds that also had exposure to Madoff.  In the six years preceding the collapse of Madoff's scheme, the Funds withdrew more than $700 million in invested principal from Madoff's firm.  Picard filed lawsuits against Herald and Primeo in July 2009, and subsequently filed an amended complaint on December 5, 2010.  As a protective measure, Picard also filed a proceeding against Primeo in the Cayman Islands.

Under New York law, transfers within six years of the filing of a bankruptcy petition may be recovered as proceeds of a fraudulent transfer.  Because Madoff admitted to running a Ponzi scheme, these transfers are considered to be made with the actual intent to hinder, delay, or defraud.

While settlement negotiations had been ongoing for several years, the Motion implied that a Cayman court's 2013 placement of Herald into official liquidation - which replaced the fund's board of directors with a court-ordered slate - may have been the turning point.  Picard entered into mediation with the Funds earlier this year, and recently reached an agreement.

The agreement calls for Herald to pay approximately $467 million to Picard, which includes a $100 million credit relating to an investment in Herald by JP Morgan that Herald had long maintained should be factored into any amount it purportedly owed.  In addition, Primeo would pay approximately $29 million, which brings the total settlement by the funds to approximately $497 million.

The settlement also includes the allowance of a customer claim filed by Herald of approximately $1.64 billion, which Picard indicated represents Herald's net equity of $1.172 billion and the $467 million paid into the estate as part of the settlement.  Notably, this claim amount would likely place Herald as among one of the largest investors in Madoff's scheme.  As part of the settlement, Picard will make a "catch-up" distribution to Herald, since it was not allowed to receive distributions made to victims over the past few years due to the pending litigation, representing 46.059% of its allowed losses of $755,320,133 - of which Herald will use a portion to contribute its settlement amount with Picard.

Interestingly, while Herald filed a claim with Madoff's bankruptcy estate claiming scheme-related losses, Primeo did not.  While the Motion for Approval of Settlement does not disclose the amount of Primeo's losses, it does disclose that all transfers made by Primeo during the six-year period preceding the bankruptcy filing were withdrawals of principal.  Thus, it is entirely possible that Primeo's failure to file a proof of claim may have prevented it from recovering a significant portion of its losses, as Herald was able to do.

A hearing is scheduled for December 17, 2014 to present the settlement for court approval.

A copy of the Motion is below:

Madoff Settlement

Wednesday
Feb062013

Maine Woman Receives 80-Year Sentence For $4.7 Million Ponzi Scheme

In what is likely the stiffest sentence for a female Ponzi schemer, a Maine woman was sentenced to serve eighty years in prison for her role in a $4.7 million Ponzi scheme.  Karen Bowie, 61, received the sentence after being convicted at a week-long trial in Austin, Texas of property theft.  While Bowie was not charged with masterminding the scheme, authorities accused her of playing a focal role in promoting the scheme, in which she received over $2 million that was diverted from investors.  While Bowie would be eligible for parole due to her conviction on state crimes, the sentence will likely be a life sentence.

Bowie was part of Titan Wealth Management, LLC ("Titan"), which was in the business of recommending European mid-term notes ("MTN's") to clients.  Potential investors were told that the notes were low risk and offered outstanding short-term returns ranging from 10% to 50%.  Additionally, Titan's owner, Thomas Lester Irby, told investors that Titan would receive no fees or compensation from selling the notes, and in the event of emergency, Irby could easily liquidate a $10 million MTN that he personally owned.  Irby and Titan would eventually raise over $3 million from more than 30 investors.

However, investor funds were not pooled to purchase MTN's or even any interest in MTN's.  Instead, millions of dollars in investor funds were used to pay putative MTN 'profits', as well as diverted for Irby's personal benefit.  Bowie, who did not deal directly with investors but instead directed Irby to make false representations, also received nearly $2 million without providing any apparent consideration.  Irby was sentenced in 2010 to 24 years in prison after being charged with money laundering.

Bowie's 80-year sentence should serve as a stark reminder of the perils of proceeding to trial rather than accepting a guilty plea. The severity of Bowie's sentence is not only grossly disproportional to the relatively meager amount of funds involved, but is also easily one of the highest handed down to a Ponzi schemer - man or woman. (While women have been convicted of operating Ponzi schemes, they are handily outnumbered by men.)  Indeed, the 30-year sentence handed down to a Florida woman for orchestrating a $100 million Ponzi scheme pales in comparison to Bowie's sentence.  Other examples of women being sentenced for Ponzi schemes are herehereherehere, and here.

Tuesday
Nov202012

SEC: Secretive 'Trust' With World War II Ties That Promised 38% Annual Returns Was $15 Million Ponzi Scheme

The Securities and Exchange Commission ("SEC") instituted a civil enforcement action against a Florida man and a California woman, alleging that the investment opportunity promising 38% annual returns and requiring strict secrecy was, in reality, a Ponzi scheme that raised more than $15 million from unsuspecting investors.  Billy W. McClintock, 70, and Diane Alexander, also 70, were charged with multiple violations of federal securities laws in connection with the alleged scheme, which promised lucrative gains through a highly-secretive entity known as the "Trust".  The SEC is seeking injunctive relief, an asset freeze, disgorgement of all ill-gotten gains, and civil monetary penalties.

According to the SEC, McClintock was a resident of Bradenton, Florida, and had previously served time in prison due to a cocaine trafficking conviction.  McClintock and Alexander apparently shared a long-time friendship, and sometime before 2002, McClintock confided to Alexander that he was associated with a secretive investment club known as the "Trust".  Apparently, while on a trip to London, McClintock had happened upon a man named "John" who was a member of the Trust and disclosed to McClintock that he could lend money to the Trust and receive a 38% annual return.  The "Trust" was allegedly formed after World War II by several wealthy European families, with offices in Luxembourg and Zurich, and had the power to create money "through fractional banking and the sale of banking debentures"

The "Trust" was shrouded by heavy secrecy, with McClintock being told that the communication of any details about the trust to any third person, such as an attorney, certified financial accountant, or financial planner, would result in that person's permanent ban from participating in the Trust.  After hearing McClintock's story, Alexander accepted McClintock's offer to serve as United States Regional Director for the Trust, in addition to three other unnamed Regional Directors.  Along with McClintock - the 'United States National Director' - the two relayed the same story to potential investors, along with the promise of steady annual returns of 38%.  The two also appealed to investors' religious beliefs, telling them to "put your money in the Trust and your trust in God.” In total, approximately 220 investors contributed over $15 million to the "Trust".

However, contrary to their representations, there is no evidence that any secretive Trust ever existed, and neither Alexander nor McClintock ever sent any investor funds to any Trust.  Rather, according to the SEC, investor funds were simply pooled together in classic Ponzi scheme fashion, and the regular interest payments made to investors were in fact comprised of these commingled funds.  Additionally, investors were not told that, in return for referring investors to the "Trust", Alexander received a 'management' fee of 5%, which she also received for every investor that 'rolled over' their principal investment upon expiration. As the SEC stated, 

the Trust is a Ponzi scheme in which new investor funds, not Trust profits, pay the purported fees  and interest owed to earlier investors. 

Ironically, Alexander sought to convince investors to disregard the old agage that  'If it sounds too good to be true, it probably is,' claiming that it was simply 'a lie that came from the pit of hell.' 

A copy of the SEC complaint is here.