California Man Charged with $1.75 Million Ponzi Scheme

A Miami man was arraigned Monday on charges that he operated a Ponzi scheme that ultimately cost investors $1.75 million.  Fidel Bermudez, 43, pled not guilty to multiple counts of grand theft and security fraud after being extradited from Miami where he was arrested on June 15, 2011.  

State prosecutors alleged that Bermudez solicited investors from the congregation at the Church of God in Simi Valley, California.  From 2004 until 2007, Bermudez promised high returns while assuring investors that their investments were risk-free.  As later investors placed their money with Bermudez, earlier investors were paid with these proceeds disguised as interest payments.

Bermudez faces up to 17 years in state prison if convicted of the charges.  Bail has been set at $500,000, and a preliminary hearing is scheduled for July 7.  From the charges levied against Bermudez, it appears that only state charges are currently pending.  Federal charges may be forthcoming depending on the nature of the scheme.

Colorado Man Pleads Guilty to $1.7 Million Ponzi Scheme

A Colorado man has pled guilty to defrauding at least 79 investors as part of a Ponzi scheme that netted at least $1.7 million.  Frederick H.K. Baker, 46, pled guilty Tuesday to one count of wire fraud and one count of conspiracy to commit wire fraud in connection with a purported sophisticated currency trading operation that was ultimately revealed to be a Ponzi scheme.

Baker admitted that he began soliciting investors in 2006 and 2007 from Colorado and several other states.  Promising investors a monthly return of at least 8 percent, Baker also guaranteed investors that the principal would remain safe.  Yet, instead of using actual profits, Baker used funds from incoming investors to pay older investors.  Prosecutors alleged that investor funds were used to pay for off-road vehicles, a down payment on a Durango, CO house, and work done on personal automobiles.  

As part of Baker's sentence, he was also ordered to pay $820,000 in restitution to the victims defrauded by the scheme.  He is currently scheduled to be sentenced on October 7th in a Denver federal court. Under current federal sentencing guidelines, Baker faces a sentence between 41 and 51 months in prison.  Another individual charged in the scheme, Mark Akins, is still awaiting trial after pleading not guilty earlier this year.  

Philadelphia Ex-Lawyer Faces Federal Charges Relating to Ponzi Scheme

Federal prosecutors have unveiled charges against a Philadelphia man alleging that he ran a Ponzi Scheme that defrauded investors out of more than $6 million.  Ira Pressman, 64, is already facing charges of theft and corrupt organizations filed by the state of Pennsylvania in March.  While the state charges allege a total loss of $3 million from 8 victims, the federal charges allege that a total of $6 million was lost from 20 investors.

Authorities allege that Pressman operated his scheme through his company PJI Distribution Corporation in Bryn Mawr.  Similar to the much larger scheme run by Thomas Petters, Pressman represented to investors that he was buying closeout merchandise and reselling that inventory to buyers.  Pressman even forged invoices and purchase orders to create the appearance that he was engaged in legitimate business dealings.  Yet, rather than purchase these goods, Pressman instead kept the money, and used money from new investors to pay off older investors.  

Pressman has been charged with one count of wire fraud, mail fraud, and money laundering.  A former lawyer, he was convicted of several fraud-related offenses in the early-1990s and eventually disbarred as a result.  

Pair Sentenced to Prison in $78 Million Ponzi Scheme

Two individuals were sentenced Monday for their role in a Ponzi Scheme promising to help homeowners pay off their mortgages.  Isaac Jerome Smith, 48, and Alvita Karen Gunn, 33, received sentences of six years and five years, respectively, along with orders to pay restitution to the nearly 1,000 investors that were defrauded.  The two were convicted earlier this year, along with a third co-defendant, Michael Anthony Hickson, who is due to be sentenced on July 1st.  Hickson was convicted of the same charges as Smith and Gunn, and was also convicted of perjury, which adds a potential five years to his sentencing recommendation.

The three operated Metro Dream Homes, which promised investors with a minimum $50,000 investment that the company would invest in ATMs, phone card kiosks, and flat-screen televisions displaying advertising at businesses.  These ventures would supposedly pay off the investors' mortgages in a short period of five to seven years.  

Unlike the typical Ponzi Scheme, in which investors received periodic interest payments, Metro Dream Homes promised to take over homeowners' monthly mortgage payments and pay off the mortgage within five to seven years.  The company went to great lengths to attract investors, including conducting elaborate presentations at luxury hotels in Washington, D.C., New York, and Beverly Hills.  More than 1,000 investors were found to have invested approximately $78 million in the scheme.  Thus far, two other individuals have been convicted of crimes relating to their role in the scheme, and currently await sentencing.  

Appeals Court Affirms Co-Defendant Sentence in Petters Ponzi Scheme

Larry Reynolds, charged by authorities for his role in the multi-billion dollar Ponzi scheme orchestrated by Minnesota businessman Tom Petters, has lost his bid to appeal his sentence.  Reynolds was sentenced to 130 months for his role in the $3.7 billion scheme, which consisted of allowing Petters to wire funds through Reynolds' business - a total of $12 billion over six years - in return for a percentage of the laundered funds.  While Reynolds appealed this sentence, the Eighth Circuit Court of Appeals on Friday, June 24, 2011 affirmed Reynolds' sentence, agreeing that "Reynolds' involvement in Petters's scheme warranted severe punishment."

Reynolds, 68, owned Nationwide International Resources, a wholesaler that sold shoes and clothing to retail outlets.  Petters scheme involved the purported purchase of consumer electronics at wholesale prices and subsequent sale to large retailers at a substantial markup.  Petters enlisted the help of individuals including Reynolds to create the appearance that large sums of money were being paid to vendors for these purported goods.  Instead, Petters was doing nothing more than running an elaborate Ponzi scheme, and individuals such as Reynolds received compensation for their assistance.  From 2002 until September 2008, Reynolds received $9.9 million for his role in the scheme.  

Petters was sentenced to 50 years in prison in April 2010, following a jury trial in which the Minnesota businessman was convicted by a jury of numerous counts including wire fraud and money laundering. The sentence, which was the longest financial-related sentence in Minnesota history, would later be eclipsed by the 150-year sentence handed down to Bernard Madoff.  

The Department of Justice has established a webpage devoted to the criminal prosecutions against Petters and his associates here.