CFTC Charges Colorado Man With $1.9 Million Ponzi Scheme

Charges were unsealed Thursday by the United States Commodity Futures Trading Commission against a Colorado man and his company. The CFTC alleged that Shawon McClung, of Denver, Colorado, operated Flint-McClung Capital LLC of Englewood, Colorado and promised investors lucrative returns from a foreign currency-trading business, but instead operated as a classic Ponzi Scheme that did not do any currency trading.
The District Court Judge handling the case, Judge Christine M. Arguello, has issued emergency orders freezing the assets of the accused during the pendency of an investigation.

Two Men Charged in $14 Million Ohio Ponzi Scheme

Two Florida men were accused Thursday of running a Ponzi scheme targeting investors in several Ohio cities.  Edward Allen, 35, from Auburndale, Florida, and David Olson, 60, of Lakeland, Florida, were each charged with thirty federal offenses, including conspiracy, mail fraud, wire fraud, and money laundering.  Each man faces a maximum twenty-year prison sentence and a $5 million fine.

Allen and Olson formed A&O Companies in 2005, and during a three year period between 2006 and 2009, sought out investors for the company's real estate ventures, promising annual returns ranging from twenty to forty-five percent.  Instead of investing in real estate, the pair used investor funds for personal expenses, employee salaries, and to pay off old investors.  

The pair issued promissory notes to investors, telling each investor that the notes were secured by lakefront property in Florida.  Yet, authorities say the property was worth much less than the $8 million issued in promissory notes, and lost further value when a sinkhole developed.  Falsified documents were also provided to lenders about the mortgages.

The Securities and Exchange Commission filed a civil suit against Olson and Allen in 2010, alleging the pair raised nearly $15 million from at least 100 investors in nine states.  Both worked at World Group Securities Inc., and used their positions as registered representatives to solicit investors.  The pair settled with the SEC in May 2011.  

Guilty Plea in Gift Card Ponzi Scheme

A South Carolina woman has pled guilty to orchestrating a gift card Ponzi Scheme.  Annette Marie Benson, 44, pled guilty to one count of wire fraud in a South Carolina federal court on Wednesday, which carries a maximum 20-year prison sentence and a fine of up to $250,000.

Benson carried out the scheme by selling valid gift cards to victims at a steep discount, often up to 20%-50% off the retail value.  These cards were from retailers such as American Express, Shell, Visa, and Walmart.  Benson did not receive any discounts on the cards she purchased to resell, and would continue selling the cards to new victims in order to make up for the losses incurred.  Yet, consistent with the hallmarks of a Ponzi scheme, Benson's scheme collapsed when her outstanding obligations outweighed the money she was able to draw in.

Benson is scheduled to be sentenced October 4th.  

Judge Rules That Investors in Madoff 'Feeder Funds' Are Not Customers Under SIPC

A federal judge handed a significant victory to the trustee overseeing the liquidation proceeding of Bernard L. Madoff Investment Securities on Tuesday, ruling that investors who placed their money in Madoff's hands indirectly through 'feeder funds' could not be considered customers entitled to share in any recovery by Picard.  Picard stated in a recent filing that he has recovered over $7 billion for the benefit of defrauded investors, although some of that amount remains tied up in litigation.

In addition to precluding the so-called customers from recovering from any money Picard may distribute, the ruling also stated that the customers were not entitled to the protections afforded by the Securities Investor Protection Act, which reimburses customers of failed broker-dealers up to $500,000 of allowed losses.  Drawing on the definition of customer in the Securities Investor Protection Act, Judge Burton Lifland reasoned that "bestowing customer status on the objecting claimants would 'stretch that term wholly beyond its limits.'"  

Judge Lifland agreed with Picard that the feeder funds, and not Picard himself, should determine how much any investors should recover.  Picard noted that the majority of the feeder funds were eligible to file claims since they had suffered a net loss on their total investment.  Thus, allowing both the feeder funds and their investors to file claims would be akin to double-dipping on losses.  Additionally, many of the feeder fund customers have initiated litigation against the funds themselves for the decision to invest in Madoff.  

According to Picard's website, over 16,000 claims have been filed to date, with Picard allowing less than 15% of those claims.  Picard has filed a motion to approve his first distribution of monies recovered to date, with a hearing set on that motion for July 12th.  

Several South Florida Precious Metals Trading Firms Charged With Operating Ponzi Scheme

Prosecutors charged the owner of several South Florida precious metal investment firms with operating a giant Ponzi scheme that ultimately resulted in 1,400 investors losing more than $25 million.  Jamie Campany, 47, was charged with nine counts  each of wire fraud and mail fraud, each of which carries a maximum of twenty years in federal prison and a $250,000 fine.  A trial is not likely, as Campany's attorney has indicated he plans to enter a plea arrangement with prosecutors.

Campany is alleged to have operated several entities, including Global Bullion Exchange, that had a presence in several South Florida cities.  As the price of precious metals such as gold and silver rose dramatically, Campany promoted the businesses through internet and telephone advertising.  More than 1,400 investors flocked to invest in Campany's operation, which promised to purchase precious metals and store them in secure locations.  Instead, Campany bought minimal amounts of the precious metals and instead used funds from new investors to pay returns to old investors.  

A cease-and-desist order issued by the Maryland Securities Commissioner provides more insight into the selling tactics employed by the companies.  The order details the use of a now-vacant warehouse in Baltimore that was apparently used as a 'boiler room' to solicit investors.  A 'boiler room' refers to the practice glorified in the movie sharing the same name in which individual brokers make large volumes of cold-calls using high-pressure sales tactics to ensnare investors.  The order also noted that Global Bullion Exchange nor any of its related entities ever registered with the state of Maryland to sell securities or investments.

The operation collapsed in the fall of 2009, and a receiver was appointed to recover assets for the benefit of defrauded investors.  According to his attorney, Campany has been working with the receiver to assist in recovery of assets.