Indiana Police Arrest Two in $4.5 Million Ponzi Scheme

Two men were arrested on charges that their investment company was in reality a Ponzi scheme that cost investors $4.5 million.  Jerry Smith, 49, of Brookville, Indiana, and Jasen Snelling, 47, of Anderson Township, were charged with 18 felonies by Indiana prosecutors, including securities fraud and theft. While authorities have arrested Smith, Snelling's whereabouts remain unknown.

Snelling and Smith operated Dunhill Investment Advisers and CityFund Advisory in downtown Cincinnati, where they guaranteed high rates of returns to clients under the guise that the firms were successfully day-trading.  More than thirty people invested $4.5 million with the operation, which, instead of being invested, was used to pay owner salaries and purchase a boat, furniture, and plastic surgery.  Following his arrest, Smith, through his attorney, claimed he and his family had also lost a great deal of money and was a victim of Snelling.

Following a tip by an investor whose accountant questioned the legality of the operation, the Indiana Securities Division filed a civil complaint in June 2010 freezing Smith and Snelling's assets.  Smith and Snelling have also been charged in two other Indiana counties.  The filing of federal charges is also a possibility. 

Ex-Attorney Indicted for $7 Million Ponzi Scheme in San Francisco

A federal grand jury has indicted a San Francisco man on charges that he operated a Ponzi scheme that blked investors out of $7 million.  Robert Tunnel, 72, was indicted on seven counts of mail fraud, thirteen counts of wire fraud, and one count of money laundering.

According to the indictment, Tunnel told friends and relatives that he was a sophisticated investor and could achieve substantial returns with low risk.  In an affidavit filed by a FBI agent, Tunnel told one victim taht he was a semi-retired international attorney and had achieved handsome returns investing in commodities such as coffee and copper. From 2006 until his arrest last month, Tunnel took in $10 million from new investors consisting mainly of family and friends.   Rather than investing in commodities, Tunnel made risky trades resulting in losses of $7 million of the original $10 million.  Other funds were paid to investors as returns to create the appearance that Tunnel was successfully trading.

Tunnel was an attorney in California for nearly 35 years before resigning from the California bar amid allegations of misappropriation of funds from his law firm.  Tunnel studied at Dartmouth and obtained his law degree from Harvard Law.  Incidentally, Tunnel is not the first Harvard Law graduate to be accused of running a Ponzi scheme in recent years - Marc Dreier, a fellow Harvard Law grad, is currently serving time for masterminding a $400 million scheme in New York.

Tunnel is no longer in jail after posting a $10 million bond.

Mets Owners File Additional Brief in Bid to Dismiss Madoff Trustee's Lawsuit

In a filing July 7, lawyers for New York Mets team president Saul Katz and other team executives submitted additional briefing in support of their previous motion to dismiss Irving Picard's lawsuit. Picard, the court-appointed trustee liquidating Bernard L. Madoff Investment Securities LLC, filed suit in January seeking hundreds of millions of dollars from the Mets owners and team executives, alleging that as sophisticated investors, they had to know that the consistent returns achieved by Madoff could not have been legitimate.  

Unique from the typical clawback lawsuit - which now total over 1,000 - Picard sought not only money withdrawn in excess of invested principal - termed "false profits" - but also the return of 'fraudulent transfers' withdrawn from Madoff into accounts owned or controlled by the executives.  Picard asserted that such an approach was appropriate in light of "certain indicia of fraud by the Sterling Partners.".  Not surprisingly, the Mets executives fired back, lambasting Picard and his team for their overzealous pursuit and pointing to the subsequent financial damage suffered by the Mets organization after the Madoff fraud was exposed.

In their motion to dismiss and subsequent reply in support, the Mets executives seek to refute the many facts alleged by Picard in support of his contention that the defendants knew or should have known of the illegality of Madoff's operation.  Calling Picard's motion without a "factual or legal foundation," the defendants specifically sought to refute several of the allegations, arguing that (1) the Sterling Partners never shopped for Ponzi Scheme Insurance, and (2) Mets executive David Katz was not concerned that Madoff's scheme was a Ponzi scheme.

The issue is now fully briefed, and a hearing will likely be scheduled in the near-future.  However, any hearing will be held in a New York federal court, rather than Bankruptcy Court, after a ruling that the legal issues raised were more suitable to be heard in federal court.  This is seen as an advantage for the Mets defendants, as the Southern District of New York is highly experienced in dealing with such issues.

Stanford Investors Accuse Receiver of Collecting Nearly All Money Recovered As Fees

Ralph Janvey, the court-appointed receiver tasked with dismantling the alleged multi-billion dollar scheme perpetrated by R. Allen Stanford, today faced an unlikely threat: the investors for whom he has been seeking to recover assets.  In a motion filed in Texas federal court Friday, a group of investors claimed that Janvey's expenses to date amounted to nearly all of the assets recovered thus far as a result of Stanford's fraud.

Several investors filed a motion to intervene on July 7, making several startling accusations.  First, it states that out of the $120 million collected thus far to date by Janvey, nearly all - $118.2 million - has been paid to Janvey and his legal team as expenses, leaving just $1.5 million available to investors.  This includes allegations that Janvey billed $20 million in his first eight weeks as Receiver, and $46 million during the first year of the receivership.  Additionally, the investors allege that not one distribution has been made to investors since Janvey's appointment.  As if the amount itself was not enough, the motion breaks down each investor's pro rata share of that $1.5 million - approximately $71.42 per investor.  

But that's not all.  The motion further alleges that the Stanford Investors Committee - the court-installed group responsible for overseeing the Receiver's actions - had made an arrangement with the receiver to  receiver 25% of all recoveries from the multitude of fraudulent transfer lawsuits filed on behalf of the Receivership estate.

Ultimately, the investors seek the appointment of a representative to the Stanford Investors Committee to represent the rights of over 500 investors who had accounts with Stanford.  There has been no response from the Receiver.  Stanford is set to stand trial in January.  

Fugitive Arrested in $80 Million Ponzi Scheme

Authorities arrested a man today wanted since 2003 for his role in a Ponzi Scheme that fleeced investors out of at least $80 million.  Marlyn "Milt" Hinders, 72, was arrested at Houston airport in June after being rumored to have been living in Mexico since 2004.  A recent tip is rumored to have led to his arrest.  

Hinders, along with eight other individuals, was charged in an 83-count indictment on counts of conspiracy, obstruction, mail fraud, wire fraud, money laundering, and several other charges.  The other eight co-conspirators were all arrested in California and Costa Rica in 2005, and have been or are being prosecuted for those charges.  

Authorities alleged that the nine individuals operated the Genesis Fund, which from May 1998 to June 2002 took in over $80,000,000 in investor funds.  Investors were told that their funds would be pooled and invested as part of a sophisticated foreign currency operation.  According to the indictment, the Genesis Fund received investment funds using offshore bank accounts to avoid scrutiny by the Internal Revenue Service, and kept no financial statements.  Additionally, the Fund's management offices were moved from California to Costa Rica in April 2000 to further avoid regulatory oversight.  

In June 2002, shortly after advertising that the Fund's value exceeded $1.3 billion, the Genesis Fund suspended redemptions and investing operations, and told investors that a new investing operation would begin soon.  An indictment shortly followed.

Hinders is being held in Los Angeles, where he is scheduled to stand trial on August 9th.