SEC Sues Estate of Deceased Houston Money Manager

The Securities and Exchange Commission ("SEC") charged  two Houston money management firms and their founders with operating a Ponzi scheme that allegedly took in over $50 million from investors, including nearly $8 million from at least 13 prominent college basketball coaches.  In a complaint filed August 1st, the SEC charged Select Asset Management, J. David Financial, Brian A. Bjork, and the Estate of Joel David Salinas with various securities law violations and sought an asset freeze during the pendency of the investigation.  As recently covered by Ponzitracker, Salinas committed suicide shortly after being interviewed by the SEC for his involvement in the scheme.  Salinas had gained fame for founding the Houston Select summer basketball program which became known in basketball circles for attracting a high caliber of attendees.  Many former and current NCAA basketball coaches are reported to having invested with Salinas.

According to the SEC's complaint, Brian A. Bjork and Salinas formed Select Asset Management and J. David Financial to orchestrate two fraudulent offerings of securities from at least 2004 until the present.  In the first scheme, over 100 investors purchased approximately $39 million in corporate bonds offering annual yields up to 9%.  Investors believed they were purchasing bond offerings of large US companies, including Ford and IBM, and were provided with monthly account statements reflecting such holdings.  In reality, these bonds were never purchased or retained by J. David Financial or Select Asset Management.  Instead, investor funds were commingled and used to pay fictitious coupon interest payments to older investors.

The second scheme involved the offering of securities in the form of units of membership interests issued by two private funds managed by Select Capital Management.  According to Private Placement Memorandums issued by the two funds, the Funds intended to build a commercial-loan portfolio by originating short-term commercial loans, purchasing loan participations and syndications, and investing in commercial-loan funds.  The SEC alleged that two offerings were held from August 2007 to December 2010, in which nearly $14 million was raised from over 50 investors.  

According to Bloomberg, a note purporting to be from Salinas was found during a search of his office claiming sole responsibility for the crimes.

A hearing is set before United States District Judge Keith P. Ellison on August 10th.  

A copy of the SEC Complaint is here.

Hawaii Couple Sentenced in $4 Million Ponzi Scheme Coordinated Behind Prison Walls

A Hawaii husband and wife were sentenced to federal prison for orchestrating a Ponzi scheme that bilked investors out of nearly $4 million.  Perry Jay Griggs, and his wife, Rachelle Griggs, received sentences of eighty-seven months and four years, respectively, for operating a scheme that authorities say Perry Griggs masterminded while he was incarcerated (incidentally while serving a sentence for an earlier Ponzi scheme).   The couple entered guilty pleas earlier this year to charges of wire and mail fraud.  Each of those charges carried a maximum sentence of twenty years in prison and additional criminal monetary penalties.

From at least 2005 until 2009, prosecutors say the Griggs operated Aloha Ventures, soliciting money from prison inmates and their families who thought they were investing in a commodity pool that purportedly traded commodity futures contracts.  While incarcerated following convictions for wire fraud and money laundering, Perry Griggs approached fellow inmates about the investment opportunity, while his wife solicited investments from the family of inmates and other members of the general public. Potential investors were told that Perry Griggs was a highly successful commodity trader and that they would receive monthly payments composed of trading returns.  In total, it is estimated that seventeen victims placed more than $4 million with Aloha Ventures.  Yet only a fraction of these funds were invested in commodity futures contracts, with authorities alleging that nearly all of these funds were lost.  Additionally, the Griggs misappropriated approximately $1 million for personal uses and $1.1 million to pay fictitious returns to investors.  Upon his release from prison, the Griggs became fugitives until their arrest in December 2010.

In addition to their respective prison sentence, both Perry and Rachelle Griggs were ordered to pay nearly $2 million each in restitution to investors defrauded by the scheme.  

A copy of the complaint filed by the US Commodity Futures Trading Commission is here.

Global Bullion Exchange Founder Pleads Guilty to $30 Million Ponzi Scheme

A south Florida man entered a guilty plea to operating a Ponzi scheme that ultimately raked in $30 million under the guise of a precious metal trading firm.  Jamie Campany, 47, pled guilty to one count of wire fraud and one count of mail fraud, which each carried a maximum prison sentence of twenty years along with criminal penalties and the possibility of restitution.  However, a maximum sentence is not anticipated, as Campany has been cooperating with prosecutors since his arrest in late June.

As covered by Ponzitracker, Campany was charged in late June with nine counts each of wire fraud and mail fraud  for his operation of several South Florida precious metal investment firms.  From 2007 to 2009, these entities, including Global Bullion Exchange, promised investors above-average returns in precious metals as prices of various metals such as gold and silver rose rapidly in value.  The companies purported to purchase the metals and store them in secure locations.  Ultimately, more than 1,400 investors entrusted nearly $30 million to Campany's companies.  Instead, minimal amounts of the precious metals were purchased.  The majority of the funds were used to pay returns to old investors.  

Sentencing is currently scheduled for October 28 before United States District Judge James I. Cohn.  

Attorney Disbarred After Admitting to Ponzi Scheme

A former attorney who masterminded a Ponzi scheme that bilked investors out of $30 million was stripped of his license to practice law in New York.  In the case, Matter of Starr, M-1636, the five-member panel of the Appellate Division, First Department stated that:

"Since respondent admitted to conduct which satisfies the elements of scheme to defraud in the first degree, a New York class E felony, and grand larceny in the second degree, a New York class C felony…he is subject to automatic disbarment…which he does not contest,"

The disbarment will be retroactive to Starr's guilty plea in September 2010.

Kenneth Starr had pled guilty to charges of wire fraud, money laundering, and investment advisor fraud in September 2010, under which prosecutors had agreed to request a sentence based on federal sentencing guidelines calling for a sentence of ten to twelve years in prison.  However, United States District Court Judge Shira Scheindlin departed from the guidelines and sentenced Starr to ninety months in federal prison based on Starr's longstanding charity and civic work. 

The scheme made headlines when it was revealed that several of Starr's victims were celebrities, including Uma Thurman.

Convicted Hawaii Ponzi Schemer Sentenced to 20 Years for State Charges

A Hawaii man who ran a Ponzi scheme that spanned two decades and cost investors at least $8 million in losses was sentenced on state charges resulting from the scheme.  Lloyd Y. Kimura, 61, of Maui, was sentenced to twenty years in state prison by State Circuit Court Judge Joseph Cardoza as well as ordered to pay $8 million in restitution to defrauded victims.  Last month, as covered here, United States District Judge David Ezra had sentenced Kimura to twelve years in federal prison and also ordered Kimura to pay $8 million in restitution.  According to the Hawaii Attorney General's office, Kimura will serve the two sentences concurrently.  Judge Ezra had noted the pending state charges and possible sentence in deciding Kimura's federal sentence, noting that his twelve-year sentence would likely be more severe in light of the possibility for parole under the state sentence.

Kimura operated Maui Industrial Loan & Finance Co. as a massive Ponzi scheme that spanned two decades.  Starting in 1986, Kimura would loan out money to investors at high interest rates ranging from eighteen to twenty-four percent.  Yet, instead of lending the money out, Kimura used funds from new investors to pay off old investors.  When Kimura's scheme was unable to sustain itself in 2009, authorities estimated that at least 50 victims suffered losses exceeding $8 million from Kimura's scheme. Kimura subsequently filed bankruptcy in 2010.