Former NBA Player Accused of $2 Million Ponzi Scheme

A former college basketball standout who later played professionally for the New Jersey Nets and Milwaukee Bucks is scheduled to make an initial appearance after being charged with operating a $2 million Ponzi scheme. C. Tate George, 43, was indicted in a federal complaint unsealed today that charged him with one count of wire fraud. Wire fraud carries a maximum statutory penalty of twenty years in federal prison, along with criminal monetary penalties and restitution.  

From 2005 until 2011, the indictment alleges that Tate solicited more than $2 million from investors who included several former professional athletes.  Investors were told that George's company, The George Group ("TGG"), was a profitable business that engaged in real estate development ventures in Florida, Illinois, Connecticut, and New Jersey.  TGG also maintained a website that described its strategy as follows:

The George Group specializes in both commercial and residential development financing including equity contributions. We have amassed a network of quality real estate and business investors that we are able to share with developers in areas where there is no conflict with one of our existing projects.

Additionally, the website made claims that the company had a real estate development portfolio in excess of $500 million.  A cached version of the website page is here.  The website has since been taken down. 

Investors were given promissory notes reflecting their investment amount and length, which varied from several days to a year.  Investors were also assured that their funds would be maintained in an attorney escrow account. Contrary to these representations, George deposited investor funds into his personal bank accounts, and authorities alleged that George and TGG had virtually no income-generating operations.  Instead, George operated a typical Ponzi scheme, using investor funds to fund principal and interest payments to existing investors and to sustain a lavish lifestyle.  

George's is scheduled to appear before a federal magistrate Friday afternoon.

A copy of the Indictment is here.

Madoff Trustee Seeks $189 Million in Clawback Suits

The trustee overseeing the liquidation of Bernard Madoff's failed Ponzi scheme filed another set of lawsuits seeking to "claw back" nearly $180 million from four entities that invested with Madoff through investment accounts with 'feeder fund' Fairfield Sentry.  Fairfield Sentry was the largest of the so-called 'feeder funds' that funneled billions of dollars into Madoff's scheme.  Irving Picard, the court-appointed trustee, earlier this year reached a settlement with Fairfield Sentry that allows Picard to pursue clawback actions against Fairfield Sentry investors.  According to Picard, Fairfield Sentry received approximately $3 billion in avoidable transfers from Madoff during the six years preceding the collapse of the scheme.

Picard is seeking the return of nearly $190 million from Atlantic Security Bank ("ASB"), Trincaster Corporation ("Trincaster"), Bureau of Labor Insurance ("BLI"), and Naidot & Co ("Naidot").  With the exception of New Jersey-based Naidot, the remaining three companies are foreign companies, with ASB based in Panama, Trincaster in Switzerland, and BLI in China.  A list of the amounts sought from each entity is provided below:

• Atlantic Security Bank - $120,168,691
• Trincaster Corporation - $13, 311,800
• Bureau of Labor Insurance - $42,123,406
• Naidot & Co. - $13,654,907

These clawback actions derive their authority from various federal and state laws.  Under Sections 550 and 551 of the Bankruptcy Code and various sections of the New York Debtor & Creditor Law, initial and subsequent transfers from a debtor within the six-year time period preceding the filing of a bankruptcy petition are subject to avoidance.  

Including the four suits filed today, Picard has now filed clawback lawsuits seeking nearly $1 billion from Fairfiield Sentry customers, including lawsuits against the investment arm of Abu Dhabi (LINK) and the National Bank of Kuwait.

The Complaints against each entity are here: Atlantic Security, Bureau of Labor Insurance, Naidot, and Trincaster. 

Related Ponzitracker coverage:

Madoff Trustee Files Seven Clawback Lawsuits Against Feeder Fund Investors

Madoff Trustee Fires Next Salvo of Clawback Lawsuits

Madoff Trustee Files Five More Clawback Lawsuits Against Feeder Fund Investors Seeking Nearly $100 Million

Madoff Trustee Seeks $300 Million From Abu Dhabi Investment Arm

SEC Accuses Washington Woman of Payday Loan Ponzi Scheme

The United States Securities and Exchange Commission filed a complaint against a Spokane woman on Thursday, charging her with orchestrating a Ponzi scheme disguised as a payday loan operation that defrauded thousands of investors out of tens of millions of dollars. Doris E. Nelson, 51, of Colbert, Washington, was charged with multiple violations of federal securities laws, including the Securities Act of 1933 and the Securities and Exchange Act of 1934.  In its complaint, the SEC is seeking injunctive relief permanently barring Nelson from future violations, disgorgement of ill-gotten profits, and the payment of civil monetary penalties.  

According to the Complaint, Nelson formed Little Loan Shoppe ("LLS") in 1997 in British Columbia, Canada, subsequently moving business operations to Spokane, Washington in 2001.  LLS was comprised of at least fifteen sub-entities, including Little Loan Shoppe Ltd., Team Spirit America, LLC, and Little Loan Shoppe Canada, LLC.  The entities offered short-term payday loans through storefronts, later expanding to offering the same loans through the internet.  In 2006, LLS ceased retail storefronts and operated exclusively as an internet-based  payday loan business.  Beginning in 1999, LLS issued hundreds, if not thousands, of promissory notes to more than 650 investors who were promised annual returns ranging from 40% to 60%.  Through the issuance of these notes, LLS raised approximately $135 million from investors.  Investors were reassured that their investments were risk-free, that LLS was financially sound, and that Nelson had a separate account to repay investors in the case that the economy went sour.  However, according to authorities, LLS failed to generate operational income from 1999 through 2008.  As a result, LLS used existing investor funds to make approximately $115 million in Ponzi-style payments of principal and interest to earlier investors.  Additionally, Nelson also misappropriated millions of dollars in investor funds for personal use, including the purchase of luxury automobiles, gambling, and home renovations.

As the scheme faced increasing difficulty in 2008, Nelson formulated additional ways to draw in much-needed investor funds, including the creation of new companies that promised a 60% annual return.  Eventually, the fund ceased making payments to investors, and in July 2009, several of the LLS entities either filed for or were forced into bankruptcy.

Washington state financial regulators filed suit against the companies in 2010.  It is unknown as to whether Nelson will face criminal charges.

A copy of the SEC Complaint is here.

Pennsylvania Man Sentenced to Prison For $7.5 Million Ponzi Scheme

A Scranton man who operated a $7.5 million Ponzi scheme in a downtown office above the Lackawanna County District Attorney's Office was sentenced to spend 5 1/2 to 16 1/2 years in state prison.  Brian Murray, 68, was charged along with several other executives of Murray Insurance, including Murray’s wife, Diane D. Murray, 66; Christine M. Oliver-Shean, 51, of Scranton; and Oliver-Shean’s husband, Timothy G. Shean, 53.  The four faced a variety of state charges, including criminal conspiracy, money laundering, theft, insurance fraud, and forgery.  As Pennsylvania Attorney General Tom Corbett quipped, 

It is interesting to note that the building in Scranton where Murray’s insurance business was headquartered is known as ‘One Pyramid Center,’ because this was a massive illegal pyramid.

Murray entered a plea of no contest to criminal conspiracy, two counts of theft by deception, and theft by failure to make required disposition of funds, each a third-degree felony.

Murray operated Murray Insurance Agency in Scranton, which purported to purchase insurance policies for local businesses.  According to authorities, Murray collected insurance premium payments but failed to forward those payments to insurers to obtain coverage, instead pocketing the premiums.  In the case of a client filing a claim, new investor funds were used to satisfy any payouts.  This practice continued for nearly a decade, resulting in many businesses not receiving insurance coverage they assumed was in place.  Included among Murray's victims were University of Scranton, Marywood University, Loyola College of Maryland, St. Joseph’s University, Moses-Taylor Hospital, the Borough of Phoenixville, and the Lackawanna County Multi-Purpose Stadium.  One of the victims, Philips Healthcare, paid Murray $500,000 for an insurance policy that was never existed.  It later cost the company over $2 million in investigative and court costs to determine this fact.  Murray Insurance filed for bankruptcy protection in 2009.  Authorities estimated total losses from the scheme at $10 million.

Murray's wife earlier pled guilty to a single count of criminal conspiracy and was sentenced to twenty-four months of probation.  Ms. Oliver-Sheen pled guilty to three counts of theft, one count of insurance fraud and one count of conspiracy, and received a three-month sentence in state prison.

Idaho Man Sentenced to Eight Years in Prison for $29 Million Ponzi Scheme

An Idaho Falls man behind a $29 million Ponzi scheme was sentenced to eight years in federal prison on Tuesday. United States District Judge Edward J. Lodge sentenced Daren Palmer, 38, in what authorities described as the largest Ponzi scheme in state history.  Palmer was indicted for the scheme in March 2011 following a two-year FBI investigation of Palmer following investor complaints. Palmer recently pled guilty to single counts of wire fraud and money laundering in May 2011, and faced up to thirty years in federal prison at sentencing.  

From 2005 to 2008, Palmer operated Trigon Group LLC in Idaho Falls, Idaho. Palmer's plea agreement details a transaction in which David Swenson and others operating as Worry Free LLC, of Utah, invested $500,000 with Palmer's Trigon Group. To persuade Swenson to invest with him, Palmer sent Swenson and other investors a power point presentation that promised favorable rates of return and assured the safety of invested principal.  In addition to Swenson's investment, Palmer also solicited nearly $76 million from sixty-eight additional investors.  However, investors were not told that Trigon Group was experiencing financial distress, or that investor funds would be used to pay returns to other investors and to pay Palmer's personal and business expenses.  Ultimately, Palmer lost more than $20 million of investor funds.  The plea agreement also details a $110,500 purchase of jewelry by Palmer using proceeds of the fraud, constituting wire fraud.  

Palmer was also ordered to pay $29,842,731 in restitution to defrauded investors. The Securities and Exchange Commission and the Commodity Futures Trading Commission have each already won civil judgments against Palmer.

A copy of Daren Palmer's Plea Agreement is here.

A copy of the Justice Department Release annoucning Palmer's guilty plea is here.