SEC Halts New Hampshire Ponzi Scheme That Offered 200% Annual Returns

The Securities and Exchange Commission (the "Commission") charged a Canadian resident and his New Hampshire business with operating a fraudulent Ponzi scheme that took in over $1 million from investors.  Henry Roche, through his company New Futures Trading International Corporation, was charged with multiple violations of federal securities laws in connection with the sale of unregistered securities.  The Commission is currently seeking injunctive relief, disgorgement of ill-gotten gains and civil monetary penalties.

Since at least 2008, Roche operated an internet-based stock and futures day-trading business.  Through New Futures Trading International Corporation ("New Futures"), Roche solicited investors by, among other means, YouTube videos, in the United States and Canada for the purchase and sale of high-yield promissory notes with promised monthly returns ranging from 5% to 10%.  Roche represented that investor funds would be used to purchase bonds, treasury notes, and/or treasury futures contracts.  Additionally, some investors were told that their funds would be invested directly in New Futures, which Roche described as an online futures day-trading education and training business located in Canada.  In total, Roche raised $1.3 million from fourteen investors. However, the vast majority of investor funds were used for non-investment purposes, including the payment of nearly $900,000 to investors in the form of purported interest payments and nearly $350,000 to pay the costs of Roche's horse-breeding ranch in Kendal, Ontario, Canada.

According to the Commission, Roche continues to operate the business under a series of names including Masters Palace, Inc., and Third Realm Institute.  As a result, the Commission announced it had obtained a temporary asset freeze of the operation during the pendency of the investigation.

A copy of the SEC Complaint is here.

SEC Charges Former Hip-Hop Promoter With Operating $5 Million Ponzi Scheme

The Securities and Exchange Commission (the "Commission") initiated civil proceedings against a former hip-hop promoter who orchestrated a Ponzi scheme that bilked investors out of $5 million.  Tyrone Gilliams Jr., 44, was charged with multiple violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with a scheme that purported to invest in derivatives of United States Treasury securities.  The Commission is seeking permanent injunctive relief, along with civil monetary penalties and disgorgement of ill-gotten gains.

From at least June 2010 to August 2011, Gilliams and TL Gilliams, LLC ("TLG") solicited potential investors by representing that he would pool and use investor money to make large purchases and sales of Treasury STRIPS. STRIPS are the individual interest payment components of a United States Treasury bond, payable semi-annually over the life of the bond.  Gilliams told investors that the trading program would yield weekly returns of five percent and was virtually risk-free.  Several investors, including the the director of a family foundation, invested a total of over $5 million with Gilliams.  Over the next year, Gilliams paid nearly $100,000 in what were described as profits from the trading operation.  

However, rather than use investor funds to purchase STRIPS, Gilliams failed to invest any of the funds.  Instead, Gilliams misappropriated investor funds for a variety of personal uses, including paying for his children's tuition, buying jewelry, and paying for international travel.  In addition to spending nearly $1 million to sponsor a black-tie gala at the Philadelphia Ritz-Carlton, Gilliams also wired approximately $1.6 million to a purported gold trading operation in Ghana, Africa.  

After demands from investors to return their principal in late 2010, Gilliams claimed, falsely, that he could not return their funds as they were frozen in ongoing civil litigation.  Shortly after, in early 2011, Gilliams filed documents with the Commission indicating his intent to raise an indefinite amount of funds for Black Box Funds, LLC.  Gilliams was arrested last month for his involvement in the scheme and faces wire fraud and securities fraud charges.  

A copy of the SEC Complaint is here.

SEC Alleges Multi-Million Dollar D.C. Ponzi Scheme

The Securities and Exchange Commission filed civil charges against several individuals who allegedly operated a Ponzi scheme that defrauded Washington D.C. investors out of more than $27 million.  Garfield Taylor, along with several family members and friends, was charged with various federal securities law violations in connection with the scheme, which purported to engage in low-risk options trading.  The SEC is seeking permanent injunctive relief in the Complaint, along with penalties and disgorgement of ill-gotten gains along with pre-judgment interest.

According to the complaint, Taylor operated the scheme through two entities he controlled - Garfield Taylor Incorporated ("GTI") and Gibraltar Asset Management Group, LLC ("Gibraltar").  Investors were lured into investing with the companies through the sale of promissory notes that purported to pay above-average rates of return as high as twenty percent with little or no associated risk.  Taylor, who was not a licensed securities broker, even likened the investment strategy to some investors as similar to bank accounts insured by the Federal Deposit Insurance Corporation ("FDIC"). In total, more than $27 million was raised from approximately 130 investors, who were primarily middle-class residents and charitable organizations in the Washington, D.C. area.  However, in reality, Taylor did little trading, and when he did trade, made highly risky bets on naked options that resulted in substantial losses.  The majority of investor funds were instead used for non-trading purposes, including the payment of $12.5 million to existing investors in the form of purported returns.  Additionally, Taylor misappropriated investor funds for a variety of personal reasons, including the payment of private school tuition for his children.

The SEC also named three companies belonging to the other defendants as relief defendants for the purpose of seeking disgorgement with prejudgment interest of investor funds.  

A copy of the SEC Complaint is here.

Murder-for-Hire Plot Linked to Suspected Ponzi Scheme

A disgruntled investor in a suspected Costa Rica-based Ponzi scheme apparently tried - unsuccessfully- to hire a hit man to kill the head of one of the funds recommended by the scheme.  The suspected Ponzi scheme, Voyageur Foundation ("Voyageur"), is an "investment club" that charged investors membership fees in return for recommending accredited investment opportunities to investors.  It is currently under investigation stemming from its inability to repay more than $65 million to approximately 1,000 Canadian investors.  The foundation stopped granting redemption requests from investors last year, and has since been barred from soliciting clients or selling investments by securities regulators in Quebec.

One of the funds recommended by Voyageur was the Admiralty Fund, run by former Calgary lawyer Richard Devries.  According to Devries, the Admiralty Fund received money from a Voyageur-controlled company that subsequently funnelled money into Admiralty.  Calgary businessman Nicholas Djokich suspected that Devries was involved in the scheme as a result of his inability to have his investment returned, and tried to hire an agent posing as a contract killer to kidnap Devries and force him to wire money back to Djokich. According to the agent, Djokich stated that he wouldn't mind if the hit man "took (DeVries) fishing and he never came back."  However, the contract killer Djokich thought he hired turned out to be an undercover US agent, and Djokich was subsequently arrested and sentenced to twenty years in federal prison in October 2010. 

Voyageur, founded by the Jarman family out of British Colombia, solicited investors by promising access to exclusive investment opportunities through annual membership fees.  Approximately 1,000 investors entrusted more than $65 million with Voyageur, which sought to comfort investors about its legitimacy by telling investors that third-party firms were used to perform "due diligence" on the investments.  However, subsequent investigation has shown that these claims were false.  Indeed, members of the Jarman family or their relatives are alleged to have served as officers for these firms, as well as for investment firms recommended by Voyageur.  Additionally, those family members are said to have received commissions `for investments made by Voyageur investors.  Thus, members of the Jarman family apparently gave advice on whether to invest in Jarman-controlled entities.  

Additionally, Voyageur made substantial investments in Merendon Mining Company, a Canadian company run by Gary Sorenson, who is currently facing charges that he operated a Ponzi scheme that defrauded investors out of as much as $400 million.  After Sorenson was arrested in connection with that fraud, payments to the Voyageur-affiliated investment funds soon stopped, and investors were left unable to withdraw any of their funds.  

Little is known about Voyageur or its affiliated investment funds, as neither has issued prospectuses or financial reports. Additionally, the funds' Costa Rican origin also presents transparency issues.  

Spokane Woman Indicted for $126 Million Payday Loan Ponzi Scheme

The Department of Justice charged a Washington woman with orchestrating a Ponzi scheme that took in more than $126 million from investors worldwide.  Prosecutors filed a 110-count indictment against Doris "Dee" Nelson, accusing her of operating the scheme to support a payday lender known as Little Loan Shoppe.  Nelson faces 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering, which could result in a prison sentence of hundreds, if not thousands, of years if she is convicted of the charges.  The charges come several months after the SEC instituted civil proceedings against Nelson.

According to the indictment, Nelson used numerous different business entities to operate a payday/short-term lending business called the Little Loan Shoppe ("LLS").  Originally centered in British Colombia, LLS moved its operations to Spokane in or around 2001.  Shortly after in 2003, LLS closed all physical operations and and began conducting the business over the internet.    According to the indictment, the scheme began in or around May 2000, when Nelson began soliciting investors by promising high yields on investor funds which Nelson claimed would be paid from the profits of the short-term operations of LLS.  These purported returns ranged from forty to sixty percent annually, and were often paid to investors via post-dated interest checks mailed to the investor at the time of their investment.  When the operation began to encounter financial difficulties in October 2008, investors were offered reduced interest rate payments of ten percent.  However, the financial difficulties continued, and by March 2009, Nelson had ceased making any payments.

While Nelson represented to investors that LLS generated huge profits that were used to pay the exorbitant returns, in reality the entire operation was a massive Ponzi scheme, with nearly all investor funds being used to pay interest to existing investors and to sustain Nelson's lavish lifestyle.   Nelson alone received over $3 million in funds diverted from investor funds, which were used to purchase, among other things, a motor home, a Chevrolet Corvette, and a Mercedes Benz S550.  Additionally, Nelson used investor funds to gamble at Las Vegas casinos, losing nearly $500,000 between 2005 and 2008.  Nelson also paid commissions to several investors in return for directing further investment to Nelson's operation.  

Little Loan Shoppe filed for bankruptcy in 2009, and the trustee appointed to oversee the liquidation process has filed clawback lawsuits against LLS investors who received interest payments in excess of their original investment.

A copy of the Indictment is here.