Authorities Charge Three With $28 Million Ponzi Scheme That Targeted Retirees

Authorities charged three men with operating a massive Ponzi scheme that targeted retirees and raked in nearly $30 million.  Robert C. Pribilski, 54, Mahmut Erhan Durmaz, 42, and John T. Burns III, 53, were each charged with multiple criminal fraud counts, with Pribilski and Durmaz each charged with five counts of wire fraud and four counts of mail fraud, and Burns charged with three counts of wire fraud and three counts of mail fraud.  Both wire fraud and mail fraud carry a maximum sentence of twenty years in prison, as well as criminal monetary penalties.  Additionally, the government is seeking $28 million in forfeiture from the three defendants.  While Pribilski and Burns are scheduled to be arraigned later this week, Durmaz fled the United States several years ago and is believed to be hiding in Turkey.

According to authorities, the three men were associated with USA Retirement Management Services ("USARMS"), which solicited retirees through mass-mailings to estate planning seminars held at country clubs and banquet halls.  The men portrayed themselves as educated and experienced in foreign investments that were specifically tailored to senior needs.  Investors were pitched "Turkish Eurobonds" through the purchase of USARMS promissory notes that yielded lucrative annual returns ranging from 8 to 11 percent.  Based on these representations, over 100 investors contributed more than $20 million to USARMS.

However, authorities allege that many of these representations were simply untrue.  For instance, USARMS did not actually invest these funds in Turkish Eurobonds.  Instead, investor funds were used to make over $7 million in Ponzi-style payments to existing investors under the guise of profits from successful trading.  Additionally, the men misappropriated nearly $5 million in investor funds to support a lavish lifestyle that included expensive cars, homes, vacations, and even pornography.  Durmaz even purchased a stamp collection and funded the purchase of the cyrogenic preservation of umbilical cord stem cells.  

Moreover, while investors were told that Durmaz had earned a Masters in Business Administration and was a Certified Senior Advisor, neither of these representations were true.  Finally, nearly $14 million was transferred to relatives and related companies in Turkey.  When the scheme was uncovered in 2010 by the Securities and Exchange Commission, only $900,000 remained in financial accounts controlled by USARMS. 

In addition to the newly-unveiled criminal charges, the SEC instituted a civil enforcement action against the three in 2010, seeking disgorgement of all ill-gotten gains and civil monetary penalties.  

A copy of the SEC's complaint is here.

Florida Man Suspected In Forex Ponzi Scheme Dead In Apparent Suicide

A Ft. Myers man suspected in a foreign currency Ponzi scheme that bilked investors out of nearly $1 million has been found dead in what authorities have preliminarily deemed a suicide.  Willaim Jeffrey Chandler, 55, was found dead early today inside a silver Mercedes parked in front of a Muvico Theaters in Palm Harbor, Florida.  A police spokeswoman disclosed that Chandler had "self-inflicted" wounds, but declined to elaborate further.  

Chandler was the subject of a civil enforcement action brought in September by the Commodity Futures Trading Commission ("CFTC").  According to the CFTC, Chandler had been soliciting individuals since at least July 2010 to contribute to a pooled account that purportedly engaged in trading off-exchange contracts in Chandler's account at a Swiss bank.  Participants were told that Chandler used to trade commodity futures when he previously worked at Merril Lynch, and lured by the prospect of guaranteed returns that ranged from two to 12.5 percent.  In total, Chandler collected nearly $1 million from investors.

However, not only had Chandler's account at the Swiss bank been closed since July 2011, but at the time the account was transferred to another foreign-exchange dealer, the account contained only $292.49.  Additionally, Chandler continued to solicit funds from prospective investors under the guise that he continued to trade in the closed Swiss account.  This was not disclosed to investors, who continued to receive consistent monthly returns.  However, Chandler began missing scheduled payments in early 2012, and when investors began demanding the return of their principal, they were met with a variety of excuses including his daughter's cancer recurrence, his wife's illness, and adverse tax consequences of transferring funds from Switzerland to the United States.  Indeed, according to the CFTC, Chandler is believed to have misappropriated the majority of investor funds. 

Following the filing of the enforcement action, the CFTC obtained an emergency order freezing Chandler's assets.  According to the Tampa Bay Times, and subsequently confirmed by Ponzitracker, at least one of Chandler's victims posted in local Craigslist sites seeking out any other investors who may have been scammed by Chandler, directing them to contact police.  Those posts, located here and here, appear to have been deleted.  

Chandler's alleged scheme was not his first run-in with authorities.  In 1991, he was charged with bank fraud and obtaining funds by false pretenses by the Department of Justice.  He was sentenced to ten months in federal prison.  

A copy of the CFTC's complaint is here.

California Woman Pleads Guilty to $2.2 Million Ponzi Scheme

A California woman admitted to masterminding a Ponzi scheme that bilked investors out of at least $2.2 million.  Celia Gallardo, 42, pled guilty to a single count of wire fraud stemming from her role in the scheme.  She was arrested earlier this year in July after a grand jury returned a sixteen-count indictment charging her with multiple counts of mail and wire fraud.  Gallardo faces up to twenty years in federal prison, as well as a fine of up to $250,000.  

According to authorities, Gallardo touted her real estate investment program to investors and promised above-average annual returns from Gallardo's purchase of condominiums.  From September 2007 to September 2008, dozens of investors contributed to the venture and received promissory notes from Gallardo memorializing thier investment.  However, rather than use investor funds for the stated purpose, Gallardo instead operated the classic Ponzi scheme, making Ponzi-style payments using funds from existing investors.  Additionally, Gallardo lived a lavish lifestyle, regularly taking expensive vacations and using ijnvestor funds to make mortgage payments.  In total, dozens of investors sustained losses exceeding $2 million.  

At her sentencing hearing, which has not yet been set, it is likely that Gallardo will be ordered to pay restitution to her defrauded victims.  

Authorities Make Second Arrest in $60 Million Silver Ponzi Scheme

Authorities arrested a second individual in connection with a $60 million Ponzi scheme that ranks as one of the largest in South Carolina’s history.  Wallace Howell, 60, was indicted and later taken into custody yesterday on the charge that he conspired to commit mail fraud in a $60 million Ponzi scheme masterminded by Ronnie Wilson that purported to profit off silver trading.  Wilson was arrested earlier this year, and pleaded guilty in July to two counts of mail fraud. 

Beginning in 2004, Howell is believed to have been involved with Wilson’s scheme as a promoter, touting the venture to investors as a lucrative opportunity.  Indeed, according to the Independent Mail, a South Carolina newspaper, many investors submitted questionnaires indicating that they became aware of the scheme through Howell.  However, likely unbeknownst to investors, Howell would later receive millions of dollars from Wilson as payback for the referrals.  This included nearly $3.5 million in “profits” realized by Wilson in trading for two investor accounts.  According to the indictment, Howell “instructed” Wilson to transfer those profits into his own account, which Howell later withdrew.  If true, the allegations would also likely constitute violations of federal securities laws if Howell was not licensed to offer or sell securities or investment advisory services in South Carolina. 

A receiver has since been appointed to recover funds for victim’s of Wilson’s scheme.  Wilson faces up to twenty years in prison when he is sentenced. 

The Receiver’s website is here.

Iraqi Man Receives 57-Month Sentence for $2 Million Ponzi Scheme

An Iraqi and Michigan citizen was sentenced to serve fifty-seven months in prison for operating a Ponzi scheme that preyed on Middle Eastern investors and ultimately defrauded victims out of over $2 million. Ahmed Alabadi, 45, received the sentence after pleading guilty to a single charge of wire fraud in July 2012.  Along with the sentence, Alabadi was ordered to pay $2.3 million in restitution to his victims and serve three years of supervised release following completion of the sentence.  

According to authorities, Alabadi used his company, Fedek Group, Inc., to solicit investors who thought their funds would be used to support rebuilding efforts in post-war Iraq, fulfill contracts with the United Nations, and various other ventures.  Alabadi preyed on individuals of Middle Eastern descent, relying on cultural taboos forbidding dishonesty and self-dealing when dealing with tribal brothers and sisters.  Investors were promised annual returns of up to 100% and told that their funds would be safe.

However, Alabadi did not conduct legitimate investments, but instead ran a classic Ponzi scheme by using investor funds to pay returns to existing investors.  Following the collapse of the scheme, Alabadi was the subject of a civil lawsuit brought by over 100 investors, who subsequently obtained a $170 million default judgment.  Alabadi was arrested in February 2012 at a Detroit airport after being charged with bank fraud, attempted bank fraud and money laundering.  A federal judge later denied Alabadi's request for release following his arrest, citing his potential flight risk.