Judge To Accused Ponzi Schemer: Stop Gambling At Vegas Casinos

"I am not a degenerate gambler.  I love this country."

- Ramon Desage

A federal judge had harsh words for a man accused of running a $75 million Ponzi scheme after authorities caught him gambling over two dozen times in Las Vegas casinos while awaiting trial.  Ramon Desage, arrested earlier this summer and charged with wire fraud, was ordered by Magistrate Judge Peggy Leen to stop gambling and stay away from casinos.  DeSage, who according to authorities appears to fancy video poker, had been ordered to submit to electronic home monitoring as one of the conditions that allowed him to remain out of jail while the criminal case progresses.  From his past track record gambling, Judge Leen has good reason to worry: in the criminal complaint, authorities painted DeSage as a "prodigious gambler" who allegedly lost over $20 million at various Vegas casinos since 2006. 

According to authorities, DeSage operated a massive Ponzi scheme using his company Cadeau Express, which described itself as a "unique company that caters to hotels and casinos who roll out the red carpet for selective guests and high-end gamblers."  Rather than use investor funds for these described purposes, DeSage allegedly made Ponzi-style payments to existing invesetors and financed a lavish lifestyle that included a 40,000 square foot palace in his native Lebanon and a $10 million real estate portfolio.  Authorities moved to arrest DeSage in June when investor losses were said to approach over $75 million and DeSage was on the verge of fleeing the country to Lebanon.

Ironically, when DeSage's lawyers successfully obtained his release from jail following his arrest, Judge Leen explicitly included a ban on casino visits as part of the home monitoring restrictions  However, those instructions apparently took several weeks to reach pretrial service officers in charge of supervision, who unknowingly violated those orders when they allowed DeSage to visit casinos 26 times over an eight-week period.  For his part, DeSage maintains that he did not deliberately violate Judge Leen's order.  

Zeek Receiver Posts "Subpoena FAQ" for Clawback Targets

Yesterday, the court-appointed receiver tasked with gathering assets for victims of the $600 million ZeekRewards Ponzi scheme provided various updates on the claims process, asset recoveries, and his intention to pursue those who actually profited off the scheme.  Kenneth Bell, the receiver, indicated he would begin sending out subpoenas this week as part of his plan to institute "clawback" litigation against those "net winners" that, according to Mr. Bell, withdrew hundreds of millions of dollars in profits from Zeek.  As Mr. Bell stated, the first batch of subpoenas would be sent out this week, and "thousands" more would follow in the coming weeks.

The Receiver has now added a "Subpoena FAQ" to his website established for scheme victims, www.zeekrewardsreceivership.com.  Under the tab, the Receiver lists nine commonly asked questions, and in doing so, provides several new details on the clawback process.  First, he indicates that a possible target of a subpoena can include an affiliate, participant, agent, or employee of Zeek Rewards, suggesting that he is not limiting the search to just participants in the scheme.  Second, it appears as if the scope of the subpoenas is more broad than simply the turnover of financial documents, as electronic documents and communications are being sought.  Thus, in addition to bank statements, the Receiver is also likely seeking any communications those "net winners" may have had with the Receiver or possibly other affiliates.  Finally, as speculated yesterday, the Receiver confirms that the first batch of the subpoenas are indeed sent to those "the Receiver currently believes may have won the most money." 

The FAQ's also contain a section not only for those who have received a subpoena and do not want to proceed with litigation, but also for those who wish to avoid receiving a subpoena in the future (i.e., profited from the scheme but were not the recipient of the first batch of subpoenas).  FAQ # 9 provides that those who wish to reach an arrangement with the receiver to return those profits without "the necessity of lengthy and expensive legal action" may contact the Receiver at zeeksettlement@mcguirewoods.com to discuss the possibility of a settlement.  There is no explicit mention of a slight discount as an incentive to settle, but the wording does suggest that there may be some wiggle room.  Of course, if there is a discount offered, it would likely be an 'across-the-board' discount to avoid the appearance of favoritism or unfairness.

A link to the FAQ's is here.

Update From ZeekRewards Receiver: Claims Process Coming, Potentially "Hundreds of Millions of Dollars" In Clawback Lawsuits

The receiver appointed to recover assets for victims of the $600 million ZeekRewards Ponzi scheme has posted a letter on his website providing an update to investors and indicating that he intends to vigorously pursue those who received profits from the scheme - profits he estimates are in the hundreds of millions of dollars.  Kenneth E. Bell, appointed by United States District Judge Graham Mullen, disclosed that the total amount recovered thus far exceeds $300 million and is likely to increase while he pursues additional funds being held in financial institutions.  Additionally, Mr. Bell indicated that once victims completed a court-approved Official Claim Form, he would proceed with a preliminary and partial distribution rather than make one final distribution at the conclusion of the Receivership.

Pegging the number of true victims who lost more in the scheme than they were able to withdraw as approximately 800,000, the Receiver estimated that total losses ranged from $500 million to $600 million.  For those victims, the Receiver indicated that an Official Claim Form will be posted to his website once he received Court approval.  There will likely be a deadline for victims to submit their completed Form, after which the Receiver indicated he will proceed with a preliminary and partial distribution.  It appears as if the affiliate User ID's will be used as a method of identification for victims, as Mr. Bell refers to those IDs several times in his letter.

While the updates on Mr. Bell's intent to proceed with a claims process are similar to what he has indicated in prior updates, today's update provides a wealth of new information surrounding those investors whose withdrawals/distributions from Zeek exceeded their initial investment.  In a Forbes article I posted shortly after the scheme was uncovered, I estimated that the prospect of "clawback" lawsuits was "amost certain" once the Receiver had completed his initial investigation.  While Mr. Bell later confirmed that he would be pursuing those affiliates "who took more out of Rex Ventures than they put in," he did not provide specific numbers on the amount of potential clawback victims or recovery.

Apparently having completed his initial investigation, the Receiver disclosed that "there are more than 100,000 User IDs" that took more out of the scheme than they invested.  While declining to provide specifics on the potential amount of clawback recoveries, Mr. Bell did disclose that the 'false profits' enjoyed by these individuals numbered in the "hundreds of millions of dollars."  Mr. Bell indicated that subpoenas would be sent out "this week" to approximately 1,200 of these likely clawback targets, seeking documentation of financial dealings with the scheme and, if necessary, depositions and litigation.  

While not mentioned in the letter, it is likely that these 1,200 individuals received the highest amount of distributions from the scheme.   Additionally, in an attempt to allow settlement without litigation, a letter will also be included with the subpoena offering the possibility of negotiating the voluntary surrender of profits without litigation.  While the letter does not elaborate, it is likely that a slight discount will be offered as an incentive to avoid litigation costs.  These 1,200 likely represent the first batch of clawback targets, as Mr. Bell also indicated that subpoenas and demand letters will be served on "thousands more" in the upcoming weeks.  

With over $300 million in the bank and an estimated "hundreds of millions of dollars" in potential clawback recoveries, there is an increasing possibility that Zeek victims could eventually recover an amount close to, if not equal to, their net investment.  While Mr. Bell was quick to caution against counting on a 100% recovery, he stated that "if we don't it won't be for lack of trying."

The Receiver's letter is here.

California Man Charged With $49 Million Ponzi Scheme

Federal authorities arrested a California man of Pakistani descent on charges that he masterminded an investment scheme that raised nearly $50 million from investors.  Syed Qaisar Madad, 65, a Pakistani native with Canadian citizenship living in the US as a lawful permanent alien, was charged in a sixteen-count indictment that included twelve counts of wire fraud, one count of making a false statement to a government agency and three counts of subscribing to a false tax return.  If convicted of all charges, he faces a statutory maximum of up to 260 years in federal prison.  

Madad was the CEO and co-owner of Technology for Telecommunication and Multimedia, Inc. ("TTM"). While details remain scarce as to the government's allegations due to the indictment remaining sealed, a January 2010 article from Pakistanlink.org provides a glimpse into Madad's life.  Portraying Madad as the "zenith of the American dream," the article paints a rags-to-riches story of a man who completed two Masters degrees in five semesters who spent over 25 years working in the oil and gas industry.  After he left the oil and gas industry, Madad founded TTM in 1993, which claimed to be in the business of securing large orders for the supply of equipment to a video-conferencing company in Massachusetts.  However, in a move that likely marks the beginning of his alleged scheme, TTM then transitioned to a primary focus on investments and trading in 1999.  According to the article,

Exploring and developing oil and gas fields involves operation and investment risks that require an educated, calculated estimate regarding available reserves. And as an added buffer to the speculative nature of the business, Madad’s engineering background was very useful in predicting market movement with chart and trend analysis.

Madad stated that his investment strategy centered around both beginning and ending the trading day with 100% cash.  Putting an emphasis on preservation of capital, Madad purported to first begin the day monitoring trends from European markets to determine how US markets will react when they open several hours later.  Despite never investing more than 10% to 15% of his cash in the market at any given point, Madad claimed to achieve extraordinary returns that regularly exceeded 30% and some years approached 65%.  

Now, according to authorities, Madad's purported investment prowess was nothing more than an elaborate Ponzi scheme, using money from new investors to pay fictitious returns to existing investors.  The scheme is estimated to have taken in nearly $50 million, and authorities have preliminarily pegged investor losses at $32 million due to trading losses and personal expenses including gambling.  Madad also allegedly provided the FBI with fraudulent documents supposedly representing brokerage statements for UBS accounts in Switzerland.  Madad is also accused of hiding income and benefits he received from TTM since 2007.  

A copy of the PakistanLink article is here.

Admitted Ponzi Schemer Claims Innocence, Says Attorney Coerced Him To Plead Guilty

After pleading guilty five years ago to masterminding a $29 million Ponzi scheme, a 76-year old Pennsylvania man now wants a federal judge to allow him to stand trial on claims that his now-deceased defense attorney "coerced" him to plead guilty when, in fact, he was not.  Wesley A. Snyder, serving a 12-year prison sentence after pleading guilty to a single charge of mail fraud in 2007, appeared before United States District Court Judge Yvette Kane yesterday, claiming now that he never intended to defraud any of his 800+ victims.  Instead, he claimed, his representations to the contrary in his plea agreement were made at the direction of his then-lawyer.

Snyder operated Personal Financial Management, which offered "wrap mortgage" and "equity slide down" mortgages to consumers.  These types of mortgages typically featured a consumer who borrowed more money than necessary to mortgage or refinance their homes, with the understanding that the excess funds would be invested with the goal of reducing their interest rate and/or paying the loan off earlier than scheduled.  

However, investors were later shocked to discover that not only had Snyder failed to invest their excess funds as promised, but that they were on the hook for the large mortgages originally taken out.  When Snyders' companies ceased operations in 2007, the difference between the amount of funds purportedly paid to mortgage lenders and the actual amount was over $36 million.  Rather than make the promised mortgage payments, Snyder used a majority of investor funds to pay company operating expenses and hide millions of dollars in company losses.  

After he was arrested, Snyder enlisted the services of criminal defense lawyer Emmanuel H. Dimitriou. Snyder ended up pleading guilty to a single count of mail fraud, which carried a maximum sentence of twenty years in prison.  In 2008, Judge Kane handed down a 12-year sentence to Snyder.  

Now, Snyder claims in a 30-page filing that Dimitriou (who is since deceased) pressured him to plead guilty, telling him he could face up to 800 years in prison - one year for every victim.  Despite agreeing that the plea agreement was "completely correct" at his sentencing, Snyder now claims that at least 22 of those facts are incorrect.  Despite these apparent errors, Snyder claims that Dimitriou "badgered" him to respond to Judge Kane's questions in the affirmative.  Additionally, Snyder claims that Dimitriou's judgment was impaired due to medication Dimitriou was taking for cancer.  Had Dimitriou reviewed the allegations with Snyder, which Snyder claims never happened, Snyder alleges he would have chosen to go to trial.  

Snyder's prosecutor has opposed the claims, noting that Snyder was repeatedly advised of his rights, asked whether he had had a chance to review the allegations with his attorney, and asked whether he was entering into the plea agreement on his own free will.  Each time, noted the prosecutor, Snyder answered yes.  Additionally, Dimitriou's son-in-law and former law partner joined the prosecutor in opposing Snyder, noting that while Snyder may not have originally had criminal intent, the scheme's spiraling out of control certainly ended with criminal intent.  

Both sides will now submit written briefings based on Friday's hearing.