Gospel Singer Gets 14-Year Sentence For $8 Million Ponzi Scheme

A former gospel singer and member of the famous Winans family was sentenced to serve nearly fourteen years in prison for a massive Ponzi scheme that duped more than 1,000 investors out of at least $8 million.  Michael Winans, 30, received a 165-month sentence from United States District Judge Sean F. Cox, who took the rare step of upwardly departing from prosecutors' recommended 12.5 year sentence and highlighted the widespread devastation suffered by victims.  Winans pled guilty to a single charge of wire fraud in October 2012, and faced up to twenty years in prison.

According to authorities, Winans operated the Winans Foundation Trust (the "Trust"), telling potential investors that the Trust was involved in a lucrative venture investing in Saudi Arabian crude oil bonds. Between October 2007 and September 2008, potential investors were told that the bonds yielded exorbitant short-term returns of up to 100% in just two months, and that these returns were 'guaranteed'.  Winans initially recruited a group of eleven investors, who served as "shareholders" and recruited other investors on a large-scale basis. In all, at least 1,000 victims invested more than $8 million in what they thought were Saudi Arabian crude oil bonds.  

However, in reality, there were no Saudi Arabian crude oil bonds with exorbitant returns.  Rather, Winans operated the classic Ponzi scheme by using new investor funds to pay 'returns' to existing investors.  Investor funds were also used to pay Winans' personal expenses.  

In handing down his sentence, Judge Cox focused on the fact that many of the victims were recruited using Winans's religious appeal and family reputation.  The Winanses are widely known in the gospel music arena; Winans's uncle, Marvin, gave a eulogy at Whitney Houston's funeral, and Winans is the nephew of Marvin Winans, a Detroit pastor who is known nationally for gospel music.  Indeed, Winans himself also dabbled in gospel singing, even releasing an album in September 2011.  None of Winan's relatives were implicated in his scheme.  

Winans was also ordered to pay $4.8 million in restitution, and remains free on bond until his prison location is determined. 

Zeek Receiver Issues Update, Will Seek Court Approval For Claims Process By End Of March

The court-appointed receiver overseeing the recovery of funds for victims of the $600 million ZeekRewards Ponzi scheme issued an update today to address several pending issues.  Kenneth D. Bell, the Receiver, posted a three-page letter on the court-approved website, www.zeekrewardsreceivership.com, in response to 'many' requests for an update on his efforts.  In the letter, Bell provided a brief update that addressed the claims process and potential third-party litigation.  

Claims Process

The first item addressed by Mr. Bell, and arguably the most important, was the eventual claims process that would be avaialble to victims.  Because of the large number of potential victims and the likely costs that would accompany any attempt to conduct the claims process through the postal service, Mr. Bell indicated that the claims process would be carried out electronically "with few exceptions."  On or before March 31, 2013, Mr. Bell will file a motion seeking Court approval of the proposed claims process, which includes the proof of claim form that will be provided to all potential claimants.  

Once approved by the Court, Mr. Bell indicated that he would provide notice to all affiliates within fourteen (14) days that will contain a website address where a proof of claim form may be filled out and submitted.  Upon receipt, the proof of claim forms will be analyzed to first determine whether the claimed losses match up with the losses determined by the Receiver's forensic team.  Each claimant will then be notified of the Receiver's determination.

In the event that the Receiver disagrees with any affiliate's claimed amount, that individual will then have thirty (30) days to respond to the Receiver's determination.  If no response is received within that thirty-day period, the amount of loss determined by the Receiver's team will be deemed correct, and the Receiver will proceed with a distribution based on that amount.  If an objection is received, the Receiver will attempt to resolve the dispute with the claimant, and if that attempt is not successful, the Receiver will submit the dispute for the court's determination.

While the Receiver has not provided an exact estiamte of the total losses suffered by victims, he did indicate that he had recovered more than $300 million to date.  While it is unlikely that an initial distribution would include the entire amount to date, as the Receiver must maintain some reserves, the first distribution is likely to be close to 50% of approved losses should previous estimates of $600 million in losses prove correct.  After the Receiver has recovered all possible assets, including those through "clawback" litigation, he will then proceed with a final distribution.

Potential Litigation Claims

According to Mr. Bell, 'clawback' lawsuits against those 'net winners' that profited from the scheme will commence "in the next few months."  Mr. Bell issued his strongest statements to date concerning the substance of those lawsuits, stating that those winnings currently held by 'net winners' were "really just other peoples' money."  Many of those net winners are currently in negotiations with Mr. Bell's team to amicably resolve their situation without litigation, and Mr. Bell encouraged other net winners to contact his office.  While it is estimated that nearly $300 million is currently in possession of these 'net winners', Mr. Bell stated that he was unable to estimate with specificity any potential future recoveries.  In addition to clawback claims, litigation is also being considered against insiders, such as employees, contractors, and other third-parties that provided services to the scheme.  

Mr. Bell also addressed the ongoing efforts "fending off what we believe to be unnecessary and meritless motions brought before the Court by large 'net winners.'"  Labeling these efforts as nothing more than "delaying tactics," Mr. Bell indicated that a great deal of time and money had been spent to respond.  Unfortunately, the money expended to fight these efforts is a dollar-for-dollar reduction in the total amount of funds eventually available to victims.

Mr. Bell expects to file his motion seeking court approval of the claims process on or before March 31, 2013.  

A link to Mr. Bell's letter is here.

Former Pastor Pleads Guilty in Multi-Million Dollar Jewelry Ponzi Scheme

A Virginia man and former pastor entered a guilty plea to charges that he operated a Ponzi scheme under the guise of a legitimate jewelry business.  Matthew James Addy, 34, of Lancaster, Pennsylvania, pled guilty to a single charge of securities fraud, which carries a maximum sentence of up to twenty years in prison.  His jewelry store, LaPorte Jewelers, has since shut down.

After serving as a youth pastor in Scotland for several years, Addy founded wholesaler Edward J. & Co, which also operated LaPorte Jewelers ("LaPorte").  Beginning in 2010, Addy began seeking investors for what he described as the purchase and resale of wholesale jewelry and loose precious stones.  In exchange for their investments, individuals were given promissory notes carrying above-average rates of interest that purportedly were linked to specific jewelry transactions entered into by Addy.  In seeking investors, Addy relied on his affiliations with various religious organizations, and a majority of the 40-plus total investors were recruited from these groups.  In all, Addy raised more than $3 million.

However, according to the FBI and as admitted by Addy, LaPorte was nothing more than a front for an elaborate Ponzi scheme that used investor funds to make Ponzi-style payments and for a variety of other unauthorized uses.  When LaPorte originally closed down in June 2012, Addy blamed the store's bad fortunes on mounting monthly losses due to declining revenues.  

Addy is scheduled to be sentenced on May 10, 2013.

Lawsuit Accuses Antigua Of Acting As Stanford's 'Blood Brother'

"Stanford received land transfers with government assistance [in return], operated Antigua's airport, built the national library, sponsored the country's cricket tournament, and improperly 'loaned' the government tens of millions of dollars of the CD investors' money for innumerable commercial enterprises..."

The receiver and official creditors committee representing victims of Allen Stanford's $7 billion Ponzi scheme filed a lawsuit accusing the dual-island nation of Antigua and Bermuda of serving as Stanford's 'blood brother' in providing necessary assistance to sustain the massive scheme.  Stanford, who is currently serving (and appealing) a 110-year sentence for masterminding the scheme, was once a 'favorite son' of Antigua where he enjoyed close relationships with various government and regulatory officials. A separate lawsuit also asserted similar charges against eight Caribbean banks.  The lawsuits are seeking over $230 million in damages, as well as an award of punitive damages

As a result of these relationships, investors alleged that Antigua was a prime participant, beneficiary, and co-conspirator in Stanford's fraud, having received nearly $90 million in documented loans from Stanford that were not repaid and instead served as an incentive to overlook Stanford's activities.  Indeed, according to the suit, the Eastern Caribbean Central Bank ("ECCB") nationalized the Bank of Antigua soon after Stanford's fraud was exposed, and in a 'second act of brazen thievery' then distributed ownership in the bank to the Antiguan government and other Caribbean banks.  Further adding to the suspicious nature of these actions, the head of ECCB's monetary council at the time was Errol Court, who was both the Antiguan Minister of Finance and one of Stanford's personal attorneys.  

Another banking regulator, Leroy King, was accused of taking bribes from Stanford in return for falsifying bank audits as well as impeding U.S. regulatory investigations of Stanford's operations.  While King faces criminal charges, Antiguan authorities have thus far refused to participate in his extradition.  

In the separate lawsuit brought by court-appointed receiver Ralph Janvey, twenty-three former directors and officers of Stanford's operations were accused of breaching their fiduciary duties to investors.  Janvey is seeking the return of all compensation paid to those individuals.

Illinois Man Gets 9-Year Prison Term For $4 Million Ponzi Scheme

An Illinois man will spend the next nine years in federal prison for orchestrating a Ponzi scheme that defrauded investors out of more than $4 million.  James Pantazelos, 64, had faced decades in prison after originally being indicted in October 2011 on ten counts of mail and wire fraud.  He later agreed to plead guilty to a single charge of mail fraud, which could have landed him behind bars for twenty years.  In addition to his sentence, Pantazelos will also be required to pay restitution to his victims.

Pantazelos was the owner and CEO of Destiny's Partners, Inc. ("Destiny's Partners"). From May 2007 to December 2010, Pantazelos hosted conferences throughout the United States pitching investment opportunities in Destiny's Partners.  Potential investors were told that Destiny's Partners invested in “Private Investment Trading Platforms” which traded bank notes in foreign markets, and that a substantial portion of profits generated would be donated to charitable and humanitarian causes. Investors were offered a variety of investment options, with terms ranging from 90 days to 365 days and annual returns up to 200%.  To convince investors that their investment would be safe, Pantazelos represented that all funds would be kept in an escrow account.  

However, when the investment terms of various investors expired, investors were not provided with their original principal investment.  As alleged in the indictment, instead of investing in "private investment trading platforms," Pantazelos and Destiny's Partners operated a Ponzi scheme in which funds from newer investors were used to make Ponzi-style payments to existing investors.  Pantazelos also used investor funds to support an extravagant lifestyle that included the purchase of homes, expensive automobiles for himself and family members, and even attempting to open a restaurant known as "Jimmy P's".  

A copy of Pantzelos's plea agreement is here.