Canadian Police Arrest Six In Alleged $19 Million Ponzi Scheme

Canadian authorities have arrested six people suspected of masterminding a Ponzi scheme that duped hundreds of investors out of at least $19 million.  Police arrested France-Josée Dancause, 49, of Longueuil; Alain Péloquin, 48, of Sherbrooke; Benoît Sénécal, 57, of Sherbrooke; Sophie Jolicoeur, 44, of Mont-St-Hilaire; Isabelle Cantin, 36, of Sherbrooke; and Chantal Goulet, 44, of Longueuil.  Each was charged with fraud.  Police are also seeking a seventh suspect, Jean-Marc Lavallée.  

The scheme appears to date back several years to several cease-and-desist orders issued by the Autorité des marchés financiers (AMF), which acts as a regulatory body overseeing Quebec's financial sector.  According to AMF, Peloquin and his "de facto wife" Isabelle Cantin recruited investors, either directly or through the use of "team leaders," with promises of extraordinary returns by telling them that he had a lucrative contact within the federal government that allowed him to purchase seized assets before they were put up for auction to the general public.  These efforts appeared to be coordinated through Peloquin's company, Evaluation Apex Inc., with investors told that the AMF had authorized the transactions and that the investments were "safe" and "guaranteed."  Investors were also warned that strict secrecy was required.  In total, more than 200 investors invested nearly $20 million with Peloquin and his accomplices.

However, the AMF alleged that none of the investments touted by Peloquin were actually made.  Rather, investor funds were diverted to the personal bank accounts of Peloquin and Cantin where they were used for the pair's personal expenses.  Additionally, investor funds were also used to pay principal and fictitious profits to existing investors - the classic hallmark of a Ponzi scheme.  

Former Lawyer Gets 12.5 Year Prison Sentence For $2 Million South African Ponzi Scheme

A former tax attorney convicted of operating a $2.5 million South African Ponzi scheme was sentenced to serve over twelve years in federal prison.  Brian Ray Dinning, 48, of Suffolk, Virginia, received the sentence from U.S. District Judge Raymond A. Jackson after previously pleading guilty to two counts of wire fraud.  Notably, while prosecutors sought a seven-year sentence for Dinning, Judge Jackson nearly doubled the recommended sentence and cited Dinning's decision to flee to Canada after his indictment and the subsequent use of his blog to taunt his victims.  Dinning was also ordered to pay $2.3 million in restitution.

Dinning began raising money in 2005 for Hole in the Wall, which purported to make a series of charitable and profitable projects in South Africa.  Potential investors were told of Dinning's ventures that could result in a sizeable financial gain, including a luxury housing development, a luxury hotel and private residence club, and gold and diamond mining operations.  Dinning also solicited donations for charitable operations, including the construction of a church and providing aid to orphans.  In total, Dinning raised more than $2 million from at least 20 victims.

However, Dinning did not use investor funds as advertised, instead operating a classic Ponzi scheme that used investor funds to sustain a lavish lifestyle for himself and his family.  This included paying the mortgage on a nearly $1 million house, private school tuition for his children, and even $10,000 monthly alimony payments.  After Dinning learned he was under investigation, he fled to Toronto, Canada, where he maintained his innocence through various blog postings attributed to him.  He was arrested in August 2012, extradited back to the U.S., and held without bond based on his proclivity to flee.   

Jury Convicts Former NBA Player Of $2 Million Ponzi Scheme

A federal jury deliberated for four hours before returning a guilty verdict against a former NBA player who masterminded a real estate Ponzi scheme that swindled victims out of at least $2 million.  Tate George, who once played for the New Jersey Nets and Milwaukee Bucks, was convicted on four counts of wire fraud.  George, who was taken into custody immediately following the verdict, could face up to twenty years in federal prison for each count.  He is scheduled to be sentenced on January 16, 2014.

Beginning in 2005, George owned and operated The George Group ("TGG"), which was touted to potential investors as a successful real estate development company that had a portfolio exceeding $500 million.  The company was said to specialize in commercial and residential development financing, and represented that investor funds would be safeguarded in an attorney escrow account.  In return for their investment, investors received promissory notes with varying terms reflecting their investment amount and length.  In total, George raised more than $2 million from investors - including some former professional athletes.

However, contrary to George's representations, TGG did not have $500 million under management and investor funds were not used to fund real estate development projects.  Rather, TGG had virtually no income-generating operations, and George used TGG to run a classic Ponzi scheme by using investor funds for a variety of unauthorized purposes that included the payment of principal and interest to existing investors.  George also used investor funds to sustain a lavish lifestyle that included throwing a Sweet 16 party for his daughter, the mortgage and extensive renovations on his New Jersey home (that has since been foreclosed), taxes to the IRS, and traffic tickets. George also spent $2,905 for a reality video about himself (a “sizzle reel” for “The Tate Show,” is available on YouTube).

While George spent four years in the NBA, his most memorable playing moment arguably came on a buzzer-beater in the third round of the 1990 NCAA tournament:

SEC Halts $800 Million Ponzi Scheme Targeting Japanese Investors

The Securities and Exchange Commission ("Commission") announced the filing of an emergency action freezing the assets of a Nevada company suspected of perpetrating an $800 million Ponzi scheme directed at Japanese investors.  Edwin Fujinaga, who resides in Las Vegas, Nevada, and his company, MRI International ("MRI"), were charged with violations of the antifraud provisions of federal securities laws. The Commission is seeking injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties.

Fujinaga formed MRI in 1998, touting the company as engaged in the business of purchasing accounts from U.S. medical advisors with outstanding balances to collect from insurance companies.  Potential investors were told that Fujinaga and MRI were able to purchase these accounts at a discount, which would then yield a profit once the full amount was collected from the insurance company.  MRI primarily targeted investors living in Japan, and often hosted these investors in the United States for presentations and tours of MRI's office in Las Vegas.  Investors were provided promotional materials extolling the investments, including representations about the safety of the investor's principal and the use of investor funds, and were promised annual returns of up to 10.32% annually.  An investment was memorialized by a "certificate of investment," which was obtained after an investor either wired money or sent a check to one of MRI's accounts at Wells Fargo Bank in Las Vegas.

However, in reality, MRI used investor funds for a variety of unauthorized purposes, including the payment of principal and interest to earlier investors - a hallmark of a Ponzi scheme.  Indeed, between January 2009 and March 2013 alone, over $600 million was used to pay claims for principal or interest by existing investors.  Fujinaga also used investor funds to pay business expenses, to siphon funds to other businesses he controlled, and to support Fujinaga's luxury lifestyle through the payment of his credit card bills, alimony and child support (totaling $25,000 per month), the purchase of luxury cars, and the purchase of homes in Las Vegas, Beverly Hills, and Hawaii.  By 2011, MRI began defaulting on payments, and the Commission estimates that at least 8,000 people invested in MRI.

After Fujinaga and MRI received an inquiry from the Commission in March 2013, he allegedly hired a shredding company to destroy key documents.  He later fired an executive assistant who questioned his actions.  Fujinaga also failed to appear for a scheduled deposition, citing fatigue and illness, and MRI never produced documents requested in an SEC subpoena.

A copy of the Commission's complaint is here. 

Oregon Hedge Fund Manager Receives 6.5 Year Sentence For $6.4 Million Ponzi Scheme

A Portland hedge fund manager was sentenced to serve 6.5 years in federal prison for a Ponzi scheme that took in at least $37 million from investors.  Yusaf Jawed received the sentence after previously pleading guilty to seventeen counts of mail fraud and wire fraud.  In an agreement with prosecutors that cited his "substantial assistance to prosecutors," authorities agreed to recommend a 6.5 year sentence - even though a pre-sentencing report recommended a minimum term of at least 8 years.  While Jawed has promised to repay victims, he faces an uphill quest; he must pay restitution of $6.4 million in the criminal case, and recently had a $34 million judgment entered against him in a case brought by the Securities and Exchange Commission.

Jawed operated Grifphon Asset Management, LLC ("GAM") and Grifphon Holdings, LLC ("GH"), which served as the advisers to numerous hedge funds created and managed by Jawed, including Gripfhon Alpha Fund, L.P. ("Alpha") and Grifphon Iota Fund, L.P.  Investors were told through private placement memoranda that the funds experienced annual returns ranging from 12.8% to 132.5% from 2002-2008 through an investment strategy comprised of holdings in publicly-traded securities, private equities, biotech companies, foreign currencies, and commodities.  Investors were supplied with account statements and tax returns that purported to show constant profits in investor accounts, and were assured that their funds would be held at prominent institutions such as Lehman Brothers and UBS.  In total, Jawed raised at least $37 million from over 100 investors all over the United States.

However, little, if any, of the claims made to investors were true.  According to authorities, Jawed misappropriated millions of dollars in investor funds for his personal use, which included luxury vacations, lavish meals, and the payment of nearly $60,000 to settle a sexual harassment lawsuit.  Additionally, Jawed used investor funds as the source of fictitious interest payments designed to lend an aura of legitimacy to the scheme. 

When the scheme appeared on the verge of collapse in 2008, Jawed hatched a scheme with the help of Robert Custis, an attorney.  The two began telling investors that a third party would soon purchase the funds' assets, and investors would soon be reimbursed for their investment at a healthy profit.  This pattern of deception lasted an additional two years with the use of various excuses such as the time zone difference of the banks, "dotting I's and crossing T's," and confidentiality problems.  However, this third-party purchaser was none other than an entity created and controlled by Jawed.  For his role in the scheme, Custis was also charged by the SEC.

As part of his cooperation with authorities, Jawed agreed to cooperate with a lawsuit brought by investors against Grifphon's former accounting and law firms.  At Jawed's sentencing hearing, prosecutors announced that a settlement had been reached in that case, but terms were unavailable.  Jawed was previously ruled destitute by the federal court, meaning that the potential recovery against the former accounting and law firms likely represents the sole avenue for compensation for defrauded victims.