Money Manager That Committed Suicide Suspected in $10 Million Ponzi Scheme

Indiana authorities are seeking to freeze the assets of a Kokoko investment advisor who recently committed suicide amid suspicions he ran an elaborate Ponzi scheme with potential losses of at least $10 million.  According to the Indiana attorney general's office, Richard Schwartz, who committed suicide in August 2013 shortly after authorities began an investigation, may have left behind sizeable assets that can be used to repay investors, including a $13 million life insurance policy.  Indiana Secretary of State Connie Lawson has stated that some of Schwartz's victims include former NFL players.

Schwartz was the owner of RAS & Associates ("RAS"), a Kokomo financial services company that offered wealth management services to clients and sold life insurance through Schwartz's affiliation with New York Life.  The Indiana Attorney General believes that Schwartz persuaded clients to liquidate their insurance holdings in order to place their funds with Schwartz, who touted different investments carrying higher rates of return.  In total, authorities believe Schwartz raised at least $10 million from investors.

However, Schwartz was terminated from New York Life last year due to a negative ledger balance that New York Life indicated represented "compensation credited to Schwartz for policies which were rescinded, declined, not issued, canceled, surrendered, foreclosed, expired, or reduced and replaced with new policies.”  After authorities began an investigation in July 2013, Schwartz committed suicide in late August at a million-dollar estate in Simpsonville, Kentucky believed to be his home.  Authorities recently discovered the existence of a $13 million life insurance policy belonging to Schwartz, thus prompting the commencement of litigation.  Details as to the viability of the policy remain unknown, but any payout could be used to compensate victims.

Victims are urged to contact the Indiana Secretary of State's securities division at 317-232-6681 or the state’s securities fraud hotline, 800-223-8791. 

Zeek Receiver Seeks To Auction Former Headquarters, Inventory

The court-appointed receiver overseeing the fallout from the $600 million Zeek Rewards Ponzi scheme has filed papers (the "Filing") seeking court approval for the public auction of real and personal property to raise funds for nearly two hundred thousand victims.  The Receiver, Kenneth Bell, has recovered over $300 million thus far, and last month announced that 174,000 victims had submitted claims for aggregate losses of approximately $550 million.  Along with the former warehouse and office of Rex Venture Group, the parent company of Zeek Rewards, the Receiver is also seeking to dispose of over 1,000 pieces of personal property that include office furniture, music, and even entertainment memorabilia.

The shutdown of Zeek Rewards by the Securities and Exchange Commission ("SEC") in August 2012 exposed one of the largest Ponzi schemes in history, if not the largest based on the sheer number of victims.  The SEC announced that, while Zeek had daily investor obligations of approximately $45 million, it had only $225 million on hand - meaning that the scheme could have collapsed within a week.  Zeek had become well known through its representations that investors could earn daily "awards" of 1.5% based on a daily commitment of no more than 5 minutes.  The scheme featured a referral-based network that rewarded users based on investors they attracted to the company, and over 1 million would join - including over 100,000 that would ultimately profit from their investment.  

After his appointment, Bell began marshaling assets for the benefit of investors.  This included securing Zeek's former headquarters, located in Lexington, North Carolina, as well as other real estate the company had purchased, such as a warehouse holding various personal property.  The Filing seeks court approval for the sale, by public auction, of Zeek's former headquarters and the warehouse, as well as the personal property collected thus far.  According to Nash Dunn at the Lexington Dispatch, this personal property includes home and office furniture, Zeek promotional material such as water bottles and coffee mugs, and approximtely 600 items relating to country music memorabilia.  

Under the procedures proposed by the Receiver, the real estate and personal property will be sold through public auction by a professional auctioneer company.  The sale, which is proposed to take place within 60 days of a court order approving the sale, will be heavily advertised and also be broadcast over the internet to ensure maximum exposure.  The Receiver cites maintenance and upkeep costs as an incentive to sell the property, as well as additional funds for the benefit of victims.

In a quarterly report filed for the period ending July 31, 2013, Bell stated he had recovered approximately $325 million for investors.

Memo in Support of Motion to Approve Sale of Real Property by jmaglich1

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: