Canadian Woman Charged in $40 Million Ponzi Scheme

A Vancouver woman is facing fraud charges after she was arrested and charged with masterminding a $40 million Ponzi scheme that is rumored to be the largest Ponzi scheme in Canadian history.  Rashida Samji - also known as Rashida Makalai - was charged with 28 counts of fraud and theft related to approximtely $17 million in losses suffered by 14 investors between 2006 and 2012, and police believe the charges are part of a much larger fraud with significantly higher losses.  

Beginning as early as 2003, Samji, a former Vancouver notary, allegedly solicited investor funds through her company, Samji & Assoc. Holdings Inc.  Investors were told that their funds would be safe in Samji's notary trust accounts at several financial institutions, including Toronto-Dominion Bank ("TD Bank"). These funds would then purportedly be used as collateral for investments by Mission Hill Winery in Kelowna, British Columbia.  In return, investors were promised hefty annual returns ranging from 12% to 30%.  In addition to Samji's solicitation efforts, a former financial planner at Coast Capital Savings, Arvin Patel, also helped recruit approximately 90 investors to the scheme.  In total, more than $80 million is estimated to have flowed into Samji's trust accounts.

However, rather than keep investor funds in notary trust accounts, Samji is alleged to have deposited investor funds into her own personal bank accounts, which she then used to make fictitious interest payments to existing investors - a hallmark of a Ponzi scheme.  None of the alleged wineries linked to the scheme claimed to have any knowledge of Samji, and authorities filed civil charges against Samji in 2012 after an investigation.

Samji has since posted a $100,000 bail, and is subject to a variety of bail conditions while the case remains pending.

New Zealand's "Madoff" Receives 10-Year Sentence For $300 Million Ponzi Scheme

(Editor's Note: While fraud never sleeps, the blog is now back after a 12-day hiatus necessitated by the editor's recent nuptials and honeymoon.  Many thanks for your continued support of the blog.)

A 63-year old man known as New Zealand's "Madoff" was handed down a 10-year sentence - the most severe sentence handed down to anyone involved in a Serious Fraud Office investigation - for perpetrating a massive Ponzi scheme that took in hundreds of millions of dollars from unsuspecting citizens.  David Ross was labeled a "liar" and a "thief" by Judge Denys Barry of Wellington District Court, who handed down the record sentence.  Under New Zealand laws, Ross must serve a minimum sentence of nearly six years before becoming eligible for parole.

Ross was the director of Ross Asset Management ("RAM"), which he used along with numerous associated entities to solicit investors with the promise of guaranteed and lucrative returns - including annual returns of up to nearly 40%.  Investors received regular returns, and Ross was generally perceived as an astute investor.  Indeed, between June 2000 and September 2012, investors believed that Ross had accumulated a collective $351 in "profits" by trading securities.  

However, in late 2012, many investors began complaining about delays in scheduled payments, and in November 2012, authorities from New Zealand's Financial Markets Authority raided RAM's offices.  After a Receiver was appointed and began sifting through RAM's finances, it was discovered that only $10 million remained in RAM's accounts despite previous claims of over $450 million under management.  The Receiver, John Fisk, estimated that RAM took in over $300 million since 2000, keeping nearly $30 million kept as management fees while $290 million was withdrawn or paid to investors.  Fisk also found that the fund was insolvent since 2007 - that is, fund outflows exceeded new investor inflows, sometimes by $60 million.  When authorities raised RAM's offices in November, the scheme was on the verge of collapse.  Fisk later estimated that the total losses to victims exceeded $115 million.  

Ross pleaded guilty to several fraud charges in August 2013, including four false accounting charges and one charge of theft by a person in a special relationship.  

Many victims decried the sentence, claiming that the term was much too lenient to discourage the scourge of financial fraud that has recently plagued New Zealand.  While the 10-year term is much smaller than similar sentences across the globe - and many times smaller than the scheme perpetrated by Bernard Madoff whose name has been used as a nickname for Ross - the sentence is said to be the longest ever handed down to a failed investment company official or to anyone involved in a Serious Fraud Office prosecution.  Indeed, one former SFO prosecutor speculated that the sentence was the longest he could recall for a fraud-related prosecution.

State Fund Will Pay $3.25 Million to Victims of Lawyer's Ponzi Scheme

A Pennsylvania state fund supported by attorney registration fees will pay $3.25 million to victims of an elaborate Ponzi scheme masterminded by a prominent Pennsylvania lawyer.  Anthony Lupas, a former long-time school district solicitor and father of a local judge, was arrested back in May 2012 and charged with bilking dozens of victims who thought their funds were being invested in tax-free trusts yielding 5% annually.  Criminal proceedings against Lupas remain on hold while his attorneys fight efforts to declare him competent for trial.

According to authorities, Lupas offered clients the ability to earn a steady 5% return through an investment in tax-free trusts.  This continued for years, until Lupas suffered injuries in a 2011 fall that allegedly diminished his mental faculties.  Lupas's injuries resulted in his inability to keep up with investor payouts, and his his son, Judge David Lupas, would later contact authorities after discovering certin suspicious circumstances surrounding his father's investment operations.  After an investigation, the elder Lupas was arrested and charged with 29 counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering.

The Pennsylvania Lawyers Fund for Client Security is a fund created by the Pennsylvania Supreme Court in 1982 to compensate clients whose funds were misappropriated by their attorneys.  The fund is wholly funded by state lawyers, who pay an annual fee towards upkeep of the fund, and each award is limited to a maximum of $100,000. A total of 47 of Lupas's victims will share in a $3.25 million award from the fund.

While Lupas's lawyers recently argued that he suffers from an advanced stage of Alzheimer's disease and suffers hallucinations, prosecutors argue that Lupas is likely faking his condition in an effort to continue to dupe others to win his freedom.  Both the government and Lupas's defense team called medical experts to support their cause, and U.S. District Judge Robert D. Mariani is expected to issue a decision shortly.  While a conviction on just one of the thirty-one charges he is facing would effectively be a life sentence for Lupas, he potentially faces hundreds of years in prison if convicted on all counts.

Gold, Kidney Dialysis at Center of Alleged $5.6 Million Ponzi Scheme

The Securities and Exchange Commission filed an emergency action alleging that several defendants raised nearly $6 million from investors worldwide based on an elaborate Ponzi scheme pitching gold and kidney dialysis clinics.   Christopher A.T. Pedras, of Turlock, California and Auckland, New Zealand, as well as Sylvester M. Gray, of Kaysville, Utah, and Alicia Bryan, of Bossier City, Louisiana, were charged with multiple violations of federal securities laws in connection with their roles in the purported scheme.  The Commission is seeking injunctive relief, an asset freeze, disgorgement of ill-gotten gains, and civil monetary penalties.

According to the complaint filed by the Commission, Pedras formed several companies, including Maxum Gold Bnk Holdings Limited, Maxum Gold Bnk Holdings, LLC, FMP Medical Services Limited, and FMP Medical Services, LLC.  With the assistance of Gray and Bryan, Pedras pitched two investment programs to potential investors: the Maxum Gold Trade Program ("Maxum Gold") and the FMP Renal Program ("FMP Renal")

Maxum Gold was portrayed as an intermediary that allowed banks to trade with one another and avoid legal restrictions.  Investors were offered several options to invest in Maxum Gold, ranging from a "starter" program that paid 4% monthly for a six-month term to a "standard" program that paid 8% monthly for twelve months.  Investments took the form of investment contracts, and investors were also solicited by Maxum Gold's team of sales agents.  Investors were told that the details of the operation were highly secretive:

Who is the Bank of Trade: you will never be given this information, if you did get it, why would you need the Trade Platform, operated by a skilled professional.

In total, more than 50 investors invested in the Maxum Gold program from July 2010 and mid-2012.  

After scheduled interest payments to Maxum Gold investors began facing delays in mid-2012, which Pedras blamed on New Zealand regulators, investors were first encouraged to invest more to lock in then-current rates.  Later, in early 2013, Pedras and his sales agent team began encouraging Maxum Gold investors to roll over their investment to FMP Renal, which purportedly operated kidney dialysis clinics in New Zealand.  In total, Pedras raised nearly $6 million from Maxum Gold and FMP Renal investors.  

However, neither the Maxum Gold nor the FMP Renal programs were real.  Instead, funds from new investors were used to make principal and profit payments to existing investors - a classic sign of a Ponzi scheme.  In addition to paying approximately $2.4 million in purported "profits" to investors, Pedras used investor funds for a variety of unauthorized uses, including (i) $1.4 million in cash withdrawals, (ii) $1.2 million in sales commissions to the sales team, and (iii) approximately $337,000 in retail expenditures that included car payments and travel.  

A copy of the complaint is below:

Maxum complaint.pdf

71-Year Old Florida Pastor Pleads Guilty To $5 Million Ponzi Scheme

A Florida pastor could face up to twenty years in prison after pleading guilty to orchestrating a Ponzi scheme that offered annual returns of up to 1,000% and took in more than $5 million from fellow pastors and congregants.  Charles L. Kennedy, Jr., of Tampa, Florida, agreed to plead guilty to a single count of wire fraud before a Denver federal court judge.  While wire fraud carries a potential maximum term of twenty years in prison, Kennedy will likely receive a lesser sentence under federal sentencing guidelines.

According to authorities, Kennedy owned and operated a Florida company known as Keys to Life Corp. ("Keys to Life").  Sometime on or before April 2005, Keys to Life partnered with Trinity International Enterprises, Inc. ("Trinity"), a Colorado company.  Through Keys to Life, Trinity, and another company, CFO-5, LLC, Kennedy and several other co-conspirators solicited potential investors by telling them that their funds would be used to trade in investment-grade European bank notes that carried potential annual returns ranging from 200% to 1,000%.  Kennedy also solicited fellow pastors and members of their congregations, telling them that for every $1,000 invested, the minimum return would be $1,000,000 which would be payable in 90 days.  On a non-compounding basis, this translates to an annual return of approximately 400,000%.  In total, approximately $5 million was raised from more than 100 investors nationwide.  

However, there was no European bank note program.  Instead, the men operated what is known as a "prime bank" scheme, and used incoming investor funds to pay interest and principal redemptions to existing investors.  Indeed, of the nearly-$500,000 raised from fellow pastors, Kennedy sent $145,000 to Trinity and misappropriated the remainder for his personal use.  Kennedy was charged by the Securities and Exchange Commission in July 2008, and was later indicted in March 2012 on seventeen criminal charges, including fifteen counts of wire fraud.

Kennedy is scheduled to be sentenced January 22, 2013, and has agreed to pay $315,000 in restitution to defrauded victims as part of his plea agreement.

A copy of the criminal indictment is below:

US-v.-Charles-Kennedy-Indictment.pdf by jmaglich1