California Woman Convicted in $9.5 Million Ponzi Scheme

A federal jury convicted a California woman of operating a massive Ponzi scheme that defrauded hundreds of investors out of nearly $10 million.  Bich Quyen Nguyen, 59, was convicted of a single count of conspiring to commit wire fraud, which carries a maximum twenty-year prison sentence.  Following the jury's verdict, Nguyen was ordered into custody until her sentencing, which is scheduled for March 13, 2014.  

Nguyen told potential investors that she was the chief executive officer of a Swedish credit union that offered guaranteed returns as high as 46.2% through 1-year certificates of deposit.  These outsized returns were possible, according to Nguyen, from purported high-frequency and high-velocity trading.  In addition to Nguyen's promise that returns were guaranteed, investors were assured that Nguyen had "prepared" for the financial crisis and that their funds were safe in "blocked" accounts.  To meet Nguyen's minimum investment requirement of $1 million, victims were urged to form investment clubs in order to pool their funds together.  In total, Nguyen raised millions of dollars from investors.

However, following an investigation by the Securities and Exchange Commission that found that investor funds were commingled and not used as promised, a federal judge issued an injunction preventing Nguyen and her associates from soliciting investors.  Further investigation showed that Nguyen was running a classic Ponzi scheme, using incoming investor funds to make Ponzi-style payments to existing investors.  

Another of Nguyen's associates, Johnny Edward Johnson, 70, subsequently pleaded guilty to conspiracy to commit wire fraud and is scheduled to be sentenced on March 28, 2014.  

Nearly 3 Years After Schemer's Suicide, Victims Receive First Distribution

"I just closed another matter in which total payment was 2.7 percent," he said. "So even though 35 percent to 40 percent doesn't sound very good, it is pretty dramatic for a situation where you had a Ponzi scheme."

- Court-appointed Receiver Steven Harr

Victims of a Houston investment advisor that committed suicide shortly after authorities began an investigation are set to receive a pro-rata portion of a $10 million distribution approved by a Texas federal court.  David Salinas, a former college booster whose victims included a who's-who of college athletics, is believed to have run a massive Ponzi scheme that may have bilked victims out of more than $50 million. The distribution to victims comes at the request of court-appointed receiver Steven Farr, who estimates that victims could eventually recover 35% - 40% of their losses.

According to the SEC, Salinas and Brian A. Bjork formed two entities, Select Asset Management and J. David Financial, to orchestrate two fraudulent offerings of securities from at least 2004 until 2010.  The schemes collectively solicited more than $50 million from over 150 investors who believed their funds were being used to either purchase bonds in large U.S. companies or fund a short-term commercial loan portfolio.  Salinas also used his affiliation with a prominent Houston summer basketball program to solicit high-profile college athletics coaches, including Arizona coach Lute Olson, Baylor coach Scott Drew, and Texas Tech coach Billy Gillespie.  

Farr, the court-appointed receiver, indicated that he had received collective claims from victims of over $50 million.  Of those claims, approximately $33 million have been approved for inclusion in the distribution process, while more than $13 million of claims remain subject to review.  While the amount of the current distribution may reflect a downward revision to adjust for reserves for undecided claims, the latest report from Farr showed that an additional $14 million remains in reserves.  

45% Recovery For Victims of $50 Million Canadian Ponzi Scheme

Nearly five years after the collapse of a Ponzi scheme that bilked over 150 Canadians out of approximately $35 million, partial distribution checks are being mailed to victims following an out-of-court settlement with a financial institution accused of turning a blind eye to the fraud.  The checks, which represent approximately 45% of victim losses, are the result of a class action lawsuit filed by victims against the Royal Bank of Canada based on alleged misconduct in handling accounts by convicted fraudster Earl Jones.  Jones pleaded guilty to fraud charges in 2010, and is currently serving an 11-year prison sentence.

Jones founded Earl Jones Consultant and Administration Corp. (EJAC), a Montreal-based asset-management firm that operated for several decades.  Beginning as far back as the 1970's, Jones solicited clients through financial courses at local community centers, many of them elderly, and often with the agreement that he would serve as the executor of their estate upon their death.  Jones also promised steady 8% returns to clients.  In total, Jones raised at least $50 million from victims.

However, victims began raising concerns in 2009 when interest checks were returned for non-sufficient funds.  Jones was arrested in July 2009 and charged with orchestrating a massive Ponzi scheme.  According to authorities, Jones used more than $13 million of investor funds to fund a lavish lifestyle for himself and his family. Jones later pleaded guilty to two counts of fraud dating back to 1982, and was sentenced to serve eleven years in prison.

After an investigation, a bankruptcy trustee declared Jones both personally and professionally bankrupt.  However, the investigation uncovered internal RBC documents showing employees had raised questions over Jones' relationship with the bank as far back as 2001, and a consortium of Jones' victims soon instituted a class-action lawsuit.  While the lawsuit sought over $40 million, the sides settled for $17 million in early 2012.  After accounting for legal fees, $12.2 million was left to disburse to victims, who will receive a 44.1% recovery of their losses.  

In addition to the settlement, RBC was also fined $500,000 for its role in Jones' fraud by the Investment Industry Regulatory Organization of Canada.

2013 Ponzi Schemes In Review: Nearly $3 Billion of Ponzi Schemes, Over 1,000 Years Of Prison Time

While now a household word thanks in part to infamous schemers such as Bernard Madoff and Allen Stanford, many do not realize how pervasive Ponzi schemes have become. Indeed, while the larger schemes such as Madoff, Stanford, and Petters make headlines for defrauding thousands of victims out of billions of dollars, the majority of Ponzi schemes are much smaller in size and do not achieve such widespread coverage despite causing the same damage to their victims. With this in mind, Ponzitracker presents a comprehensive database containing both new Ponzi schemes uncovered in 2013 and the sentences handed down to Ponzi fraudsters in 2013. The simple truth is that there is no resource compiling these statistics in an easily accessible format, and this resource aims to fill that gap.

While the figures below include a more thorough summary, the numbers behind Ponzi schemes in 2013 are truly staggering. At least 67 Ponzi schemes were exposed in 2013, with the average Ponzi scheme coming in at approximately $44 million. In terms of sentencing, over 1,000 total years of sentences were handed down to at least 117 individuals involved in Ponzi schemes, and the total dollar amount of the underlying Ponzi schemes exceeded $13 billion. Males were the predominant perpetrators, constituting approximately 90% of the individuals being sentenced.

As a disclaimer, this database is meant for educational purposes only, and was compiled through articles published on Ponzitracker as well as through reporting available on the internet through various sources. Kathy Phelps' monthly Ponzi roundups at ThePonziSchemeBlog.com were also a great resource. The database generally only included Ponzi schemes of $1 million or more. Please feel free to direct any comments or inquiries to inquiries@ponzitracker.com.

2013 Ponzi Schemes

2013 was a busy year in the Ponzi Scheme world. In total, at least 67 Ponzi schemes were uncovered, with the total cumulative dollar amount of nearly $3,000,000,000 - that's 3 billion dollars. This equated to the discovery of a Ponzi scheme (1) more than once per week, (2) every 5.4 days, or (3) every 130 hours. This included at least eight Ponzi schemes with estimated losses or at least $100,000,000 or more, with Edward Fujinaga's estimated $800,000,000 Ponzi scheme ranking as the largest Ponzi scheme exposed in 2013.

A full database containing Ponzi schemes uncovered in 2013, arranged by date, is below:

In terms of sentences handed down, at least 117 offenders received prison sentences that totaled more than 1,000 years. These sentences ranged from mere months to decades in prison, with Karen Bowie's 42-year sentence ranking as the highest Ponzi sentence handed down in 2013. The total dollar amount of the Ponzi schemes for which sentences were levied: over $13 billion.

A full database of the sentences handed down in 2013 is below:

Ponzi schemers receiving prison sentences in 2013 hailed from more than half of the fifty states, with California, Texas, Florida, and New York unsurprisingly harboring over 40% of the offenders. A chart displaying the amount of sentenced offenders per state is below:

Chinese Court Hands Down Life Sentence For $4.9 Million Ponzi Scheme

A Chinese man has been sentenced to a term of life imprisonment for orchestrating a Ponzi scheme that defrauded investors out of nearly $5 million.  Wang Xiaoqing, 30, received the sentence from a Chinese court in southeast China's Zhejiang province.  Xiaoqing promised investors double-digit interest rates in exchange for an investment that would purportedly be used to build a luxury hotel.  Instead, Xiaoqing simply used investor funds to make Ponzi-style payments and to sustain his lavish lifestyle in classic Ponzi scheme fashion.  In addition to this life sentence, all properties belonging to Xiaoqing will be forfeited to the government.

While a corresponding sentence in the United States would have likely been no more than ten years, the sentence handed down to Xiaoqing is consistent with the hard line previously taken by Chinese authorities against financial fraud.  While the true pervasiveness of financial fraud in China is not readily ascertainable due to reporting prohibitions and government secrecy, at least two individuals have received death sentences in recent years for their role in masterminding Ponzi schemes: Ying Wu received a death sentence after being convicted of operating a $60 million Ponzi scheme, while Haiyan Lin was sentenced to death by firing squad for a $70 million fraud.  (Wu subsequently saw her sentence commuted to a life sentence).  China was also reported to have recently executed a an convicted of operating a $400 million scheme and subsequently referred to as "China's Madoff."