Florida Accountant Arrested in Suspected $6 Million Ponzi Scheme

Florida authorities arrested a Pinellas county man suspected of masterminding a $6 million real estate development Ponzi scheme.  David George Dreslin, 54, was arrested yesterday by the Florida Department of Law Enforcement on charges of racketeering, conspiracy to engage in a pattern of racketeering activity, three counts of sale of an unregistered security, three counts of sale of a security by an unregistered dealer, securities fraud and organized fraud.  Dreslin turned himself in to authorities and is currently being held on a $920,000 bond.

Dreslin was the principal of Dreslin Financial Services, where he acted as a certified public accountant and business advisor.  According to authorities, Dreslin began soliciting investors for various real estate projects in which he promised substantial returns in a short period of time.  Investors were assured that their investment would be a safe and secure investment, and some investors entrusted Dreslin with retirement funds.  In return, investors were provided with periodic account statements depicting their account performance.  

However, authorities allege that Dreslin's venture was nothing more than a Ponzi scheme that depended on the continuing flow of new investor funds to pay distributions to existing investors.  Officials from FDLE discovered that Dreslin did now have ownership over all of the real estate he pitched to clients, and also diverted their investments to himself or for other unauthorized purposes.  In total, authorities believe at least $6 million of investor funds were lost.

According to the press release distributed by FDLE, additional arrests are expected.  

Those seeking further information may contact:

Gretl Plessinger, Samantha Andrews or Steve Arthur

FDLE Office of Public Information

(850) 410-7001 

California Pastor Accused Of $4 Million Ponzi Scheme

Authorities have arrested a California pastor on charges that he conducted a foreign currency Ponzi scheme that defrauded more than seventy Spanish-speaking victims out of nearly $4 million.  Luis Alonso Serna, 61, was charged with two counts of mail fraud, two counts of wire fraud and two counts of money laundering.  Each of the mail fraud and wire fraud charges carries a maximum twenty-year prison sentence, while each money laundering charge carries a ten-year sentence. 

Serna served as pastor of the Zion Living Word Christian Center in San Fernando.  In addition to his position as pastor, Serna allegedly held himself out as an experienced foreign currency investor through his company, Architects of the Future Investments.  Serna told potential investors that their funds would be used to purchase foreign currency, and promised investors monthly returns of up to twenty percent.  In total, investors entrusted more than $7 million with Serna - of which nearly $4 million is alleged to have been lost.

However, according to authorities, Serna operated a Ponzi scheme in which he used new investor funds to pay fictitious returns to existing investors.  The scheme collapsed when Serna was unable to satisfy monthly obligations to investors - which may have been difficult to sustain with Serna offering annual uncompounded returns of 240%.

Ponzi Schemes Now Illegal In Kazakhstan

The President of Kazakhstan has signed a law criminalizing Ponzi schemes and significantly toughening the penalties for those involved with Ponzi schemes.  President Nursultan Nazarbayev signed the law, which amended Kazakhstan's criminal code by allowing the imposition of prison terms for those convicted of organizing Ponzi schemes.  The new law is a reaction to the proliferation of Ponzi schemes in Kazakhstan, with the Kazakhstan General Prosecutor's office reporting a total of 61 criminal cases related to Ponzi schemes from 2010 to 2013.  

The previous Kazakhstan criminal code did not contain a definition for a Ponzi scheme, and thus individuals suspected of Ponzi schemes could not be prosecuted for the Ponzi scheme itself, but instead ancillary crimes such as fraud or tax evasion.  

According to a draft of the newly-enacted Article 224 circulated in January 2013, individuals accused of organizing or heading Ponzi schemes can face fines based on a monthly calculated index, correctional community work, or even imprisonment for three years with the possibility that their property could be confiscated.  The term of imprisonment can rise to a seven-year term when groups of individuals are involved in a Ponzi scheme, with certain enhancements allowing a further increase in the sentence, including when the scheme involved the deposits of large amounts of money from victims.  

Boston Family Weighs Plea Deal For $10 Million Ponzi Scheme

A Boston family accused of masterminding a Ponzi scheme that bilked investors out of at least $10 million has a one-week deadline to strike a plea deal with prosecutors or else face trial.  Steven Palladino, 55, his wife Lori Palladino, 52, and son Gregory Palladino, 28, learned from a Massachusetts judge at a hearing on Tuesday the expected sentencing should the trio decide to enter into a plea agreement.  According to Suffolk Superior Court Judge Janet Sanders, the elder Palladino can expect a 10-to-12 year sentence, while his son can expect a sentence of up to two years.  Lori Palladino would not serve any prison time, and instead would receive a suspended sentence.  The family has until by January 21, 2014 to decide whether they will accept the plea agreement or take their chances at trial.  

The trio were the sole principals of Viking Financial Group ("Viking"), which advertised itself to investors as a high-yield, low-risk investment strategy carrying above-average returns by making secured loans to borrowers at high interest rates.  These purportedly profitable loans allowed Viking to pay an above-average return to investors while still pocketing the difference for a healthy profit.  Based on these representations, Viking took in more than $10 million from at least 40 victims.  

However, in reality Viking made very few loans, and of these loans, many were made in violation of a state statute prohibiting loan interest rates exceeding 20%.  Indeed, three of the loans extended in 2007 and 2008 carried interest rates exceeding 60% - which would later serve as the basis for three usury charges against Steven Palladino.  The majority of investor funds served only to support a lavish lifestyle for the Palladinos that included Bahamas trips, rent for Steven Palladino's mistress, and hundreds of thousands of dollars in gambling losses.  Additionally, nearly $400,000 in investor funds were used to satisfy a condition of Steven Palladino's probation stemming from a 2007 conviction for, ironically enough, defrauding an elderly relative.  

The family was indicted back in September on charges that they carried out one of the largest investment scams in Boston since Charles Ponzi's infamous scheme nearly 100 years ago. Each of the three was charged with one count of larceny over $250 and larceny over $250 from a person over 60.  The three were also charged with conspiracy to commit larceny, with Gregory Palladino facing an additional three counts of usury and one count of tampering with evidence. 

Following the indictment, Steven Palladino was recently arrested on loan-sharking charges after prosecutors accused him of seeking out an investor for repayment of a Viking-made loan.  

Previous Ponzitracker coverage is here.

North Carolina Bank To Pay $1.2 Million Penalty For Role in Ponzi Scheme, Payday Loans

A North Carolina bank will pay a $1.2 million fine after authorities accused it of failing to maintain proper controls to prevent a payday lender and massive Ponzi scheme from defrauding thousands of customers.  Four Oaks Fincorp, Inc., and Four Oaks Bank & Trust Company (“Four Oaks Bank” or the “Bank”), agreed to pay the penalty in connection with civil charges unveiled by the Department of Justice, which accused the bank of violations of the Anti-Fraud Injunction Act and the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA").  In addition to the fine, the Bank, which neither admitted nor denied wrongdoing, agreed to assist authorities in any ensuing criminal investigations.

According to authorities, Four Oaks Bank began a relationship with a privately-owned Texas third-party payment processor the ("3rd Party Processor") in 2009.  As part of the relationship, the Bank gave the 3rd Party Processor direct access to the Federal Reserve Bank in Atlanta, which allowed the 3rd Party Processor to directly submit Automated Clearinghouse ("ACH") requests for payment to the Federal Reserve.  This differed from the typical scenario where the Bank would serve as the intermediary between the 3rd Party Processor and the Federal Reserve, allowing the Bank to employ a variety of controls to ensure that the transactions are not suspicious or potentially fraudulent.  Indeed, these controls are required under the Bank Secrecy Act to ensure that the Bank has a customer identification program ("CIP") that sufficiently allows the Bank to verify the identity of each customer.  By providing the 3rd Party Processor direct access to the Federal Reserve, the DOJ alleged that the Bank failed to satisfy its "know-your-customer" obligations.  

Under the arrangement with the Bank, the 3rd Party Processor was able to originate nearly 10 million ACH transactions on behalf of its merchants for a total dollar value of nearly $2.5 billion.  This resulted in the generation of nearly $1 million of fees for the Bank.  While the majority of ACH transactions were connected to the 3rd Party Processor's relationship with various payday lenders, authorities also discovered that, in Spring 2012, 3rd Party Processor began allowing direct ACH access to a client named Rex Venture Group, LLC ("RVG").  RVG was the parent company of ZeekRewards, a massive Ponzi scheme that was shut down in August 2012 and which is estimated to have caused over $500 million in losses.  According to authorities, the Bank allowed direct ACH access to RVG despite the inability to verify (1) the identity of RVG's principals; and (2) the nature of RVG's business.  As a result, RVG was able to use the Bank to raise more than $60 million in just a short span before the Ponzi scheme was discovered. 

The settlement comes as authorities are increasingly scrutinizing the compliance of banking institutions with federal laws.  These laws, including federal anti-money laundering statutes, require banks to institute sufficient controls to identify and report suspicious activity to authorities.  The settlement by Four Oaks Bank comes days after financial juggernaut JP Morgan Chase agreed to a record-$2.6 billion fine for its role in the massive Ponzi scheme perpetrated by Bernard Madoff.   Other recent and notable settlements by high-profile banks include a $55 million fine by American Express Bank, a $1.256 billion fine by HSBC, and a $160 million fine by Wells Fargo/Wachovia.  Such cases make it clear that authorities are devoting increasing resources to policing banks, and it appears certain that the Bank's settlement is indicative of additional action.

A copy of the DOJ's complaint is below (thanks to ASDUpdates):

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