Criminal Charges Filed In Alleged $100 Million ATM Ponzi Scheme

Several months after the Securities and Exchange Commission levied civil fraud charges, two California men now face criminal charges for operating what authorities allege was a massive ATM Ponzi scheme that duped over 1,000 investors out of over $100 million.  Joel Barry Gillis, 74, and Edward Wishner, 76, were each charged with one count of conspiracy, two counts of mail fraud, and one count of wire fraud.  The charging of the men through a criminal information suggests that the men are in plea negotiations with criminal authorities. Each count of mail fraud and wire fraud carries a maximum prison term of twenty years along with criminal monetary penalties.

Gillis and Wishner operated Nationwide Automated Solutions ("NAS").  According to authorities, NAS has solicited investors since 1999 by promising that their funds would be used to place, operate, and maintain automated teller machines ("ATMs") throughout the country.  Investors were told that they could purchase ATMs for a price ranging from $12,000 to $19,800 from NAS, and could then lease those same ATMs back to NAS for a 10-year term in exchange for a "rent" of $.50 per ATM transaction.  A contract memorializing the investment purportedly contained the serial number and the location of the ATM, and investors were guaranteed an investment return of at least 20% annually.  Notably, each contract also included a "non-interference" clause prohibiting the investor from interfering with the operation of the ATM by contacting the locations where the ATM was installed or any ATM service provider.  An analysis of NAS' bank accounts from 2013 forward showed that more than $123 million was raised from investors in just that short period.

While the company's records showed that it had sold and was leasing back more than 31,000 ATMs to investors as of June 2014, third-party settlement reports provided by NAS's ATM servicers show that only 253 ATMs were serviced.  As the SEC previously alleged,  

Defendants have “sold” and “leased back” tens of thousands of ATMs to NASI investors that they never owned, that they never operated, and that may have never existed. 

For example, while NAS's internal records claimed ownership or operation of nearly 700 ATMs located at "Casey's Convenience Mart" locations in the Midwest, the Commission's investigation showed that neither NAS nor any of its investors owned or serviced any of those ATMs.  Rather, those ATMs were owned by an unrelated company with no affiliation with NAS.  The Commission also alleged that NAS often sold and leased back the same ATM to more than one investor.  Of the ATMs that NAS did service, those revenues were minimal and were dwarfed by the significant amount of new investor funds.  Those investor funds were used to pay returns to existing investors - a classic hallmark of a Ponzi scheme.  

Authorities alleged that NAS bounced over $3 million in checks to investors in August 2014, with investors told that a "glitch" in connection with retention of a new outside firm handling investor payments was to blame.

Authorities began investigating NAS shortly after the bounced checks, with court records in the SEC's case demonstrating that an application for a temporary injunction and other relief was filed on September 17, 2014.  A receiver, William Hoffman, was appointed at the request of the SEC, and a website has been established at http://www.nasi-nationwideatm.com/ for interested parties.

Several Ponzi schemes purportedly offering lucrative returns from investments in ATMs have been uncovered in recent years, including here, here, and here.

Colorado Investment Advisor Charged With $4.8 Million Ponzi Scheme

A Colorado investment advisor has been indicted on multiple charges that he operated a $4.8 million Ponzi scheme through his financial services company.  Perry Sawano, 51, was indicted on five counts of securiites fraud and twelve counts of theft over $20,000.  Both securities fraud and theft over $20,000 are class 3 felonies in Colorado, and each carries a minimum four-year sentence and fine ranging from $3,000 to $750,000.  Sawano was arrested on December 15, 2014, and is currently free on $100,000 bond.

Sawano owned and operated Integrity Financial Consulting ("IFC"), which was formerly known as Providence Financial Services.  IFC was previously a licensed investment adviser, with Sawano serving as an authorized adviser representative.   Beginning in January 2007, Sawano is accused of soliciting potential investors for IFC, first using their funds for traditional investments.  However, Sawano allegedly moved those funds from traditional investments to alternative investments that were often affiliated with or controlled by Sawano, including multiple investments owned by clients of Sawano.  In total, authorities alleged that Sawano and IFC raised at least $4.8 million from investors.

However, investors were not informed of the switch from their traditional to alternative investments.  Moreover, while those alternative investments were made to appear legitimate to outsiders, many were in fact defunct, fabricated, or lacked any legitimate business purpose.  When clients did learn of the switch, many requested that Sawano liquidate the positions.  According to authorities, Sawano instead used funds from other investors to satisfy the redemption requests - a classic hallmark of a Ponzi scheme.

Sawano and IFC were previously accused in April 2013 of securities violations by the Colorado Securities Commission ("CSC") that resulted in a stipulated injunction permanently barring Sawano from the industry.  However, as a condition of consenting to the injunction, Sawano neither admitted nor denied the CSC's allegations.  

A copy of the CSC's Complaint for Injunctive Relief is below:

Complaint for Injunctive Relief

Ponzi Schemer's Wife, Brother Avoid Jail For Hiding Cash And Gold

The wife and brother of a South Carolina man currently jailed for operating a $60 million Ponzi scheme will not serve their own stints in prison after previously pleading guilty to hiding hundreds of thousands of dollars in cash and gold coins from authorities.  Cassandra Kendall Wilson, 66, and Timothy L. Wilson, 60, will each serve nine months of home confinement for their admitted role in assisting Ronnie Wilson in concealing more than $400,000 in currency and precious metals from authorities.  Each could have faced a potential sentence of up to five years in federal prison.  The Ponzi mastermind, Ronnie Wilson, who is currently serving a 19.5-year sentence in federal prison, was unable to secure a similar arrangement as he received an additional six-month sentence for his role in the concealment.  

Wilson was arrested by authorities in early April 2012 on accusations that his company, Atlantic Bullion and Coin, Inc. ("ABC") was operating a massive Ponzi scheme that promised above-average returns to investors through the purchase and sale of silver futures contracts.  While the contracts entailed the purchase of significant amounts of silver, Wilson told investors that he would manage and store the silver on their behalf at a Delaware depository.  From 2001 to 2012, the scheme raised more than $90 million from approximately 1,000 investors.  Wilson subsequently pleaded guilty to two charges of mail fraud and received a 19.5 year sentence.

Around the time of his arrest in April 2012, authorities now claim that Wilson gave his brother, Timothy, an ammunition canister containing gold, silver, and U.S. currency to hide from authorities. Later that summer, Wilson allegedly gave another ammunition canister full of bullion and currency to his wife, Cassandra, who would later conceal this fact from the court-appointed receiver testify tasked with recovering assets for victims.  In total, the value of the precious metals and currency exceeded $400,000.

Court-appointed Receiver Beattie Ashmore indicated that the assets had been recovered for the benefit of Wilson's victims, and promised that:

This indictment will be followed by a number of lawsuits to be filed by the Receiver against those that profited from the Ronnie Gene Wilson Ponzi scheme.    

The Receiver's website is here. 

The indictment is below:

Wilson Indictment by jmaglich1

New York Tax Preparer Gets 11-Year Sentence For $4.8 Million Ponzi Scheme

A New York former tax preparer who admitted to swindling longtime clients out of millions of dollars in an elaborate Ponzi scheme was sentenced to spend the next 11 years in federal prison.  Robert Van Zandt, 70, received the sentence after previously pleading guilty to a 33-count indictment that included charges of securities fraud, grand larceny, and intent to defraud.  Van Zandt received the maximum possible sentence pursuant to his plea agreement with prosecutors, which had called for a sentence ranging from 3.8 years to 11 years.  

Van Zandt operated the Van Zandt Agency, a well-known tax preparation agency, for decades.  However, beginning in 2007, Van Zandt began using his position to solicit longtime clients to invest with him - sometimes convincing investors to entrust him with their entire retirement funds and/or savings.  This was facilitated through Van Zandt's unique access to each client's financial situation.  In return, Van Zandt provided investors with promissory notes or shareholder agreements promising guaranteed rates of return. Van Zandt promised to place investor funds in lucrative securities, including real estate projects that were impossible to build.  

In total, Van Zandt raised nearly $5 million from investors from February 2008 through January 2011. However, rather than invest in 'lucrative securities', Van Zandt commingled investor funds and misappropriated them for his own personal and business use.  Van Zandt was arrested in May 2012, and subsequently pleaded guilty in November 2014.

Van Zandt's attorney was quoted as insinuating that others at the Van Zandt agency were involved in the fraud and thus potentially subject to criminal and/or civil prosecution.  

The charging document is below:

Van Zandt Complai9nt

After Failed Suicide Attempt, Lawyer Charged With $5 Million Ponzi Scheme

“I have systematically over the course of five years or so perpetrated a huge Ponzi scheme envelloping [sic] my family and closest friends... I managed to completely squander the hard earned money that my family and dear friends managed to set aside over the course of their working lives. To be clear about this: the whole . . . investment scheme that so many thought was real was in fact a complete and fiction of my crazed imagination.”

After penning a detailed suicide note confessing to operating a multi-million dollar Ponzi scheme, a former prominent New York lawyer jumped into the Hudson River as a final act.  However, after a NYPD SCUBA diver saved his life, his suicide note was discovered and authorities subsequently charged him with masterminding a Ponzi scheme that duped family, friends, and law clients out of at least $5 million.  Charles A. Bennett, 56, was the subject of a civil fraud complaint filed earlier this month by the Securities and Exchange Commission, and was also arraigned on wire fraud and securities fraud charges from his hospital bed.  A federal magistrate judge refused a request by prosecutors to detain Bennett as a flight risk while he recovers at a local hospital.

Bennett started as a lawyer in the 1980s, working for several prominent New York law firms that specialized in corporate law and mergers and acquisitions.  During his tenure at those firms, he made several key connections, including the then-wife of former New York governor Eliot Spitzer and the principal of a Wyoming family-owned investment fund.  In the early 2000s, Bennett opened a solo law practice.  

In the mid-to-late 2000s, Bennett began encountering financial difficulties as a solo legal practitioner and started borrowing funds from friends to stay afloat.  Soon thereafter, Bennett began representing that he had a connection to a Wyoming hedge fund (the 'Fund"), which purportedly generated significant returns through investments in European real estate mortgage-backed securities and/or credit default swaps.  Potential investors were told that former Governor Eliot and his then-wife were investors in the Fund.  After making an investment in the Fund, investors then received falsified documents containing the logo of the Fund, which he used without permission of the Fund.  In total, Bennett raised more than $5 million from at least 30 investors.

However, while the Fund was real and Bennett had a relationship with the Fund principal, no outside investor money was ever taken by the Fund nor did Bennett ever make an investment with the Fund.  Rather, Bennett simply appears to have taken advantage of the fact that the Fund was based far away from New York in Wyoming.  Instead of investing those funds entrusted to him, Bennett instead used investor funds to sustain his lavish lifestyle that included international travel and large cash withdrawals.  Bennett also used new investor funds to make payments of fictitious interest and principal to existing investors - a hallmark of a Ponzi scheme.

By 2014, Bennett was repeatedly receiving investor demands for the return of their principal and accrued returns - demands that Bennett was unable to meet with his available funds.  In an attempt to stave off victim demands, Bennett opened two bank accounts at a new financial institution with $100 in each account - and then proceeded to write checks of $500,000 and $550,000, respectively.  Those checks subsequently bounced.  After the demands intensified, Bennett checked into a New York hotel in early November 2014 and authored a 16-page suicide note titled "A Sad Ending To My Life," in which he took full responsibility for the Ponzi scheme and confessed that “the whole investment scheme that so many thought was real was in fact a complete and [sic] fiction of [his] crazed imagination,” and that “the bulk of the funds were used in classic Ponzi scheme fashion to pay off other supposed ‘investors’ and my absurd lifestyle.”   The next day, Bennett jumped into the Hudson River.

The SEC's complaint is below.

comp-pr2014-279 by jmaglich1