New York Lawmaker's Son-In-Law Pleads Guilty To $6 Million Ponzi Scheme

The son-in-law of a prominent New York state lawmaker has pleaded guilty to operating a Ponzi scheme that duped victims out of approximately $6 million.  Marcello Trebitsch, also known as Yair Trebitsch, entered a guilty plea to a single count of securities fraud today in a New York federal court.  Trebitsch, whose father-in-law is currently fighting federal corruption charges, was charged in April with securities fraud and wire fraud.  He could face up to twenty years in prison under the securities fraud charge, although federal sentencing guidelines will likely call for a reduced range.  He has agreed to pay nearly $6 million in restitution to his victims.

According to the complaint, which was filed under seal on April 10, 2015 by way of a sworn affidavit by a Federal Bureau of Investigation special agent, Trebitsch began soliciting investors in or around 2009 forAllese Capital, LLC ("Allese"), which Trebitsch touted as a successful investment fund that he operated with his wife.  Trebitsch, whose wife Michelle is a certified public accountant and is the daughter of former New York Assembly Speaker Sheldon Silver, told potential investors that Allese employed a successful trading strategy through the day-trading of large cap stocks that resulted in annual returns ranging from 14% to 16%.  Trebitsch assured investors that little to none of their funds would remain invested in the market overnight, and also claimed that he cleared his trades through a major Wall Street investment bank that also had agreed to invest $50 million in Allese.  In total, Trebitsch raised at least $7 million - a majority of which was raised from a single victim.

After Trebitsch's largest investor requested a partial redemption of his investment in June 2014, Trebitschultimately disclosed through his attorney that he had experienced significant trading losses and that, after accounting for Trebitsch's $400,000 "fee," no money remained.  

The Complaint alleged that a forensic review of Trebitsch's bank accounts demonstrated that only a small portion of investor funds were used to engage in trading, and that Trebitsch suffered net trading losses.  A subsequent search warrant executed at Trebitsch's house apparently turned up a handwritten note that appeared to be authored by Trebitsch and stating that he "reckognize [sic] the tremendous pain along with financial," followed by the crossed-out word, "pain."  

The Complaint is below:

US v Trebitsch by jmaglich1

Criminal Charges Filed In Alleged $1.5 Billion Medical Factoring Ponzi Scheme

Authorities have filed criminal charges against the president and two former executives of a Las Vegas investment company, alleging the company operated a massive $1.5 billion Ponzi scheme.  Nearly two years after the Securities and Exchange Commission filed civil fraud charges, the U.S. Department of Justice announced the indictment of Edwin Fujinaga, the former president and CEO of MRI International Inc. ("MRI"), and former MRI executives Junzo Suzuki, 66, and Paul Suzuki.  All three of the men were charged with eight counts and mail fraud and nine counts of wire fraud, while Fujinaga was also charged with three counts of money laundering.  The scheme ranks among the top Ponzi schemes ever uncovered.  Each of the men could face dozens of years in prison if convicted of the charges.  

Fujinaga formed MRI in 1998, claiming the company engaged in the business of purchasing accounts from U.S. medical providers with outstanding balances to be collected from insurance companies.  Potential investors were told that Fujinaga and MRI were able to purchase these accounts at a discount, which would then yield a profit if a larger amount was collected from the insurance company.  MRI primarily targeted investors living in Japan, and often hosted these investors in the United States for presentations and tours of MRI's office in Las Vegas.  Investors were provided promotional materials extolling the investments, including representations about the safety of the investor's principal and the use of investor funds, and were promised annual returns of up to 10.32% annually.  An investment was memorialized by a "certificate of investment," which was obtained after an investor either wired money or sent a check to one of MRI's accounts at Wells Fargo Bank in Las Vegas.  Potential investors were assured that an independent third party would hold and manage their funds to ensure they were used properly.  In total, authorities allege that MRI raised over $1.5 billion from thousands of investors worldwide.  

However, in reality, MRI used investor funds for a variety of unauthorized purposes, including the payment of principal and interest to earlier investors - a hallmark of a Ponzi scheme.  Indeed, between January 2009 and March 2013 alone, over $600 million was used to pay claims for principal or interest by existing investors.  Fujinaga also used investor funds to pay business expenses, to siphon funds to other businesses he controlled, and to support Fujinaga's luxury lifestyle through the payment of his credit card bills, alimony and child support (totaling $25,000 per month), the purchase of luxury cars, and the purchase of homes in Las Vegas, Beverly Hills, and Hawaii.  By 2011, MRI began defaulting on payments, and authorities estimate that at least 8,000 people invested in MRI.

After Fujinaga and MRI received an inquiry from the Commission in March 2013, he allegedly hired a shredding company to destroy key documents.  He later fired an executive assistant who questioned his actions.  Fujinaga also failed to appear for a scheduled deposition, citing fatigue and illness, and MRI never produced documents requested in an investigative subpoena.  The Commission filed an enforcement action in September 2013, and a Nevada federal judge entered a final judgment of over $580 million against Fujinaga and MRI in January 2015.  Fujinaga and MRI are currently appealing that judgment.

In addition to the charges, the U.S. is also seeking a forfeiture judgment of over $1.5 billion against each defendant.

A copy of the indictment is below:

MRI Indictment by LVReviewJournal

SEC Alleges California Woman Ran $68 Million Oil-And-Gas Ponzi Scheme

A California woman was charged with masterminding a $68 million Ponzi scheme that touted lucrative oil-and-gas interests to primarily Chinese-Americans both in the United States and abroad.  The Securities and Exchange Commission filed an enforcement action accusing Bingqing Yang, her management companies Luca International Group, LLC, Luca Resource Group, LLC, and Luca Energy Fund, LLC, (collectively, the "Luca Managers"), Lei (Lily) Lei, Anthony V. Pollace, and Yong (Michael) Chen of violating multiple federal securities laws.  Pollace has agreed to pay a $25,500 penalty to settle charges that he played a small role in the alleged fraud.  The Commission is seeking injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil monetary penalties from the remaining defendants.

According to the Commission, Yang and others began targeting Chinese-American investors in September 2007 through Chinese-language television, radio and newspaper advertisements, and investment seminars.  Potential investors were promised annual returns ranging from 20% to 30% through an investment in several investment funds (the "Luca Funds") that purportedly were able to achieve highly lucrative returns by developing and operating oil and natural gas wells in Texas, Montana, North Dakota, Louisiana, and the Gulf of Mexico.  In brochures and powerpoint presentations, potential investors were told there was "zero risk of losing entire principal."  At least one potential investor expressed their confidence and trust in the investment based on Yang's Chinese heritage.

Yang also targeted Chinese citizens who sought to obtain permanent residence in the United States through the EB-5 Visa program, which provides foreign nationals with a method for obtaining a green card by making an investment in the United States.  Chinese citizens were solicited at investment seminars that took place in China, and Yang ultimately raised over $8 million alone from investors who thought they were investing in an opportunity to acquire EB-5 visas.  In total, Yang and the Luca Managers raised at least $68 million from investors.

However, the Commission alleges that Yang made numerous misrepresentations in touting the investment opportunity, incuding that the Luca Funds were profitable when in reality they were losing millions of dollars in their oil and gas investments.  Investors were not told that Yang paid herself approximately $1 million in a "trademark licensing fee" in March 2012 despite the company not having any trademark logos on record and later backdating a trademark licensing agreement in March 2013.  Nor did Yang disclose that investor funds would be used use to support a lavish lifestyle that included the purchase of a 5,600 square foot house in California (which Yang disguised as a letter of intent to make a deposit on a Chinese oil drilling rig), to pay her personal taxes, to pay for family travel to China and Hawaii, to pay private school tuition, and to pay for martial arts and choir lessons for her children.  Yang is also accused of using over $500,000 in investor funds to take potential Chinese investors on a 10-day expenses-paid trip to Pebble Beach, California that included a speech by a former U.S. President.  

Yang is also accused of misrepresenting the true nature of the various oil and gas ventures to potential investors.  While distributing projections that assumed a 100% success rate for each well, Yang failed to disclose that the true success rate of the wells was less than 60% and that the returns were based on a flawed assumption that the wells would be drilled in the first year.  

A copy of the Commission's complaint is below:

SECvLuca

Energy Drink CEO Charged With $600,000 Ponzi Scheme

The President and CEO of an Indiana energy drink company was arrested over the weekend on charges that he took in at least $600,000 from several investors in what the Indiana Secretary of State likened to a Ponzi scheme.  Eric Nicholas Morgan, of Evansville, Indiana, was arrested by Indiana authorities and charged with fifteen counts of securities fraud.  Morgan is being held on a $10,000 cash bond.  

Morgan was the President and CEO of Liquid Ninja, an Indiana-based company that marketed a new energy drink to local stores and groceries.  According to Indiana Secretary of State Connie Lawson, Morgan solicited funds from investors under the guise that those funds would be used to invest in Liquid Ninja.  For example, one elderly couple was approached by Morgan, who served as their financial advisor (despite not being registered as such), beginning in late 2012 about Liquid Ninja.  In April 2014, the couple invested $250,000 with Morgan and received a promissory note in return that promised an annual 7.5% return for two years.  At the end of the two years, the couple was told they could either redeem their principal investment or receive a 15% ownership interest in the company.  Secretary of State Lawson alleged that neither Lawson nor the product he was selling were licensed in Indiana.

Instead of using investor funds for the Liquid Ninja business, Lawson alleges that Morgan used the funds for his own personal use.  According to authorities, nearly $150,000 was withdrawn from Liquid Ninja's bank account seven days after the elderly couple's $250,000 investment and used to obtain a cashier's check made payable to an unrelated individual.  In December 2014, an Indiana newspaper reported that Liquid Energy had shut its doors.  The company's website has also been taken down.

Hedge Fund Manager Gets Six Year Sentence For $11 Million Ponzi Scheme

A Chicago investment fund manager who touted his law degree to potential victims in an attempt to win their trust will serve the next seventy-two months in federal prison for masterminding a Ponzi scheme that raised more than $11 million from primarily Hindu victims.  Neal Goyal, 34, received the sentence from U.S. District Judge Matthew Kennelly after previously pleading guilty to one count of wire fraud.  Goyal was also ordered to pay more than $9 million in restitution to his victims - an amount prosecutors estimate will never be completely repaid.  

Goyal owned and managed two investment advisors: Blue Horizon Asset Management ("Blue Horizon") and Caldera Advisors, LLC ("Caldera").  Blue Horizon and Caldera, neither of which was registered with federal or state securities regulators, acted as investment advisers to four investment funds created by Goyal (collectively, the "Funds").  Beginning in 2006,  while he was attending law school at the Thomas Jefferson School of Law, Goyal began raising funds from friends and family members in the Hindu community.  Potential investors were told that the Funds primarily invested in equities, and employed a "long-short" strategy that involved holding both long and short positions.  According to account statements provided to investors from 2011 to 2013, the Funds returned at least 17% per year.  In total, Goyal raised more than $11 million from at least 35 investors.

However, Goyal was not the savvy trader investors were led to believe.  Indeed, his initial trading resulted in substantial losses, and he ceased trading completely by January 2009.  Instead, Goyal used investor funds to pay returns to existing investors - a classic hallmark of a Ponzi scheme.  Additionally, Goyal misappropriated investor funds to sustain his lavish lifestyle, including more than $1 million for two homes, more than $200,000 in investments in a Chicago tavern owned by his father-in-law, luxury vacations and custom-tailored suits, and $100,000 for a children's clothing boutique operated by his wife.  Indeed, despite the fact that his wife's children's clothing boutique was losing money, Goyal used investor funds to help the business expand to a second location.  Goyal also splurged on his employees, handing out gold bars as rewards, renting out a bank vault for a work Christmas party, and even treating his staff to a week-long trip to the Dominican Republic just before the scheme collapsed.

A routine audit by the Securities and Exchange Commission uncovered the fraud, and the Commission filed an enforcement action last May accusing Goyal and the Funds of multiple violations of federal securities laws. Goyal was also criminally charged, and subsequently pleaded guilty to one count of wire fraud in February 2015.